MEANING AND DEFINITION OF FINANCE

:-

Finance is the life blood of business.Without finance,the heart
and brain of business cannot function implying thereby its natural
death.right from conceiving the idea of birth of a business to its liq-
uidation finance is required.It is a prerequisite for obtaining physical
resources, which are needed to perform productive activities and car-
rying business operations such as sales,pay compensations,reserve
for contingencies(unascertained liabilities)and so on.So,finance is the
pivot around which the whole business operations cluster.
According to F.W.paish:-“Finance may be defined as the position
of money at the time it is wanted”.
MEANING AND DEFINITION OF FINANCIAL MANAGE-
MENT:-
Financial means procuring sources of money supply and allocation
of these sources on the basis of forecasting monetary requirements of
the business.the word ‘management’refers to planning,organization,
co-ordination and control of human activities and physical resources
for achieving the objectives of an enterprise.
Financial management refers to the management of fi-
nance.It is the effective & effective utilization of financial resources.
According to Weston & Brigham:-financial management is anarea
of financial decision making harmonizing individual motives& en-
terprise goals.

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IMPORTANCE OF FINANCIAL MANAGement:-
Some of the importance of the financial management is as follws:
1) FINANCIAL PLANNING AND CONTROL:-Finance is a base
for all the business activities.Business activities shouls be not only
harmonized but also planning determination implementation offer
analysis of finance.All activities revolve around the finance. So fi-
nance planning and control are important function.
2) ESSENCE OF MANAGERIAL DECISION:-Financial manage-
ment provides a sound base to all managerial decisions.Financial
management is the focal point in the process of decision making
.Production,sales, employees,research & development decisions are
based on financial management.
3) IMPROVE PROFITABILITY:-Profitability of the concern purely
depends on the effectiveness and proper utilization of funds by the
business concern .Financial management helps to improve the profit-
ability position of the concern with help of strong financial control
devices such as budgetary control,ratio analysis and cost volume
profit analysis.
4) BASIS OF AMANAGERIAL PROCESS:-financial management
is the basis of whole management process,such as planning,co ordi-
nation and control.According to sound financial planning all other
plans are executed & controlled.
5) MEASURE OF PERFORMANCE:-financial management deals
with risk & uncertainty factors which are directly hit by profitability
& risk.Thus,financial management is needed for maintaining proper
balance in risk & uncertainty.

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INTRODUCTION OF RATIO ANALYSIS
In the last to last chapter we studied five of the tool available in the
tool available in the tool kit of a financial analyst namely multi step income
statement,horizontal analysis ,common sized analysis,trend analysis and
analytical balance sheet and applied them to analyse the financial statement
of capol ltd and libertyeltd. We can upon some interesting findings based
on that analysis .what you must have observed is that in all the cases we
analysed the two financial statements ,that is,balance sheet and profit and
loss statement,almost in isotation .In reality however,the two statements are
totally interrelated and dependent on each other . this is ,despite their mer-
its, one of their limitations and thence the need for amore comprehensive
tool of analysis,that is Ratio Analysis.One of the ratio that is Eps has been
analysed in the last chapter.
Definition of Ratio analysis:-
Ratio Analysis is a comprehensive tool of analysis in that it seets to meas-
ure and establish cause and effects the relationships between either two
items of balance sheet , say current ratio ,that is ratio of current assests to
current liabilities, or of profit and loss account, say net profit margin that is
ratio of pat to net sales or both the balance sheet and the profit and loss ac-
count say return on net worth that is ratio efficiency protitability and capi-
tal market valuation of a company.

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That does not mean that it can be used independently of other tools and techniques . to initiate you in the subject it is neces- sary to take up abridged finacial statements. ratio analysis .hence the need for a full annual report .Ratio analysis is thus a relative and more focusedanalysis of financial statements.particularly the com- putation part may accquire numerous reasonable and logical assumption depending upon the information available.because absolute figure comparison will lead to now where  Intra firm compari8son for the same reson  Comparison against industry benchmarks  Analysis of chronological performance over a long period As you will observe later in this chapter . 4 . Ratio analysis is of particular significance in the following cases  Inter firm comparison.while analysing the ratios of industries Ltd. however..It leads to an expansion and futher analysis of the findings recorded through other tools.At the same time.

Ratio Analysis is part of the fi- nance statement analysis. The company’s Financial Information is contained in the basic finan- cial statements i. This technique is very much usefully in the assessment of working capital requirement and also to know the performance of company. production. marketing and personal manage- ment. This is the region why the ratio analysis is done. A ratio is relationship between to variable unless to variables are compared it cannot be calculated which one is superior to other. needs finance to carry on its operations and to achieve its targets. medium or small. 5 . trading and profit & loss account.e. which helps in know in the companies position to the outsiders. By us- ing the these ratios we can review the at how much working capital are in- vested in current assets. INTRODUCTION The success any organization mainly depends upon four functional areas of management namely finance. Every enterprise either big. balance sheet. Finance is defined as the provision of money at the time it is re- quired.

Aratio analysis is analyzing the information by comparing two different vari- ables. it is to be noticed that there is a basic limitation of the tra- ditional financial statement comprising the balance sheet and the profit & loss account i. they do not give all the information regarding financial operation of the firm. other people who these with the company. However.e. Accordingly RATIOS not only indicate the present position. Using various ratios we can find out the liquidity and solvency posi- tion of the company. May indicate not only the financial position and pre- cautions but also the past policies and actions they have caused. So ratio analysis is a technique that helps these people to deal with the company. investors..These statements are very useful for evaluating the financial position and performance of the of a firm. 6 .it is a widely used tool of financial analysis and interpretation of ratios should give experienced . skilles analysts a better understanding of the financial condition and performance of the firm than they would obtain from the analysis of financial data alone . In practical use these statements does not give much more detailed information what creditors. Ratio Analysisis a powerful tool of financial analysis. they also indicate the causes leading up the large extent for in- stance accounts ratio.

Ratio Analysis the principle tool of finance statememt analysis. They reveal the relationship in more meaningful way which enables to draw better conclusions. But comparing ratios merely does not add any information of profits and sales. referred to as ratio Analysis. The relationship can be expressing items that are related with each other are for the purpose of financial analysis . 7 . It is also defined as the systematic use of ratio is to interpret the finan- cial statement so that the strengths and weakness of afirm as well as its historical performance and current financial condition can be de- termined. it is the process of analyzing the relation between two financial variables.

A creditor can establish the credit rating & an investor can plan buying and selling of shares on the basis of safety of principal earnings.  The study is also beneficial to employees and offers motivation by showing how actively they are contributing for company growth.  By using the technique of ratio analysis the labor leaders reveal how the company stands in relation to labor & welfare. 8 . NEED OF THE STUDY  The study has great significance and provides benefit to various par- ties who are directly or indirectly connected with the company.  A banker can judge the liquidity position.

liquidity and leverage and activity ratios only.  The study consists of only the past performance of Coromondel Agro Products and Oils Limited (CAPOL)  The study does not consist of the future trend analysis. Ratio Analysis is done with se- lected ratios.  The study is based on secondary data only. SCOPE OF THE STUDY The study is based on analysis of the historical data & information contained in company published income statements & balance sheets for a period of 5 years from 2011-12 to 2015-16. 9 .  Only the ratios concerned with profitability.

profitability and efficiency position of the company. OBJECTIVES OF THE STUDY The major objective of the study is to know about financial strengths & weakness of Coromondel Agro Products and Oils Limited (CAPOL) through financial ratio analysis.  To make appropriate suggestions and measures for the effective work- ing of the company. staff devel- opment and career progression. The main objectives of study are:  To understand the liquidity.  To make comparison between the ratios during different periods.  To assess levels and sources of job satisfaction and job dissatisfaction  To explore their ideas on the development of higher education over the next twenty years.  To evaluate and analyze various facts of the financial performance of the company.  To examine the opportunities available to them for training.  To understand the impact of broader changes in higher education on the working lives of administrative and support staff and in particular on their roles and responsibilities. 10 .

2.Lack of Adequate standards:There are no well accepted standards or rules to thumb for all ratios which can be accepted as norms .Limited use of single ratios:A single ratio usually does not convey much of asense. 11 . ratios also suffer from the inherent weakness of accounting records such as their historical nature ratios of the past are not necessarily true indi- cators of the future 4.it renders interpretation of the ratios difficult. LIMITATIONS OF THE STUDY The ratio analysis is one of the most powerful tools of financial management throught ratios are to calculate and easy to understand they suffer from some serious limitations.Inherent Limitations of Accounting:Like financial statement. 3.To make a better interpretation a number of ratios have to be cal- culated which is likely to confuse the analyst then help him in making any meaningful Conclusion. 1.Personal Bias:ratios are only means of financial analysis and not an endin itself ratios have to be interpreted and different people may interpret the same ratio in different ways.

Primary Data: It is collected from the direct interaction with the financial per- sons and other officials of the company. To some extent this method is also used in natural sciences. including questionnaires and telephone interviews in market research. That information was utilized for calculating performance and based on that. 12 . In natural sciences observation is conducted in natural settings while in the social sciences an artificial situation can also be created where the observer can observe the participants. 1. interpretations were made. The distinction between primary research and secondary research is crucial among market-research professionals  TOOLS OF PRIMARY DATA:  Observation: is the most commonly used method of data col- lection in the humanities and social sciences. METHODOLOGY OF THE STUDY The information is collected from secondary sources during the project. amongst others. It is often undertaken after researchers have gained some insight into an issue by review- ing secondaryresearch or by analyzing previously collecte primary data It can be accomplished through various methods.  Primary research: involves the collection of original primary data by researchers. or experiments and direct observations in the physical sciences.

Interviews are expensive as compared to other meth- ods of data collection.  Questionnaire: is one of the most commonly used methods of data collection in research.Some of the information regarding theoretical aspects is collection through referring standards text books. Questionnaires are formulated to get to the point information on any subject area. Due to this reason it becomes costly as well as time consuming. Interviews: are another important method of primary data col- lection. 13 .  2. Secondary Data: Most of the calculations are made on the financial statements of the company. In the interview the interviewer collects information from each respondent independently. The question- naire is an inexpensive method of data collection as compared to other methods of primary research.

by prepaid subscriptions.whichis printedo r electronically published sometimes referred to as an online magazine. daily) has several related meanings:  a record of events or business a private journal is usually referred to as a diary  a newspaper or other periodical. and so on. other informative articles (listed below) about politics. JOURNALS: A journal (through French from Latin diurnalis. arts. Magazines are generally published on a regular schedule and contain a va- riety of content. but not exclusively. sports. NEWSPAPER: A newspaper is a serial publication containing news about current events. A newspaper is usually. printed on relativelyinexpensive. They are generallyfinanced by advertising.usuallya periodicalpublication. in the literal sense of one published each day REPORTS: A report or account is any informational work (usually of writing. by a purchase price. television.TOOLS OF SECONDARY DATA: MAGAZINE: A magazine isapublication. and advertising. or film) made with the specific intention of relaying information or recounting certain events in a widely presentable form. speech. 14 . or a combination of the three.

the object is to deactivate these enzymes early by means of heat. INDUSTRY PROFILE About Cooking Oil: Cooking oil is purified fat of plant. Vegetable oils and fats are princi- pally used for human consumption but are also used in animal feed. followed by chop- ping or grinding. The different kinds of edible vegetable oils include: Olive oil. Palm oil. Sunflower oil. The following are the steps involved in the processing of oils. The oils and fats are extracted from a variety of fruits. Grape seed oil. soyabean or sunflowr oils. all oil seeds have enzymes that can influence quality. Step1: Preparation of seeds begins with heating and dehulling. freeing the oil to make the penetra- tion of solvents into the cells easier. corn. Pumpkin seed oil. Sesame oil and rice bran oil. During processing. Penult oil. The generic term “vegetable oil” when used to label a cooking oil product refers to a blend of a variety of oils often based on palm. Safflower oil. Canola oil. for medicinal purposes and for certain technical applications. This is accomplished by rolling or flaking. Processing of Cooking Oil in India: The vegetable oil processing industry the extraction and processing of oils and fats from vegetable sources. 15 . which is liquid at room tempera- ture. to break the cell walls. seeds. Many other kinds of vegetable oils are also used for cooking. and nuts. Corn oil. Soya beam oil. In addition.

In some cases. Later. isthiocyanates. after mechanical pressing. At this stage. Be aware that. but not all. producing fatty acid damage.For example. The primary objective of this step is to produce a clean. if the chemical ex- traction method is used. the oil is filtered and sold as unrefined oil. the oil undergoes further refining. but more often. the oils are steam heat- ed to evaporate the solvents at temperatures around 3000 F. 16 . At this temperature. Step2: Extraction from seeds is accomplished either by mechanically press- ing or by mixing such gasoline-like solvents as hexane and heptanes (which are lung irritants and nerve depressants). de- pending on t he seed type. oxazolinine thiones and other compounds. the oil can now be bottled and sold as “unrefined oil” in health food stores. with canola or rapeseed. crude oil product. Most of the sol- vents are evaporated. sulpate. the oil is extremely flammable and some factories have been known to blow up or catch on fire. mechanically pressed seeds are subject to addi- tional heating during the “auger” process. where the average temperature reaches about 1200C (2480) with higher temperature and pressures produc- ing more oil. After be- ing mashed and cooked for up to two hours at varying temperatures. Oil desig- nated for more refining goes through more processing procedures. at this stage. Some of these compounds act as a catalyst poison during hydro generation of oil for margarine production. the enzyme myrosinase can influ- ence quality because it catalyses hydrolysis of glucosinolates to give glu- cose.

(often sodium hydroxide – commonly known as Drano – or a mixture of sodium hydroxide and sodium carbonate) is one such substance used to remove free fatty acids that can cause rancidity and decreases the quality of the oil. di- lute acids. 17 . salt solutions. which can cause rancidity of the oil. The hydrated gums are vacuum dried for crude lecithin processing. or greenish hue. Alkali solutions combine with the free fatty acids to form soaps and also help to remove toxic substances that are natu- rally present in many plants. At this stage. It satisfies export oil requirements for a product free of impurities that settle out during shipment. which is also deemed undersirable Degumming coverts the phospha- tides to hydrated gums which are insoluble in oil and readily separated as sludge. yellow. increasing the neu- tral oil contained in the soap stock. or alkalis used in order to remove phosphates.Step 3: Degumming is a treatment of crude oils and water. This process also involves the addition of phosphoric acid and water at temperatures of 600C (1400F) The Industry’s rationale for the degumming process is as follows: It is necessary to remove the lecithin. Caustic soda. waxes and other impurities. It substantially decreases refinery waste load because of the lower neutral oil lossess and the reduction of gums discharged. the oil still has its pigmentation of red. Gum removal prior to alkali refining often improves yield because the phosphates can acts as emulsifiers in a caustic solution. Temperatures again have reached 750C (1670).

Degummed oil is more suitable to this physical refining technique because of the significant reduction in such nonvolatile impurities as phosphatides and metallic prooxidants. and mixed with a type of clay substance that will absorb the unwanted pigment. forming conjugated fatty acids. sterols.It prepares the oil for steam refining. Most of the spent clay is then filtered from the oil. and products or oxidation formed during the bleaching stage. In the bleaching process. trans acids begin to form. which removes undersirable odors and tastes from the oil. monoglycerides. including residues.2250 C. Above 1600C (3200F). Above 2000C (3920F) trans fatty acids multiply substantially and above 220 0C. 18 . Step4: Bleaching oils is necessary because they have a strong yellow or reddish pigment that is considered undesirable. It results in improved acidulation performance. Step5: Deodorization is done through pressurized steam distillation at tem- peratures of 2400-2700 C (464-5180F) for 30 to 60 minutes. toxins. Note: When temperatures go above 1500C (3020F) unsaturated fatty acids become mutagenic. Deodorizing reduces the content of many other substances. During this phase. some of the plyunsaturated fatty acids may undergo oxidation and toxic peroxides. for about 4 hours. the trans fatty acid explodes. beta carotene and tocopherols (Vitamin E). oils heated to temperatures of 1750 . The soap stock from alkali refining is easier to adulate because of lower emulsifier content and the ac- id water has less impact on the waste water treatments systems. as well as removing sulphur.

5% LNA. citric acid. almond. shorten- ing oils. BHA (Butylated Hydroxy Anisole. or methyl sili- cone. soyabean. The most common forms are shortening. con- taining on average 10% LA and 0. BHT (Butylated Hydroxy Toluene). Oils can be hydrogenated to varying degrees. despite all of the heating involved the oils can stillb e sold as “cold-pressed” since there is no accepted definition of the term. Olive oil is the only oil sold on supermarket shelves that is not heated above 1500 C. oil not designated for sale. Preservatives are added such as synthetic antioxidants. canola. rice bran. sesame. go on to more processing in the form of hydrogenation to make margarine. walnut.The oil is now tasteless and cannot be distinguished from other oils derived from seeds or plants. At this point. A defoamer may also be added to prevent turbidity when refrigerated. and the partially hydrogenated fats used for frying and in processed foods. These fates are desirable for its melting point. “All” includes safflowr. TBHQ (Tertiary Buty1 Hydroquinone). peanut. corn. Propyl Gallate. 19 . avocado and others including belnds. All oils sold in supermarkets and convenience stores are processed in the above manner. allowing for high temperature cooking and frying. grape seed. The hydrogenation oil convents liquid oils into hard fats by adding hydrogen to the fat molecule. depending on the harness. Step6: Hydrogeneration After all this. Hydrogenation involves the artificial satu- ration of fully refined oils to harden them into spreadable products. marga- rines. However is a poor source of essential fatty acids. sunflower.

4%) candies (38. causing a nation-wide deficiency of the essential fatty acids. Remmants of both metals re- main in the final products of hydrogenated or partially hydrogenated goods.6%) and bakery products (33.5%) completely hydro- genated oil is now a hard fat containing no essential fatty acid activity. During complete hydrogenation. the trans fatty acid content can be more than 60%.After the above refining process oils are put under pressure. all double bonds are saturated with hydro- gen. using hydrogen gas at temperatures of 120-2100 C (248-4100F) in the presence of a metal catalyst (nickel. Paritally hydrogenated oils are found in French fries (37. A nickel catalyst is actually 50% nickel and 50% aluminum. platinum or copper) for six to eight hours. 20 . This means there are no unsaturated fatty acids. In some partially hydrogenated margarine. no w6’s and no w3’s.

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77 11.16 Nigerseed 1.67 18.20 Cotton seed 4.07 00.67 277. The main edible oils from these sources are groundnut.50 13.12 0.54 60.97 02.34 01. sunflower.27 B. Name of the Oilseeds 2014-15 2015-16 A.00 83.52 Subtotal 243.17 09. Secondary Source Coconut 5. soya bean.91 Seasame 6. Primary Source Groundnut 67.70 0.74 2. niger and safflower.32 Castor 7.09 06.31 68.74 15.50 4.87 3. The main secondary sources of oils include coconut. which are cultivated.54 78.30 5.45 Soyabeen 68. sesame.87 Linseed 1.36 Sunflower 11. rapeseed/mustard.73 00.Source for Edible in India: There are two sources of oils: Primary sources Secondary sources Theprimary sources include those oilseeds.09 Rapeseed/Mustard 75.70 22 .88 04.51 1.87 24.93 3.67 03.58 78.92 14.93 23. cottonseed and rice bran.

89 2015-2016 277.47 117. realiza- tion has gone up from Rs.82 2009-2010 207.60 95. oilseeds and minor oils has increased from 3.15 60.64 90.46 107.48 69. India is one of the largest producers of oilseeds in the world and this sector occupies an important position in the agricultural economy and accounting for the estimated production of 24.46 104.99 96.40 54.98million tons in the financial year 2015-16.4% of world oil meal export.78 23 .29 2013-2014 251. Export of oil meals.39 46.30 2014-2015 243. Oil Year Production of Net availability of Consumption of (Nov.15 102.68 2012-2013 148. India accounted for about 6.Oct.11 2010-2011 184.73 71.54 72.4613crores to Rs.5299crores. Importance of Edible Oils in the Country’s Economy: Oilseeds and edible oils are two of the most sensitive essential com- modities. In terms for value.76 2011-2012 206. India contributes about 7-8% of the world oilseeds production.63 61.37 125.36 million tons in the financial year 2014-15 to 4.86 71.31 82.35 million tons of nine culti- vated oilseeds during the year 2014-15.40 124.) Oilseeds edible oils from all Edible Oils domestic sources (from domestic and important sources) in lakh tones 2008-2009 247.25 2016-2017 307.

are also a significant source of oils. Inhabitants of northern plain are basically hard fat consum- ers and therefore. Its production is about 1. Groundnut. Niger seed/castor are the major traditionally cultivated oilseeds. availability of edible oils from all domestic sources and consumption of edible oils (from Domestic and Import Sources) during the last few years are as under. a term used to denote a partially hydro- genated edible oil mixture. Figures pertaining to estimated production of major cultivated oilseeds. prefer Vanaspati. It has around 10% share of the edible oil market. Soya been and sunflower have also assumed importance in recent years.Types of Oils commonly in use in India: India is fortunate in having a wide range of oilseeds crops grown in its different agro climatic zones. oilseeds of trees and forest origin. linseed. which grow mostly in tribal inhabited areas.2million tons annually. For example. Efforts are being made to grow oil plan in Andhra Pradesh. Coconut is most important amongst the plantation crops. Among the non- conventional oils. sunflower. rice bran oil and cotton seed oil are the most important. Sesame. Vanaspati has an important role in our edible oil economy. Tamilnadu in addition to Kerala and Andaman & Nicobar Islands. Consumption Pattern of Edible Oils in India: India is a vast country and inhabitants of several of its regions have developed specific preference for certain oils largely depending upon the oils available in the region. mustard/rapeseed. It has the ability to absorb a heteroge- neous variety of oils. people in the South and West pre- fer groundnut oil while those in the East and North use mustard/rapeseed oil. Likewise several pockets in the South have a preference for coconut and sesame oil. Karnataka. In addition. 24 .

The share of raw oil. This gave a thrust to Government’s efforts for augmenting the production of oilseeds. One was the setting up of the Tech- nology Mission on Oilseeds in 1986. through technological means such as refining. palm oil or its liquid fraction (palmolein). bleaching and de- odorisation. all de-odorisation. which have very significantly contrib- uted to the development of this sector.3 million tons in 1986-87 to 24. newer oils like soyabean. all oils have been rendered practically col- ories and tasteless and. things have changed. like those of cottonseed. There was some setback in 1999-2000 because of the un-seasonal rain followed by inclem- ent weather. sunflower. have become easily interchangeable in the kitchen. Of late. Major Features of Edible Oil Economy: There are two major features. other dominant feature which has had significant impact on the present status of edible oilseeds/oils industry has been the program of liber- alization under which the Government’s economic policy allows greater freedom to the open market and encourages healthy competition and self regulation rather than protection and control.For example. The production of oilseeds declined to 20. therefore. soyabean and rice bran. This is evident by the very impressive increased in the production of oilseeds from about 11. These tend to have a strong and dis- tinctive test preferred by most traditional customers. 55% and 10% respectively.7million tones in 1999-2000. sunflower. 25 . refined and vanaspati in the total edible oil market is estimated at 35%. rice bran and cottonseed and oils from oil seeds of tree and forest origin had found their way to the edible pool largely through vanaspathi route.8million tons in 1998-99. Newer oils which were not known before they have entered the kitchen.

1995.  Edible Oils Packaging (Regulation) Order 1998.31% Units bearing Material) Refineries attached 127 51 (In terms of oil) 45% with Vanaspati Units Refineries attached 297 36 (In terms of oil) 27% with Solvent Units Independent Re.  Vegetable Oil products (Regulation) Order.18% ti.50. Bakery Shortening & Margarine) Oil seeds crushing units include crushing units in the small scale sec- tor as also in the organized sector.425 (In terms of Seeds) 10-30% Units prox) Solvent Extraction 711 313 (In terms of Oil. The capacity utilization generally ranges from an average of 10% for the ghanis (small scale sector) to around 30% in case of the expellers in the organized sector.000 (Ap. Regulation/Control Order of Edible Oil Industries: a) The Regulatory Functions are performed basically through the fol- lowing three Orders. 1998. 1967. And  Solvent Extracted Oil. 26 . of Units Annual Capacity (Lakh Average Capacity Oil Industry MT) Utiliztion Oilseed Crushing 1. b) The above Orders are statutory in nature promulgated under the Es- sential Commodities Act. De-Oiled Meal and Edible Flour (Control) Order. 585 35 (In terms of oil) 36% fineries Total Refineries 1009 122 (in terms of oil) 35% Vanaspati Units 264 53 (in terms of Vanaspa. Present Status of Indian Vegetable Oil Industry: Status of the Vegetable Oil Industry (As on August 2006) Type of Vegetable No.

50m million. Highly fragmented industry. 27 . 2. Market size and Growth:- Out of the total oil consumption pf 9 million ton per annum refined oil account for only around 2 million ton 70% refined oil is sold in loose unbranded from sunflower ground nuts are popular throughout the country rape seed (also known as mustard) has high penetration in the north and fast edible oil consumption has been raising their last 5-6 years resulting in higher imports of edible oil nut the widening deficit domestic production of edible oil was 7 million ton in 2005-06 to 2. Idle capacities among these units due to shortage in feed stock supply. Major oil brands sundrop Dhara Saffola week postman. 5. Vanaspathi brands Dalda Rath. Over 50% of the units’ silk or underutilized due to surplus ca- pacity. Over 600 oil extraction units. 3. Only 10 edible oil units and 8 Vanaspathi units have national reach. 6. 4. 7.1 million ton in 2007-08 imports in 2008-09 are expected to be around 2.166 vanaspathi manufacturing units. Market Industry structure 1.20-2.

3.Agro Products and Oil Ltd Characteristics 1. Regulations: under the edible oils packaging (regulation) order 1998 edible oils cannot be sold loose but can be sold only in packed form oil consumption –north is largest market followed by south. 2. Oils primarily a commodity market price sensitive. Oil sold in bulk (tin. 5. jars. IIDPE containers) to institutions: In retails packs (PET bottles cans. 28 . Whole sellers/ stockiest & retailers (kirana shops super markets). 4. west & east zones. and pouches) to small customers’ seasonal demand for oils and vanaspathi Sep- tember to November (pack season). Effective distribution chain through a complex network of C$F aizents.

In the next five years the market for future edible oil will grow by 8% to 12. Influence of branded product’s health message. 3. Key Success Factors 1. Free imparts low imports duties and slump in global prices lead to. Macro Economic Factors:population growth per capi- tal income purchasing power oil seeds crop. 4. 6. Branding essential for success(vanaspathi – Dalda oils – Sundrop) 2. 5. Proposed future trading in edible oils will help curtail price volatility and lend knowledge based assistance to farmers of eliminate unofficial markets. Raw materials sourcing: Fours on improving yields get- ting better quality oil seeds ensuring regular supplies through symbolic relationship with farmer. 29 . 4. 3. Better distribution network to improve reach. Efficiency in operation to become price competent and with stand overseas competition. Growing preference for convenience foods.Future of the Agro products 1. 2.65 million MT Vanaspathi will grow to 1.5 million MT.

restaurants. Oils and vanaspathi substitutes can be fleck imported under OGL. 2. 7.647151…of (whole sale. 4.23500/MT (whole sale.i. Prices of edible oils: RBD palmoein Rs.Imports and price 1. 8. institutions) 30 .38 million MT. Prices of vanaspathi: Rs. canteens. Import duties : 15% basic 10% surcharge oils basic (oil seed) 3. Imports during 1998-1999-2. 6. 5. hotels. Oil and vanaspathi used as cooking media (in households. World market: $420/MT (Rs. Ex- Calcutta)10|May99 9. Ex-Mumbai). Estimable imports 1999-2000-3million MT.18060/MT) c. Large scale imports of oils and vanaspathi substitutes pri- marily to check price rise and meet supply shortages.f-july99.

Cotton seed crushing industry is one of the Agro based industries cotton seed is used in the manufacturing of edible oils deoils cake bulls and acid oil. India is the 3rd largest edible oil based economy in the world after US and Chinas.80 crores out of which Govt. of India has central directors on the board of each corporation the total authorized share capital of all the corpo- ration up to march 1970 was Rs. India accounts 9.Agro Industry Corporation These corporation have been setup in17 states in the sector under taking in which both central and state Govt. By a product that is cotton seed oil cake cotton seed hulls soap stock etc… further the products of CAPOL like de oiled cake are also exported to Japan Thailand Malaysia and West Germany etc. Cotton seeds are removed from the cotton and would be sold to company of manufacturing of various products.7% to the global oil seed production the main production of this industry is edible oil. of India’s contribution was 31.5 croresCAPOL is an oil producing industry at chirala has acquired much importance in this part of the parkasam district in AP thesis because of the extensive of cotton by the growers. therefore the study on consumer survey of the CAPOL has assumed a greater significance in recent times. 31 .

the Central Govt. so also the identity of the packer becomes clear. an Edible Oils Packaging (Regula- tion) Order.  The State Governments will have power to relax any requirement of the packaging order for meeting special circumstances.Edible Oils Packaging (Regulation) Order.  Only oils which conform to the standards of quality as specified in the Prevention of Food Adulteration Act. 1654 and Rules made there under. and the Prevention of Food Adulteration Act. 1998: In order to ensure availability of safe and quality edible oils in packed form at pre-determined prices to the consumers.  Edible oils shall be packed in conformity with the Standards of Weights and Measures (Packaged Commodities) Rules. 1998. 1995 to make packaging of edible oils.  The packer will have to have his own analytical facilities or adequate arrangements for testing the samples of edible oils to the satisfaction of the Government. 1954 and Rules made there under will be allowed to be packed. promulgated on 17th September. 1998 under the Essential Commodities Act. compulsory unless specifically ex- empted by the concerned State Govt. Silent features:  Edible oils including edible mustard oil millers will have to register themselves with a registering authority. 1977. sold in retail. 32 .  Each container or pack will have to show all relevant particulars so that the consumer is not misled.

The Central Govt is aware of the production of edible oils is a highly unorganized industry. Orissa. The controls exercised were stringent and covered both the manufacturer and the dealer. namely (i) Vegetable Oil Products (Control) Order. It was decided that in future. Karnataka and Rajasthan have started implementation of the Packaging order. Delhi. Government had carried out a through review and intensive consulta- tions with the industry. it would be sufficient if control is limited to the manufacturing stage only.The power for implementation of the order is basically delegated to the State Governments. 1975. It is in view of the situa- tions that the State Governments have been empowered to exempt any edi- ble oils from the provisions of this order in specific circumstances. 1998: The Vanaspathi industry was controlled by this department through two control orders under the Essential Commodities Act. For the smooth implementation of the packaging order. Looking to the status of the vegetable products industry in the coun- try. efforts are be- ing made to remove some operational difficulties. A substantial quantity of oil produc- tion is in the small scale or unorganized sector. Andhra Pradesh. Vegetable Oil Products (Regulations) Order. 1995. 33 . The other States have also initiated action and appointed Registering Authority and Inspecting officer for implementation of this or- der. The State Governments namely Tamilnadu. Pondicheery. 1947 and (ii) Vegetable Oil Prod- ucts (Standards of Quality) Order. These two Orders were issued at a time when the vanaspati industry was at a primitive stage and strict control over manufacture and distribution of the product was required.

1967: The order is basically a quality control order to ensure that the sol- vent extracted oils particular are not reached to the consumers for consump- tion before the same are refined and conformed to the quality standards specified in the order for the purpose. reduces the area of control and limits the role of this Department to the manufacturing stage of the vegetable oil product. The standards of quality prescribed under the Sched- ule have been tightened and all requirements which were vague and non- measurable and thus open to arbitrary interpretation have been done away with.Therefore. Standards for the solvent (hexane). have also specified so as to eliminate possible contamination of oil from the solvent used. Salient Features:  Procedure simplified  Transparency in operation  Minimizing area of control  Consumer Protection through quality assurance  Requirements which were vague and non-measurable done away with Solvent Extracted Oil. 1998. the earlier orders have been replaced with a single order called the Vegetable oil products (Regulation) order. De-oiled Meal and Edible Flour (Control) Order. 34 . which is to be used for extraction of oil from the oil-bearing materials. promulgated on 16th December 1998. This order.

1964 Ministry of Health accorded permission for the import of solvent extracted soyabean oil from USA and its use in vanaspati manu- facture subject to certain consideration.GENESIS:  In July.  Ministry of Health also indicated that since all solvent extraction units were not equipped to market their products in a fully refined form for direct edible use and many of them could only manufacture crude or semi-refined oil which had to be further processed. Hyderabad) CSIR (RRLO. Mysore).  The question of extending similar facilities the indigenously produced solvent extracted oils considered in an Inter-ministerial meeting held in Food Secretary’s room in December 1964 and decided in the meeting that the Ministry of Health to set up a Committee of  Technical Experts for a detailed study on the question and the nature of controls to be exercised in this regard. Food and Agriculture (Sugar and Vanaspati Directorate) ICMR (Nutrition Re- search Laboratory.  The Committee recommended that solvent extracted oils might be used in the manufacture of vanaspathi and refined oils provided that such use was governed by regulatory order providing inter-alias for the licensing of solvent extraction units and also for an effective system of distribu- tion control for ensuring that solvent extracted oils did not reach the consumers except after being processed in the form of vanaspati or re- fined oil and that unprocessed oil was dispatched to industrial user only. 1966 comprising of representa- tives of the then Ministry of Supply and Technical Development. 35 .  The committee constituted in January. ISI etc. Hyderabd and CFTRI.

 Eliminates the possibility of diversion of the oils for uses not intend- ed. and  Specific particulars to be declared on the label affixed to the contain- er. appropriate action has been taken against the defaulting units. For the purpose of ensuring proper quality con- trol. 36 . offer to buy. de-oiled meal and edible flour. Vegetable Oils & Fat) in terms of the provisions of the Orders. regular inspections of the units are carried out by the Field Officers of DVVO&F posted in different zones. de-oiled meal and edible flour. any solvent not con- forming to the quality standards for extraction of vegetable oils.  Consumer protection through quality assurance of solvent extracted oils. A well-equipeed laboratory exclusively devoted to the analytical work pertaining to oil and fats in available with DVVO&F in the case of failure of samples. in addition to surprise inspections by the Officers from Headquarters.  Prohibit by. Oil Quality Monitoring in India: The monitoring of Quality of edible oils and fats in done by the DVVO&F (Directorate of Vanaspati.Salient Features:  Governs the manufactures. The samples drawn by the officers are sent for analysis for checking con- formity with the prescribed requirements. use or stock for use. Irregularities pointed out by the Field Officers in their Inspection Reports are considered for appropriate action against the defaulting units. quality and movement of solvent extract- ed oils.

87 2009-10 41. expect Coconut Oil.42 10755. Imports of Edible Oils: The quantities of edible oils imported during the last few years are as under: Year (Apr – Mar) Import of Edible Oils* Quantity (in Lakh Value (Rs.65 8779. In order to harmonize the interests of edible oils to the extent possible.64 2012-13 52.22 7588. Subsequently import of other edible oils was also place under OGL.96 7983.97 2011-12 43. which was in the negative list of im- ports was first de-canalized partially in April.06) 44.65 2014-15 42.88 8961.99 2015-16 33.74 37 .95 7579. 1994 when import of edible vegetable palmolein was placed under Open General License (OGL) sub- ject o 65% of basic Custom Duty.73 2016-2017(uptoMar.93 2008-09 41.In Croes) tons) 2007-08 26. there have been progressive changes in the Import Policy in respect of edible oils during the past few years.24 2013-14 45.77 5976.53 2010-11 43. import duty structure on edi- ble oils is reviewed from time to time.78 9889.22 6464.90 11683.POLICY ON IMPORT & EXPORT OF EDIBLE OILS: In pursuance of the policy of liberalization of the Government. Edible Oil.

48 3557. salad oil.9 39.84 635.06 40.6 1.40 663.3 2. mustard oil.73 860.65 530.08 3393.5 2014-15 3. conttonseed oil. palm oil. kardi oil.80 5299.04 3559.58 4338. have been made free without any quantitative or licensing requirements.87 36.48 1106.3 49.9 33.0 2011-12 3.6 33.7 22.85 1287.64 1207.9 31.10 591.7 27.27 2042.07 1.62 3172.1 36. etc. palm kernel oil.3 2016-17 3.97 44.18 5449.77 2653. niger seed oil. Export of oilseed.22 21181.7 19.9 2009-10 2.7 2012-13 2.60 1027. in lakh tonne) (Value in Rs.7 2. sesame seeds.2 2.53 1711. linseed oil.8 2015-16 3.0 2013-14 3.  Export restrictions like registration and packaging requirements have been removed on groundnut oil.54 33191.04 2.Crores) Year Oil Seeds Minor Oils OilCake/extraction Total (Apr.7 38 . sunflower oil.70 4723.32 843.2 34.6 29.02 1530.09 581.8 23.34 2323.3 30.60 4612. sunflower seeds. Exports of Edible Oils: Some of the important measures taken by the Government of India to promote export of edible oils/oilseeds are:  Export of all oilseeds such as HPS groundnut.4 2. rice bran oil.71 3065. when exported for consumption.39 515.37 918. mustard seeds.42 726.23 837. soya bean oil have been made free.1 2010-11 3.  Export of vegetable oils such as coconut oil.6 36.77 1736.66 1261.6 2. and Fats Mar) Qty Value Qty Value Qty Value Qty Value 2008-09 1.6 26.62 1096.96 614.4 1. minor oils and fats and oil meals during the last nine years are as under: (Qty.

Role of Cotton seed oil in Indian Economy: The global production of cottonseed oil in the recent years has been at around 4-4. Currently. It is estimated that. China. more particu- larly groundnut oil. Cottonseed is traditional oilseed of India. In India the average pro- duction of cotton oil is around 4 lakh tons a year. United States and Paki- stan are the major producers of oil. viz. 39 . In India. the oil recovery from cottonseed is around 11% Gujarat is the major consumer of cottonseed oil in the country. United States (60000tons) is the major exporter of cottonseed oil. be- fore palm and soya oil became the only imports of the country. India.5 million tons. It is also used for the manufacture of vanaspathi. if sci- entific processing is carried out the oil production can be increased by an- other 4 lakh tons. while Canada is the major importer. The major seed producers. Around 2 lakh tons are traded globally every year. The price of cottonseed oil is generally depend- ent on the price behavior of other domestically produced oils. the country does not import cottonseed oil. India used to import around 30000 tons of crude cottonseed oil.

transportation. The company started its commer- cial production in April. The cer- tificate of commencement of business was obtained on 5 th January. 1977 i. 1975 as joint venture with AP Industrial Development Corporation Limited. COMPANY PROFILE HISTORY OF ORGANIZATION: The Company “Coromandel Agro Products and Oils Limited’ was incorporated on 12th December. water. requiring for the project pro- cessing operations. The joint ventures agreement with AP Industrial development Corporation Limited was signed on 1st February. as a public limited Company. 1976 was transferred to the company on February 13th. in a record time of 10 months form time of foundation stone was laid. construction material. The site is selected through roadside railway track and near to the seashore. a by – product of cotton on scientific basis.P. 1976. 40 .e. 1976. Bombay on urn key basis in 1976. skilled personnel etc. The plot has been acquired from Government A. The area occupied by the factory is nearly 29 acres. The Plant has been installed by M/s. on lease for peri- od of 99 years.. 6Kms away from Chirala. The company “CAPOL” has been located at Jandrapet Villages. Sevotech Engineers (Pvt) Lim- ited. The Company is mainly processing cotton seed. infra-structural facilities like power. And the company is favorably located near the availability of raw material.

Sri Maddi Lakshmaiah. Sri Madi Venkateswara Rao has completed his Masters degree in Business Administration (MBA) from Oxford University. S/o. A. Limited and MC Agro Products Limited.S. Sri. who was also one of the promoters of the company and they have got major shares. Edn. After the retirement of Capt. Sri Maddi Lakshmaiah Group has taken the management of the company. He has very rich and good experience in tobacco line of business. of the experienced man with high skills and got the inspection of the company.M. He visited so many East European countries and boosted their turnover. USA Soon after completion of his studies he come to India and he was nominated as direc- tor in Maddi Lakshmaiah Pvt. Before taking over the management by M.V.L.Mohan Rao (Retd) Capt.D. J.Rama Rao (Retd) V.Group. Maddi Lakshmaiah has become Executive Director of the com- pany.Badur (Retd) and Sri P. CAPOL has in- curred huge lossess and lost its working capital because of under-utilization of plant. J. since the beginning Sri Maddi Venkateswara Rao. Rama Rao. He was a very experienced man with high sills and got very wide experience.Rama Rao was the M.BACK GROUND OF PROMOTERS OF ORGANIZATION: The promoters of the company are Capt. It has been maintaining cordial relationship with the workers and successfully completed the three years agreement with the union for the pe- riod of 1990 to 1992.M. 41 .

N. he has with other in the organization chart. but also indicates the independence of the various financial aspects of the concern. fabrication and erection of equipment from various sources and expedite implementation of the project. Bombay one of the reputed engi- neering constructors in the oil seed industry. 1976 but due to unforeseen circumstances. The installation of the plant and machinery was expected to commence in the month of September. the company has entrusted the entire work turn key basis to M/s.PROGRESS OF PROJECT IMPLEMENTATION: Civil construction work is being carried departmentally by the com- pany under the supervision of M/s. Servotech Engineers Pvt. The plant and machinery are being procured from indigenous sources. The organizational chart presents a summarized view of the whole organization.N. 1997. Limited. Associates one of the leading civil engineers and architects. In order to coordinate the procurement. the company went into com- mercial production in the month April. ORGANIZATION CHART: A diagrammatic representation of the line of authority and subordi- nate that is the position of each employee in the organization and relation- ship. 42 .

5)In addition to this. India for its quality and productivity and re- ceived GOLD UDYOG PATRA Award from Sri Pranab Mukerjee. Among Oil Mills. 43 . Government of India.P. company was selected by council for Indus- trial trade of Development. As part of the Industrial re- lations. 2)For the year 1993-94. “Trade Union of the Company” also awarded also awarded “BEST TRADE UNION” by the government of A. extractions and cakes from the Union Minister. A. Dr. Managing Director was facilitated at Rashtrapathi Bhavan by Honorable President of India. remained cordial during the year under review. Sankar Dayal Sharma.AWARDS FOR CAPOL: 1)CAPOL was awarded prizes for best stalls in 1978. Honor- able Union Commerce Minister and Deputy Chairman. 3)The company has received an award from All India Cotton Seed Crush- ers Association for being the highest exporter and highest domestic seller of cotton seed extraction for the year 1993-94. for their best relation for the year 1995.P. The company also received awards from all India Cotton Seed Crushers Associ- ation for being the third highest exporter and second domestic seller of cot- ton seed extractions for the year 1992-93. Planning Commis- sion. CAPOL re- ceived prize as best exporter in India in 1979 in C. CAPOL stood first in safety competition and received prize from Chief Inspector of factories.S. 4)The director also wished to inform that the company has been awarded “May ay Commendation Certificate” by Government of A.P. for the continuous harmonious relations and with its employees. On this occasion.

2)Chemical or any other and to use sell the oils cakes to be produced or ac- quired for edible purpose Orin any industry in the manufactured of nutri- tion tools. 44 . soaps cattle fed manure fatty acids perfumes chemical and other products in which such oil’s cakes are utilized. The preparations the pressing of sand otherwise dealing with cotton seed and extraction in and other such products. Selling and purchasing agents distracters brokers of edible oils. 3)To carry on in India or everywhere in any part of the world business of spinning weaving of manufacturing or dealing in cotton or other fibrous substances. 4)There fourth relining and treating of such products and subjects them to further processor manufacture to act as stockiest a commission agent repre- sentatives or agents. To acquire –promote estab- lish and carry on business of manufacture oils from cotton seed castor line seed sunflower picebran and other types of edible and non crushing solvent extraction chemical or any other process and utilize sell the oils and cakes to be produced (or) acquired for edible purpose of in any type or pro- cessing i. ordinary crushing solvent extraction.Objectives of the CAPOL 1)Following are the objectives of the company.e.

repre- sentative’s distributors or retires in call such places as the company may from time to time determine fair carrying out all or any of the company’s objects and to acts agents for others. tools utensils materials and things necessary or convenient for carrying on any of the main objects of the company. To buy sell manufacture plant prepare treat alter exchange hire let on hire. 45 .Ancillary objectives of the company To manufacture and deal in all kinds of plant machinery apparatus. import export despise and ordeal in all kinds of articles and things which may he required for the purpose of any of the business which the company is expressly or by implication authorized by this memorandum at carry on. To establish appoint regulate and discontinue offices agents.

The process of cotton-seed involves the following: 1. Fuzzy fibers are extracted though this process.PRODUCTION PROCESS: Cotton seed is by-product of the cotton and is a valuable source of edible oil. At present the plant capacity is 150MT per day. sand and dust in the seed into the linters during the de-lining operating and their quality. Oil Mill 3. in the first cut fine cotton is extracted. There are first cut and second cut. Cotton-seed pre-processing 2. Refining COTTONSEED PRE-PROCESSING PLANT: The following operation are carried out in this plant are a) Seed cleaning b) Delinting c) Hulling and separation d) Lint cleaning e) Hull grinding A) SEED CLEANING: Cotton-seed has been taken directly by company without cleaning and will face problems. India is probably the oldest cotton producing in the world. Solvent Extraction 4. because of impurities like leaf particles. Oil has several industrial and other appli- cations. B) DELINTING: After cleaning the next stage in processing is delinting cotton from the cottonseed. 46 . whereas in the second cut rough cotton is extracted. cake linters and hulls.

E) HULL GRINDING: The extracted hull is made into fine powder through hull Grinding. The adjust- ment of the flow of the air through the hull and seed separator is important and requires considerable attention in the beginning. In order to carry this two prem- atic covering systems are provided fro the covering of the cycles of the first and second cut delinters.C) HULL AND SEED SEPARATION: The mixture of hulls and uncut seed from the upper tray of the shak- en separator is conveyed to that of the hull and seed separator. blocks of hull are powdered which can be used as Animal feeds and even in Aquaculture. DOUBLE DRUM HULL HEATER: The primary object of his hull beater is to remove fine following powder. In this conditioner slightly meat will be heated by the supply of steam. MECHANICAL EXCELLING PLANT: First meat will come from cottonseed per-processing plant to the oil mill. D) LINT CLEANING: The unusual impurities in the linter are trash sticks. The importance of proper cleaning is to make readily salable cotton. 47 . The meat will go to the tempo conditioner. Linters cannot be over emphasized. Heavy paddle shafts revolving in drums of perforated metal do the beating operation. This is designed to reduce the oil content in the hull. All these have the effect of lowering the cellulose content of the linters and thus degrading their quality.

Here the cake may have 6% to 8% of oil. from this tray meat will fall down is the kettle and inside there is a jacket to heat the meat. so the do-oiled cake is sent to the de-hexaning toaster. With the use of these two meats will go to the conveyors and the conveyors will give meat to all the xix expellers. then it goes to the “Solvent Extraction Plant (SEP). it will become small pieces. hexane is evaporated and these vapors are cooled and reused extraction.From this tempo conditioner will go be two sides that is one side there is a elevator and the other side there is a rotator lift.5% but this cake has the hexane. Thus meat will get crushed inside. Free-fatty Acid 2. Colour Pigments. steam will come down form the water-tube boiler and steam is fed to the kettle to heat meat with use of an alligators. SOLVENT EXTRACTION PLANT (SEP): Oil cake breaks into small pieces and that is discharged into the ex- tractor. meat will fall on the warm shaft. REFINER: Crude oil is having the following undesirable quantities 1. de-oiled cake is heated with steam. Gums and 3. Again cake will bend into broken cracks i.e. In extractor hexane (one of the petroleum product) is sprayed on the cake. Hexane is absorbed from oil cake and from the misella. 48 . In the toaster. Therefore oil will come to the bottom part of the machine and cake will come in the front part of the machine. After the ex- traction cake contains oil below 0. Top of Kettle is opened and there is a tray to collect the meat.

After neutralization oil is called Neutral Oil for reducing the colour of oil we are send it to the next process called bleaching. It smells bad. bubble is rotating with high speed due to that oil and soap are separated. to remove it. At temperature odors and some color pigments are evaporated. Bleaching c. After mixing oil is fed to the centrifuged in I. oil is de-odorized in de-odoriser.Refining is done in three stages: a. 49 . b) Bleaching: Neutral Oil is discharged to bleacher and it is heated with steam vac- uum.A and soap. The resultant oil is called bleached oil. De-odourisation a) Neutralization: Oil is mixed with sodium hydroxide. It is reacted with F. Neutralization b. After belaching oil is filtered for removing the particles. That oil is having the high colour (reddish). After de-odourisation oil is filtered and sent to storage tanks that are called Refined. c) De-odourisation: Bleached oil is charged upto 175 degree centigrade with the help of hot and cold steam under vacuum.F. Oil.

In fact. Ratios. As compared to other tools of financial analysis. Absolute figures are certainly valuable but their value increases manifold if they are studied with another through ratio analysis. Ratio analysis is an instrument for diagnosis of the data to be summarized and simplified. The ratio refers to the numerical or quantitative relationship between two variables or items.X weights 50Kg. Ratio analysis is an instrument for diagnosis of the financial health of an enterprise. 50 . The re- lationship of these two figures expressed mathematically is called a RA- TIO. THEORETICAL FRAME WORK INTRODUCTION: The company’s financial information is contained in Balance Sheet and Profit and loss account. Ratios enable the mass of data to be summarized and simplified. are full of meaning and communities the relative importance of the various items appearing in the Balance shet and profit and loss account. For instance. A ratio is calculated by dividing one item of the re- lationship between two variables or items. the capital employed is also seen. The need for ratios arises due to the fact that absolute figures are often misleading. Is lie fat? We cannot give answer unless we know his age and height Similarly a company’s profitability cannot be known unless to- gether with the amount of profit. However it is only in the light of other in- formation that the significance of a figure is realized. A ratio is calculated by dividing one item of relationship with the other. The figures contained in these statements are absolute and sometimes unconnected with one another. The ratio analysis is one of the most useful and common method of analyzing financial statements. An absolute figure does not convey much meaning. Mr.

It is worked out by dividing one number by another. are dump and are unable to communicate anything. MODE OF EXPRESSION: i) RATE. and obtained by dividing the former by the latter. The term ratio refers to the numerical or quantitative relationship between two figures. Ratios are relative form of finan- cial data and very useful technique to check upon the efficiency of a firm. The data given in financial statements. gross profit is 30% of sales. in absolute form. for example. Some ratios indicate the trend or progress or downfall of the firm. for example. which is the ratio between the two numerical facts over a period of time.MEANING OF RATIO: A ratio is only a comparison of the numerator with the denominator. Ratio analysis is an important and age old technique of financial analysis. Current Assets to Current Liability ratio is 3:1 iii) PERCENTAGE which is a special type of rate expressing the re- lationship in hundred it is arrived at by multiplying the quotient by 100. 51 . stock turnover is three times a year. Ratios are designed to show how one number is related to another. ii) PURE RATIO OR PROPORTION which is arrived at by the simple division of one number by another. A ratio is the relationship between two figures. for example.

STEPS IN RATIO ANALYSIS:
i. The first task of the financial analysis is to select the infor-
mation relevant to the decision under consideration from the
statements and calculates appropriate ratios.

ii. The second step is to compare to calculated ratio with the ra-
tios of the same firm relating to past or with the industry rati-
os.

iii. This step facilities in assessing success of failure of the firm.

iv. The third step involves interpretation, drawing of inferences
and report-writing.

v. Conclusions are drawn after comparison in the shape of report
or recommended course of action.

52

IMPORTANCE OF RATIO ANALYSIS:

The inter relationship that exists among the different items appeared
in the financial statements, are revealed by accounting ratios. Ratio analysis
of a firm’s financial statements is of interest to a number of parties, mainly,
shareholders, creditors, financial executives etc. shareholders are interested
with earning capacity of the firm: creditors are interested in knowing the
ability of firm to meet its financial obligation: and financial executives are
concerned with evolving analytical tools that will measure and compare
costs, efficiency, liquidity and profitability with a view to making intelli-
gent decisions.

1. Aid to measure General Efficiency: Ratios enable the mass of ac-
counting data to be summarized and simplified. They acts an index
of the efficiency of the enterprise. As such they serve as an instru-
ment of management control.
2.Aid to measure Financial Solvency: Ratios are useful tools in the
hands of management and other concerned to evaluate the firms perfor-
mance over a period of time by comparing the present ratio with the past
ones. They point out firm’s liquidity position to meet its short term obli-
gation and long term solvency.
3.Aid in Forecasting and Planning: Ratio analysis is an invaluable aid
to management in the discharge of tits basic function such as planning,
forecasting, control etc. The ratio that are derived for analyzing and
scrutinizing the past result, helps the management to prepare budgets to
formulate policies and to prepare the future plan of action etc.

53

4.Facilitate decision-making:It throws light on the degree of efficiency
of the management and utilization of the assets and that is why it is
called surveyor of efficiency. They help management in decision mak-
ing.
5.Aid in corrective Action: Ratio analysis provides interfirm compari-
son. They highlight the factors associated with successful and unsuc-
cessful firms. If comparison shows an unfavorable variance, corrective
actions can be initiated. Thus, it helps the management to take correc-
tive action.
6.Aid in Intra Firm Comparison: Intra firm comparisons are facilitat-
ed. It is an instrument for diagnosis of financial health of an enterprise.
It facilitates the management to know whether the firm’s financial posi-
tion is improving or deteriorating by setting a trend with the help of ra-
tios.
7.Act as a Good Communication: Ratios are an effective means of
communication and play a vital role in informing the position of and
progress made by the business concern to the owners and their interest-
ed parties. The communication s by the use of simplified and summa-
rized ratios are more easy and understandable.
8. Evaluation of Efficiency: Ratio analysis is an effective instrument
which, when properly used, is useful to uses important characteristics of
business – liquidity, solvency, profitability etc. A study of these aspects
may enable conclusions to be drawn relating to capabilities of business.
9.Effective Tool: Ratio analysis help in making effective control of the
business measuring performance, control of cost etc. Effective control is
the keynote of better management. Ratio ensures secrecy.

54

a financial analyst analyses the financial statements with various tools of analysis be- fore commenting upon the financial health or weaknesses of an enterprise. Just like a doctor examines his patient by recording his body temperature. In financial analysis.. It is with help of ratios that the financial statements can be analysed more clearly and decisions are drawn from such analysis. before making his conclusion regarding the illness and before giving his treatment. blood pressure etc. used to make a qualitative judgment. the pulse rate or the temperature of an individual. Analysis of financial statements to obtain a better under- standing of the firm’s position and performance. 55 . The point to note is that a ratio indicates a quantitative relation- ship. A ratio defined as “the indicated quotient of two mathematical expressions” and as “the re- lationship between two or more things”. Such is the nature of all financial ratios. in turn. which can be. a ratio is used as an index or yardstick for evaluating the financial position and perfor- mance of a firm. A ratio is known as a symptom like blood pressure. Financial analysis is used as a device to analyse and interpret the financial health of enterprise.Nature of Ratio Analysis: Ratio analysis is a powerful tool of financial analysis. An accounting figure conveys meaning when it is related to some other relevant information. The absolute accounting figures reported in the financial statements do not pro- vide a meaningful understanding of the performance and financial perfor- mance of a firm.

No Allowances for Price Level Changes 5. If due care is not taken. Limited Use 10.Arithmetical Window Dressing 12. as already mentioned a widely-used tool of finan- cial analysis. For instance.Personal Bias 11. affect the quality of ratio analysis. they might confuse rather than clarify the situation. Changes in Accounting Procedure 6. Lack of Proper Standards 4. Background is overlooked 9. Limitations of Accounting Records 3. But they must be used very carefully. Different firms may use these terms in different senses or the same firm may use them to mean dif- ferent things at different times. They suffer from various limitations. Some of the limitations of the ratio analysis are given below: 1. financial statements suffer from a number of limitations and may therefore.Changing Policies Interested Parties 56 . It is because ratios are simple and easy to understand. Limited use of Single Ratio 8.Limitations of Ratio Analysis Ratio analysis is. Differences in Definitions 2. Qualitative Factors are ignored 7.

Operating Ratio Profitability Purchasers of Enterprise 4. Current Ratio Investors 2. Par- ties interested and application of different ratios in short. creditors. Creditors (short-term) 1. Proprietary Ratio 5. debtors firm’s own management etc. Earning per share 7. are given below: Parties Interested Application of Ratios To Test 1. Assets to Proprietor Ratio 6. Long Term Loans to Net worth IV. Net Profit Ratio Government 3. Ratio analysis of a firm’s financial is of interest to number of parties mainly share-holders. Equity Capital Ratio 3. Capital Gearing Ratio Capital Structure Outsiders 2. Dividend Ratio 6. Shareholders 1. Debt-Equity Ratio 7. Capital Grearing Ratio II. Absolute Liquid Ratio Liquidity and Solvency 4. Liquid Ratio Money Lenders 3. Management All types of ratios Management Efficiency CLASSIFICATION OF RATIOS 57 .Gross Profit Ratio Creditors (Long term) 2. Dividend per share III. Return on capital em- Employees ployed 5. Share-holders and 1.

Different authors have classified the ratios in varying groups. A) Classification by Statements B) Classification by users C) Classification according to importance D) Classification by purpose A) Classification by Statements: 58 . Financial ratios have been classified in several ways. The short- term creditor’s main interest is in the liquidity position or short-term sol- vency of the firm: long-term creditors are more interested in the long-term solvency and profitability analysis and the analysis of the firm’s financial conditions: management is interested in evaluating every activity of the firm because they have to protect the interest of all parties. It is a matter of great surprise that no uniformity has been achieved in this regard. A number of standpoints may be used as base for classifying the ratios. To illustrate. Thus accounting ratios may be classified on the following bases leading to somewhat over- lapping categories.

CLASSIFICATION BY USERS Ratios for Management Ratios for Creditors Ratios for Share holders Egs: Egs: Egs: Operating Ratio Current Ratio Yield Rate Debtors Turnover Solvency Ratio Proprietary Ratio Stock Turnover Fixed Assets Ratio Dividend Rate Solvency Ratio Creditors Turnover Ratio. C) Classification According to Importance: 59 . Capital Gearing Return on Capital etc. etc. Return on capital fund etc. etc. Debt Equity Ratio Capital Gearing Ratio. Inter statements Ratios nancial Ratios) os (Operating Ratios) (Composite/mixed ratios) Egs: Egs: Egs: Liquidity Ratio Gross Profit Ratio Return on Capital Employed Current Ratio Net Profit Ratio Return on Shareholders fund Stock Ratio Operating Ratio Turnover of Working capital Proprietary Ratio Expense Ratio. etc. Profit & Loss A/c Rati. Debtors Turnover Ratio etc. The ratios are clas- sified as follows: CLASSIFICATION BY STATEMENTS Balance Sheet Ratios (Fi. B) Classification by Users: This classification based on the parties who are interested in making the use of ratios. The Traditional classification is based on those statements from which information is obtained for calculating the ratios.

The following are the broad categories of account- ing ratios from functional point of view. ratios according to the purpose are more meaningful. The modern approach of classifying the ratios is accord- ing to purpose or object of analysis. CLASSIFICATION BY PURPOSE 60 . D) Classification by Purpose / Function: This is classification based on the purpose for which an analyst com- putes these ratios. For analysis. CLASSIFICATION BY IMPORTANCE Primary Ratios Secondary Ratio Egs: Egs: Assets Turnover. Expense Ratio etc. it is customary to group the purpos- es into broad headings. This basis of classification of ratios has been recommended by the British Institution of Management. Thus. There can be several pur- pose which can be listed. Working Capital turnover Profit Ratio Stock to Current Assets Operating Profit Ratio Fixed Assets to Total As- Return on Capital Fund set stock velocity etc. They are two types. ratios are used for the pur- pose of assessing the profitability and sound financial position. Normally.

Gross Profit Ratio 1. 1. Current Ratio 1. Return on Capital. Cash Position Ratio 3. Net Profit Ratio 2. Dividend Ratio 2. Proprietary Ratio 1. Debtors Turnover 4. Liquidity Ratio 2. Creditors Turnover 3. Stock Ratio 4. etc. Stock Turnover etc. Expenses Ratio 3. Cash Turnover 5. etc. Interest Coverage 5. Earnings per share 3. BALANCE SHEET RATIOS 61 . Operating Profit Ra. Pay-out Ratio 5. 5. Leverage Ratio 3. Earning Power Ratio 6. SOLVENCY PROFITABILITY ACTIVITY EARNINGS (Stability) (Performance) Short-Term Long-Term (Liquidity) 1. Price Earnings Ratio 4. Capital Turnover 2. Debtors Velocity tio 5. Debt-Equity Ratio 2. Security Ratio 4. etc. Creditors Velocity. 4.

 The higher ratio indicates that the firm ability to pay to current obli- gations in time. Networking Capital Ratio: 62 . Current assets Current Ratio = Current liabilities “ Internationally accepted current ratio is 2:1 current assets shall be two times to current liabilities ”.  If current assets have more of stock. debtors other than cash and bank. It is also known as working capital ratio. Its may be difficult to meet current obligations.  A ratio of less than to indicates inablequate current assets to meet current liabilities.  A very high current ratio also does not indicate efficiency since it means less efficient use of funds. Current Ratio The ratio reflects the relation between currents assets and current lia- bilities. The objective of calculat- ing of this ratio is to determine the ability of the concern to meet its short- term obligations.  But at the same time most of the current assets consist of bank and cash it is easier to meet the obligations.1. 2.

At the same time. This ratio establishes the relationship between quick assets and current liabili- ties. Networking capital Net working Capital Ratio = Net Assets 3. “ For this purpose stock and Prepaid expenses are not included in current assets”. Cash Position Ratio or Absolute Liquid Ratio: 63 . normally a year. But this is not necessarily so. it measures the firm’s potential reservoir of funds. Quick Ratio: Quick ratio is also known as liquid ratio or acid test ratio or near money ratio. Quick or Liquid Assets Quick Ratio = Liquid / Current liabilities Current assets – (Stock and Prepaid expenses) = Current liabilities – Bank over draft 4. This ratio regarded as a good indicates of liquidity quick. usually not exceeding one year. Networking capital is not a ratio. The difference between current as- sets and current liabilities is called net working capital. The term current assets refers to assets which in the normal course of business get converted into cash over a short period. Current lia- bilities are those liabilities which are required to be paid in short period. The objective is to measure the instant debt paying ability of the con- cern.

to calculate this ratio. It is calculated by dividing shareholders funds by the total assets. Shareholders’ Funds Proprietary Ratio = Total Assets or Total Resources Preference share capital and equity share capital plus all reserves and items are called shareholder’s fund. Total assets includes all assets includ- ing goodwill.75: 1 ratio is recommended to ensure liquidity. The invento- ry and the debtors are excluded from current assets. It is a variant of the debt equity ratio. When liquidity is highly restricted in terms of cash and cash equivalents. 5. This type of ratio is not widely used in practice. If the ratio is 1:1 then the firm has enough cash or hand to meet all current liabilities. and immediately maturing obligations on the other. 0. Capital Gearing Ratio: 64 . this ratio should be calculated. This ratio shows the long term or future solvency of the business. Proprietary Ratio: Proprietary Ratio relates the shareholders funds to total assets. The acceptable nor of the ratio is 1:3. Cash + Marketable Securities Cash Ratio = Current Liabilities Generally. This test is more rigorous measure of a firm’s liquidity position. Liquidi- ty ratio measures the relationship between each and near cash items on the one hand. It is a variation of quick ratio. 6.

including reserves and surplus. Capital Gearing Ratio is also known as Capitalisation Ratio or Lev- erage Ratio. Closely related to solvency ratios is the capital gearing ratio which is mainly used to analyse the capital structure of a company. The term Capital Gearing or Leverage normally refers to the proportion be- tween the fixed intrest or dividend bearing funds and non-fixed interest or dividend bearing funds. The former includes funds supplied by debenture holders and preference shareholders and the latter include equity sharehold- ers fund. If indicates the proportion between owner’s fund and non-owners funds (Preference shares plus long-term debt. Debt Equity Ratio: 65 .) 7. Fixed Interest Bearing Funds Capital Gearing = Equity Share Capital The capital gearing ratio show the mix of finance employed in the business.

The financing of total assets of a business concern is done by own-
er’s equity (also known as internal equity) as well as outside debts (known
external equity). How much fund has been provided by the owners and how
much by outsiders in the acquisition of total assets is a very significant fac-
tor affecting the long-term solvency position of a concern. In other words,
the relationship between borrowed funds and owner’s capital is a popular
measure of the long-term financial solvency of a firm. This ratio indicates
the relative proportions of debts and equity in financing the assets of a firm.
This ratio is calculated in various ways.

External Equities
Debt – Equity Ratio =
Internal Equities
(or)
Outsiders Funds
Debt – Equity Ratio =
Share holders Funds

As acceptable norm for this ratio considered 2:1. A higher debt-
equity ratio is allowed in the case of capital intency industries, a norm of
4:1 used for fertilizers and comment units and a norm of 6:1 is used for
shipping units.

8. Reserves to Equity Share Capital Ratio:

66

It reveals the policy pursued by the company with regard to growth
shares. A very high indicates a conservative dividend policy and increased
back of profit. Higher the ratio better will be the position.
Revenue Reserves
Reserve to Equity Capital Ratio=
Equity Capital

9. Solvency Ratio:
It is also known as debt ratio. It is a difference of 100 and proprietary
ratio. This ratio is found out between total assets and external liabilities of
the company. External liabilities means all long period and short period lia-
bilities.
Total liabilities
Solvency Ratio =
Total Assets

Solvency generally refers to the capacity or ability of the business to
meet it short term and long term obligations it measure the proportion of
total assets provided by the forms. Creditors with total assets are far more
external liabilities, created as solvent.

10. Security Ratio:
Fixed liabilities usually make the form of debentures, preferably , se-
cured on fixed assets, of the company the market value or depreciated book
value fixed assets, should be taken into account at the date of calculation of
this ratio. A ratio of 1.5:1 is considered good.

REVENUE STATEMENT RATIO
67

(OR)
PROFIT & LOSS ACCOUNT RATIO

1. Gross Profit Ratio:
The gross profit ratio is also known as Gross Margin Ratio, Trading
Margin ration etc., is expressly as a “Per Cent Ratio” The difference be-
tween Net Sales and Cost of goods Sold is known as Gross Profit. Gross
profit is highly significant. The earning capacity of the business can be as-
certained by taking the margin cost of goods sold and sales. It is very useful
has a test of proprietary and management efficiency. It is generally content-
ed that the margin of gross profit should be sufficient enough to recover all
operation expenses and other expenses and also leave adequate amount as
Net Profit in relation to sales and owner’s equity. Thus, in a trading busi-
ness, gross profit is net sales minus trading cost of sales.
Gross Profit
Gross profit ratio = x 100
Net sales
Sales – cost of goods sold x100
or =
Net Sales

2. Operating Ratio:

68

Cost of goods sold + Operating Expenses Operating ratio = Net Sales Cost of goods sold = Opening Stock + Purchases – Closing Stock Operating expenses= Administrative expenses + Financial Expenses + SellingExpens- es 3. Operating ratios are generally expressed in percentages. Net Profit Ratio: 69 . There are many expenses ratio. adminis- trative expenses. Administrative Expenses = x 100 Net Sales 4. Cost of goods sold are also known are also known as di- rect operating expenses and the rest are known as other operating expenses. Total operating expenses include cost of goods. This ratio establishes the relationship between total operating ex- penses and sales. Expenses Ratio: The expenses is also known as supporting ratios to operating ratio it becomes imperative that each aspect of cost of sales and or operating ex- penses should be analyzed in detailed just findout as how for the concern is able to say or is making over expenditure in respect of different type of ex- penses. The following are a few: Factory Expenses a. Factory expenses ratio = x 100 Net Sales Administrative expense b.

the expenses of operating the business and the cost of borrowed funds. It is also called Net profit to Sales Ratio = (Profit margin). 70 . It is an index of efficiency and profitability when used with gross profit ratio and operating ratio. the cost of merchandise or services. Higher the ratio of net operating profit to sales. Net Profit Net Profit Ratio = x 100 Net Sales This ratio is used to measure the overall profitability and hence it is very useful to proprietors. better is the operational efficiency of the concern. The profit margin indicative of management’s ability to operate the business with sufficient success not only to recover from revenues of the period. but also to leave a margin of reasonable compensa- tion to the owners for providing their capital at risk.

This is also known as Return on Investment or Rate of Return. It measures the profitability of investments. This ratio is also known as profit – to – assets ratio. 2. The prime objective of making investments in any business is to obtain statisfactory return on capi- tal invested. Return on Shareholders Equity: 71 . It indicates the percentage of return on the capital employed in the business and it can be used to show efficiency of the business as a whole. Operating Profit Return on Capital Employed = x 100 Capital Employed 3.PROFITABILITY RATIOS RELATED TO INVESTMENTS 1) Return on Assets: Profitability can be measured in terms of relationship between net profit and assets. Thus overall profitability can be known. according to the purpose and intent of the calculation of the ratios. Return on Capital Employed: This is the second type ROI (Return on Investment). Net Profit Return on Assets = x 100 Total Assets There are various approaches possible to define net profits and as- sets.

e. Cost of Goods Sold Stock Turnover Ratio = Average inventory at cost 72 . A firm must have reasonable stock in comparison to sales. This ratio helps the fi- nancial manager to evaluate inventory policy. It is the ratio of the cost of sales and average inventory. The ratio establishes the profitability from the shareholders point of view. Net Profit Return on share holder’s equity = x 100 Shareholders Fund The term net profit as used here. means net income after payment of interest and tax including net non-operating income (i. This ratio is calculated consider the adequacy of the quantum of capital and its justification for investing in inventory. Non-operating in- come minus non-operating expenses.) ACTIVITY RATIOS OR TURNOVER RATIOS Inventory Turnover Ratio: This is also known as stock velocity.

The amount of total payables of a business concern depends upon the purchases policy of the concern. This ratio indicates the efficiency of the management in utilizing the working capital of the business concern “Net working Capital means the sum of total current assets minus current liabilities. A business usually purchase on credit goods.. change with the in- crease or decrease in sales. But when the form does not pay off its creditors within time it may have adverse effect on the business. Longer the period of outstanding payable is lessor is problem of working capital of the firm. Net Credit Purchases Creditors Turnover Ratio = Average account payable Working Capital Turnover Ratio: Working capital of a company is directly related to sales. Net Sales Working Capital Turnover Ratio = Net working Capital 73 . CREDITORS TURNOVER RATIO This is also known as Accounts Payable or Creditors Velocity. The current assets like debtors bills receivables cash and stock etc. raw materials and services from other firms. the quantity of the purchases and suppliers credit policy.

Net Credit Sales Debtors Turnover Ratio = Average Debtors + Bills Receivables Net Credit sales means that the sales return are deducted from total credit sales. it has been adopted by many firm in some form or the other. The objective of this ratio is to measure the liquidity of receiv- ables or ascertaining the average period over which receivables are uncol- lected. 74 . A change in any of these ratios will change in these factors will bring a change in these two ratios. 45 to 60 days may be considered as normal ratio. The earning power. Credit Sales as a result of credit sales debtors bills receivables are created. represented by return on capital employed. shows the combined effect of the net profit margin and the capital turnover. In order to increase their sales the business concern start making. As a useful tool for finan- cial analysis.The higher ratio is considered congenial for the business implies better cash flow. DU PONT CHART The Du pont Company of US pioneered a system of financial analy- sis which has received widespread recognition. Generally the shorter the average collection period the better is the qualities of debtors. This ratio also called receivables turnover ratio or Debtors velocity ratio.Debtors Turnover Ratio: This ratio express the relationship between sales and average debtors.

The most important financial ratios may be divided into four types. Costs A financial ratio is the principal tool for analysis of financial state- ments. particularly in signaling business strengths and weakness of a firm. The two components of this ratio. Return on Capital Employed Turnover x Profit Margin Capital Em-       Sales Sales Net Profit ployed Working Cap. the profit margin and the in- vestment turnover ratio individually do not give an over-all view as the former ignores the profitability of investments while the later fails to con- sider the profitability on sales. Costs Fixed ital Assets + Selling Costs Stock + B/R + + Debtors + Cash Adm. Financial ratios seem to have predictive ability. 75 . namely. It helps to ascertain the financial condition of a firm.The usefulness of the Du Pont type of analysis lies in the fact that it pre- sents the over all picture of the performance of a firm as also enables the management to identity the factors which have a bearing on profitability. + Sales Mfg.

These ratio indicate the funds provided by owners and credi- tors. Rate of Return Ratios reflect the relationship be- tween profit and Investment for examples. Capital- Equity Ratios. Net Profit Margin etc. Fund Flow Ratios etc. C) TURNOVER RATIOS. Fixed Asset Turnover etc. B) FINANCIAL LEVERAGE refers to the use of debt finance. Return on Investment. For examples. That is these ratios measure the proportion of outsiders capital in fi- nancing the firm’s assets and establishing the relationship between bor- rowed capital and equity capital. Liquid Ratios. PROFITABILITY RATIO measure the overall performance of Business – profit margin ratios and rate of return ratios. for examples. 76 . Current Ratios. Debtors Turnover. Return on Equity etc. leverage or capital structure ratios are calculated. Stock Turnovers. These ratios are calculated by establishing relationship between sales and assets. For example. For examples. Debt-Equity Ratios. To judge the long term financial position a firm. Gross Profit Mar- gin. Profit margin ratios show the relationship between profit and sales. Interest Coverage Ratios etc.A) LIQUIDITY refers to the ability of a firm to meet its obligations in the short run usually one year. Liquidity ratios are calculated by establishing relationships between current assets and current liabilities. also referred to as activity ratios or asset man- agement ratios measure how efficiently the assets are employed by the firm.

83 2013-14 12.87 77 .683 2.17.94.52.65.05 2014-15 14.14.636 5.461 2.CURRENT RATIO: Current ratio is the relationship between the current assets and cur- rent liabilities.24.56.70 2016-17 22.907 2.93.23.53.426 4.149 5. The higher ratio indicates that the firm ability to pay its current obli- gations in time.53.85.35.53 2015-16 20.909 5.64.48. The thumb of rule for current ratio is 2:1 This ratio is the measured of general liquidity and is most widely used to make the analysis of a shorter financial position or liquidity of a firm.23.87.849 3.65.67.264 4.48.103 4.38 2012-13 14.17. Curent ratio = Curent assets Current liabilities Current Ratio of CAPOL During 2011-17 Year Current Assets Curent labilités Ratio 2011-12 14.744 2.65.23.36.378 5.

2 5.05 5 4.83 4.87 4. High current ratio in- dicates lack of management practices leading to excessive inventories for the current requirements and poor credit management of over extended ac- counts receivable and it also means the CAPOL may not be making full use of its current borrowings capability.7 5.53 5.8 4.2 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 YEARS Interpretation: During the years 2011-17 the current ratio was approximately 5 to 6 times.4 4.8 5. CURRENT RATIO 5. But as per the bankers thumb rule the current ratio must be 2:1 ‘CAPOL’ is having the more than the standard rule.38 5. 78 .4 RATIO 5.6 4.6 5.

909 1.27.480 2.324 3.52.63.15.33.87.87.47.56.149 2.103 1.65. Liquidity Ratio of CAPOL During 2011-17 Year Liquid Assets Current liabilities Ratio 2011-12 4.678 2.93.86 2014-15 6.50.70 2012-13 5.985 3.54.94.27.749 2.81 2016-17 12.65. Because for payment of current liabilities. We must have same amount of liquid asset.94.324 3.48.90 2013-14 4.45 2015-16 10.42.61. The theoretical standard for liquidity ratio is 1:1 it means one current liabilities there must be one liquid asset. Current liabilities means which liabilities are payable within one year.455 2.19 79 .36. Liquid assets mean which assets are converted immediately into the cash.636 2.35.LIQUIDITY RATIO: Liquidity ratio is relationship between the liquid assets and current liabilities.36.378 1.64.

5 3 2.90 and it was reduced to 1. This is an outcome of the very nature of cooking oil where sales are not possible without going for credit sales.81.86 in the year 2013-14 than in the previous year.45 This ratio was more increase in the year 2015-16 and 2016-17 the ratio was 2. LIQUIDITY RATIO 3.5 1 0. The liquid assets in the form of sundry debtors are substantial as an outcome credit sales lead- ing to relatively higher liquid ratios.70 to 2. 3.70 and this was little bit increased in 2012-13 up to 1. 80 . The ratios are higher than the theoretical stand- ard of 1:1 indicating poor utilization of liquid assets.19 respectively. In the year 2011-12 the liquidity ratio was 1.5 2 RATIO 1.81.and it was increased in 2014-2015 up to 2.5 0 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Interpretation: CAPOL has maintaining its liquid ratio with in the range from 1.

09.87. Absolute liquidity ratio = absolute liquidity assets Current liabilities Where absolute liquidity assets = cash + bank +marketable securities Absolute Liquidity Ratio of CAPOL During 2011-17 Year Absolute liquidity Current liabilities Ratio Assets 2011-12 3.0141 2014-15 10.94.65. bank marketable securities.149 0.636 0.56.52.92.95.64.492 2. Absolute liquidity assets obtained through adding the cash.36.65.25.718 2.018 2016-17 12.008 2013-14 35.909 0.93.35.48.87.191 2.012 2012-13 2.ABSOLUTE RATIO: The ratio is to judge the immediate ability of the company to pay off its current liabilities.103 0.041 2015-16 6.324 0.52.625 3.342 3.667 2.378 0.031 81 .25.

5:1.02 0 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 YEARS Interpretation: Generally.08 0. ABSOLUTE LIQUIDITY RATIO 0.1 0.14 0.06 0. In the CAPOL the absolute quick assets very lower than the standard rule. This is an outcome of poor cash and bank balance for the that cash sales are poor.04 0.12 RATIO 0.16 0. 82 . the absolute quick ratio must be 0.

097 0.12.241 20.359 19.3889 2016-17 12.903 0.51.04.17.10.4451 2014-15 9.03.157 21.99.16.77.198 0.52.3950 83 .406 21.651 0.93.342 0.PROPRIETARY RATIO The ratio establishes the relationship between shareholders funds and total assets of the firm.3663 2013-14 8.47.61.04.56.208 28.25.23.312 30.85.70.3260 2012-13 7.067 0.58. The higher ratio indicates that the better long term solven- cy position of the company.63. Proprietary ratio = Share holders funds Total assets Proprietary Ratio of CAPOL During 2011-17 Year Shareholders Total Assets Ratio fund 2011-12 6. This ratio is important to determine the long term sol- vency of a firm.12.09.4507 2015-16 11.77.

395 Interpretation: During the year 2011-12 this ratio is 32.05 0 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Series1 0.4507 0.3663 0. 84 .50%. So the company is maintaining better solvency posi- tion and maintain better proprietary ratio.3889 0.25 0.51% to 45.5 0.2 0.and it is increases to next year 39.1 0.63% from the 2012-13 to 20-08 the ratio is increases from 45.89%.45 0.07% and it is decrease to next year 38.15 0.3 RATIO 0.35 0.4 0.60% and next year it is in- creased to 36.326 0. SHAREHOLDERS FUND 0.4451 0.

60 2014-15 60.261 9. inadequate marketing.762 10.66 2016-17 64.81.INVENTORY TURNOVER RATIO: The inventory turnover ratio indicates the no.89.12 85 .093 8.16.50. too little inventory can cause problems with product availability and can therefore hurt sales.60.38.51. Inventory turnover ratios vary widely by in- dustry and obvious deviations from the industry standard may indicate im- proper purchasing.23.10.45.47 2015-16 62.24.11.716 5.61.52. This ratio can be used to assess the quality of inventory. or an undesirable product.82.306 8. of times than an inven- tory is sold and replaced over a given time period.000 5.61 2012-13 45.15.834 9.935 6.69.245 6.26.449 4.270 8.717 7.36. Inventory tunrover ratio = Cost of goods sold Inventory Inventory Turnover Ratio of CAPOL During 2011-17 Year Cost of goods sold Inventory Ratio 2011-12 38. On the other hand.39.00.61.17.00 2013-14 46.05.

61 in 2011-12 to 7. in the year 2015-16 the ratio was 6. ‘CAPOL’ should carefully maintain the high ratio without fail in meeting demands of customer requirements.66 6.12 Interpretation: The Inventory turnover ratio was varies from 4.47 in 2013-2014but.12 a high ratio implies good inventor management.47 6. INVENTORY TURN OVER RATIO 8 7 6 5 RATIO 4 3 2 1 0 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Series1 4.6 7. 86 .66 . it also indicates low level of inventory. But. in the year 2016- 17 the ratio was 6.61 5 5.

WORKING CAPITAL TURNOVER RATIO Working capital of a company is directly related to sales.of times the working capital is turned over in the year.24 2016-17 76.198 10.19. which is difference between current assets and cur- rent liabilities.67.42.302 11. The current assets like debtors bill receivables.59 2013-14 54.01.94 87 .312 5.213 4.61.45.580 4. Working capital turnover ratio indicates the velocity of the utilization of net working capital.462 3.28.78.30.835 3.42.430 11.50. The ratio measures the efficiency with the working capital is being used by a firm.65 2012-13 51.804 17.05. Charge with the in- crease or decrease in sales.57.37.44.43 2014-15 69. cash and stock etc.529 5.64. A higher ratio indicates efficient utilization of working capital and a low ratio indicates otherwise.60.634 19.63.91. The ratio indicates the no.82.939 12.38.59.84.78 2015-16 72. While interpreting the ratio these ratios can at best different firms in the same industry and for various periods this can be calculate as below Working Capital Turnover Ratio of CAPOL During 2011-17 Year Sales Working Capital Ratio 2011-12 42.23.

in the year 2016-17 the ratio was decreases at 3. Be- cause the reason is the working capital percentage was increased than the net sales percentage. But. the ratio are lower than ideal in- dicating inefficiency of utilization of assets 88 .43 5.24 3. Interpretation: Working capital turnover ratio measures the efficiency of utilizing its assets.78 4. During the year. while low working capital turnover ratio indicates under – utilization. The higher the ratio reflects efficiency of managing its assets effi- ciency of managing assets effectively. WORKING CAPITAL 7 6 5 4 RATIO 3 2 1 0 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Series1 3.94 times.24 times.65 4. 7:1. The ideal ratio. 2011-12 the working capital turnover ratio was 3.65 times and the next year the ratio was increased to 4.59 5.94 . in the year 2015-16the ratio decreased to 4.5 times. In 2013-14year and 2014-15 also increased.

772 10.37.227 13.42.DEBTORS TURNOVER RATIO: The receivable turnover ratio measures the effectiveness of firm’s Credit and collections. A low turnover rate indicates that the firm should pay more attention to collecting its accounts receivable.96.84.723 14.38.52.63.939 4.44. Ac- counts receivable cam amount to interest free loans to customers.50.27.71.47 2016-17 76.13.22.15.430 3.64.45.30 89 .25 2015-16 72.5 2012-13 51.0 2013-14 54.302 3.864 10.804 6.198 3. A high receivable turnover rate can indicate an ef- fective credit and collection policy or alternatively it can indicate that a business operates on a cash basis.495 15.919 16.5 2014-15 69.42.57.91.82.55. The firm should analyze is accounts receivable in terms of its stated credit policy. Debtors turnover ratio = Credit sales Average debtors Debtors turnover ratio of CAPOL during the year 2011-17 Year Credit Sales Average debtors Ratio 2011-12 42.67.634 7.32.52.

47 10. higher turnover ratio means shorter average collection pe- riod. DEBETORS TURNOVER RATIO 18 16 14 12 10 RATIO 8 6 4 2 0 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Series1 13.5 16.25 10. During the year 2011-12 to 2013-14 the company maintains the high debtor’s turnover ratio. 90 .3 Interpretation: Generally. It means the company should focus about the collection from debtors. It means the firm having the effective credit and collection policy. But in the year 2015-16 and in 2016-17 the company having the low debtor’s turnover ratio.5 14 15.

634 8.198 6.58. It is calculated as follows: Fixed assets turnover ratio = Net sales Net fixed assets Fixed assets turnover ratio of CAPOL during the year 2011-17 Year Net Sales Fixed Assets Ratio 2011-12 42.45.804 7.430 6.63.37.42.32.51 2016-17 76.23 2012-13 51.756 10.37 2014-15 69.55.939 6.57. A high ratio indicates a high degree of efficiency.82.427 8.84.50.54 2015-16 72.44.54.79.204 9.38.20.52.91.806 9.118 7.302 6.92 2013-14 54.42.42.34.604 6.67.12 91 .66.FIXED ASSETS TURNOVER RATIO: This ratio measures the efficiency with which fixed assets are em- ployed.54.

92 .23 7.51 9.37 10. FIXED ASSETS TURNOVER RATIO 12 10 8 RATIO 6 4 2 0 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Series1 6.12 Interpretation: From the above analysis it is clear that the company has maintained sufficient fixed assets turnover ratio though it has been varying from year to year and it has been improving gradually indicating a constant improve- ment.92 8.54 9.

06.302 0.39.37.57.68.0890 2012-13 5.1491 93 .169 51.804 0.430 0.970 72.1344 2015-16 10.50.392 54.032 42.38.42.40.72.939 0.77.33.45. Gross Profit Ratio = gross profit / net sales Gross Profit ratio of CAPOL during the year 2011-17 Year Net Sales Fixed Assets Ratio 2011-12 3.44.42.11.1148 2013-14 8.846 69.07.95.84.67.82.1426 2016-17 11.1538 2014-15 9.26.198 0.634 0.63.680 76.GROSS PROFIT RATIO: This ratio indicates the percentage of gross profit that is earned on each dol- lar of sales.91. The gross profit margin for a firm should be compared to the industry averages.

04 0.12 RATIO 0.1 0.9%. GROSS PROFIT RATIO 0.38% and 8.14 0.08 0.06 0.16 0. During all the years the gross profit has been varying between 15. However it is felt that the ratio is sufficiently poor. 94 .18 0.02 0 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 YEARS Interpretation: From the analysis it is clear that the gross profit ratio has been im- proving gradually indicating improved financial performance.

57.42.302 0.23.82.38.634 0.81.0172 2012-13 1.514 42.0205 2013-14 92.0169 2014-15 1.06.046 69.19.37.0172 2015-16 1.84.430 0.64.63.50.30.198 0.683 54.931 72.91.939 0.0260 2016-17 2.0290 95 .45.42.51.89.584 51.44.05.804 0.659 76.NET PROFIT RATIO: The net profit ratio establishes the relationship between the net profit of the firm and the net and may be calculated as follows: Net profit ratio = net profit /sales Net Profit ratio of CAPOL during the year 2011-17 Year Net Profit after Net Sales Ratio tax 2011-12 73.67.

NET RPOFIT RATIO 0. During all the years the net profit has been varying between 1.005 0 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 YEARS Interpretation: From the above analysis it is clear it has been varying unevenly yet we can observe it has been improving. 96 .02 RATIO 0.01 0.9% It is interpreted that the net profit margins are very poor.03 0.72% and 2.035 0..015 0.025 0.

RETURN ON TOTAL ASSETS: It measures the profitability of the firm in terms of assets employed in the firm.931 28.514 21.067 5.329 7.198 3.40.45.86 2014-15 1. Return on assets = Net profit after tax / average total assets*100 Return On Total Assets of CAPOL during the year 2011-17 Year Net profit after Total assets Ratio tax 2011-12 73.47 2012-13 1.81.62 2015-16 1.05.64.25.06 2016-17 2.14 97 .19.23.25.04.651 5.06.097 4.51.584 20.51.683 19.046 21. It calculates the establishing relationship between the profits and the assets employed to earn the profit.04.70.56.03.52.30.89.903 6.77.659 31.11 2013-14 92.99.

47% and 7.14% and it is felt that the return on assets substantial improvement.11 4.14 Interpretation: From the above analysis it is clear return on assets was improving from year to year and has been varying between 3. RETURN ON TOTAL RATIO 8 7 6 5 RATIO 4 3 2 1 0 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Series1 3.06 7. 98 .86 5.47 5.62 6.

76.17.08.916 6.157 5.89.43.198 16.89.71.902 Investments G 850 850 Current Assets Loans H 14.79.19.59.438 & Advances TOTAL 21.744 10.CAPOL BALANCE SHEET AS ON 31ST MARCH 2011-17 As at 31-3-2011 As at 31-3-2012 LIABILITIES SCHEDULE Rupees Rupees Share Capital A 79.78.604 5.52.17.00.24.190 99 .71.041 Un Secured Loans D 1.07.17.662 Current Liabilities & 2.56.06.51.43.63.190 ASSETS Fixed Assists F 6.470 Secured Loans C 9.49.000 Reserves & Surplus B 6.64.96.03.804 (4.29.62.198 16.03.93.51.909 1.65.32.000 79.320) TOTAL 21.412 2.337 E Provisions Deferred Tax Liabil- P(5) ity/(Asset) 6.00.

CAPOL BALANCE SHEET AS ON 31ST MARCH 2012-13 As at As at LIABILITIES SCHEDULE 31-3-2012 31-3-2013 Rupees Rupees Share Capital A 79.909 E Provisions Deferred Tax Liabil- P(5) ity/(Asset) 14.82.32.000 79.49.89.93.99.198 100 .45.118 6.64.241 6..412 Current Liabilities & 2.744 H & Advances TOTAL 20.949 6.51.53.157 Secured Loans C 7.24.21.77.804 TOTAL 20.93.94.221 9.103 2.58.89.88.17.06.03.137 1.79.00.23.00.198 ASSETS Fixed Assists F 6.916 Un Secured Loans D 2.000 Reserves & Surplus B 6.65.54.56.36.52.683 14.23.651 21.99.604 Investments G 850 850 Current Assets Loans 14.85.51.03.651 21.77.

20.378 2.23.81.184 20.64.CAPOL BALANCE SHEET AS ON 31ST MARCH 2013-14 As at As at LIABILITIES SCHEDULE 31-3-2013 31-3-2014 Rupees Rupees Share Capital A 79.00.184 20.77.000 79.22.241 Secured Loans C 5.651 101 .54.52.947 7.77.99.93.85.58.651 ASSETS Fixed Assists F 6.000 Reserves & Surplus B 7.221 Un Secured Loans D 2.35.68.36.949 P(5) ity/(Asset) TOTAL 19.61.103 Provisions E Deferred Tax Liabil.907 14.00.05.118 Investments G 850 850 Current Assets Loans 12.21.137 Current Liabilities & 2.88.23.82.94.427 6.886 2.614 14.45.30.99.65.53..87.53.48.87.359 6.77. 22.05.683 H & Advances TOTAL 19.

14.61.58.161 22.22.35.756 6.77.15.65.947 Un Secured Loans D 1.05.64.30.406 7.461 12.184 ASSETS Fixed Assists F 6.149 2.07.12.71.000 Reserves & Surplus B 8.87.52.166 5.359 Secured Loans C 7.184 102 .067 19.68.48.81. 2.614 TOTAL 21.185 2.79.00.53.54.25.70.70.36.20.067 19.CAPOL BALANCE SHEET AS ON 31ST MARCH 2014-15 As at As at LIABILITIES SCHEDULE 31-3-2014 31-3-2015 Rupees Rupees Share Capital A 79.378 E visions Deferred Tax Liabil- P(5) ity/(Asset) 23.427 Investments G 850 850 Current Assets Loans & 14.000 79.75.00.886 Current Liabilities & Pro.65.907 H Advances TOTAL 21.05.87.67.31.25.

903 21.75.67.000 Reserves & Sur.65.21.166 Un Secured Loans D 1. 10.067 103 .52.31.58.067 ASSETS Fixed Assists F 7.849 14.204 6.65.71.04.12.85.149 E & Provisions Deferred Tax Lia.00.161 P(5) bility/(Asset) TOTAL 28.461 H Loans & Advances TOTAL 287.54.185 Current Liabilities 3.55.25.07.70.CAPOL BALANCE SHEET AS ON 31ST MARCH 2015-16 As at As at LIABILITIES SCHEDULE 31-3-2015 31-3-2016 Rupees Rupees Share Capital A 79.406 B plus Secured Loans C 11.103 23.36.756 Investments G 850 850 Current Assets 20.70.14.88.000 79. 33.570 1.903 21.17.87.52.04.25.79.208 8.30.636 2.66.36.386 7.15.55.48.00.42.

36.000 Reserves & Sur.67.53.067 ASSETS Fixed Assists F 7.25. 34.00.396.75.185 Current Liabilities 3.70.58.65.82.25.149 E & Provisions Deferred Tax Lia.213 23.45.12.465 7.79.103 8.562 14.161 P(5) bility/(Asset) TOTAL 306.CAPOL BALANCE SHEET AS ON 31ST MARCH 2016-17 As at As at LIABILITIES SCHEDULE 31-3-2016 31-3-2017 Rupees Rupees Share Capital A 79.067 104 .202 6.54.71.23.532 2.86.166 Un Secured Loans D 95.461 H Loans & Advances TOTAL 324606614 21.063 21.15.406 B plus Secured Loans C 13.23. 11.72.23.52.54.31.750 1.00.000 79.07.14.70.73.756 Investments G 850 850 Current Assets 24.12.

3. From the above it is evident that absolute liquidity ratio has been very poor when compared to the standard ratio. From the above study it is found that liquidity ratio of CAPOL Company was satisfactory.64 to 7. The liquidity ratio also increasing year by year from 1. 7. From the above study it is clear that the current ratio of CAPOL was vary- ing between 5. It is very high when comparing to standard ratio 2:1 it indicates that CAPOL Company has over invested in current assets. From the above study it is found that inventory turnover ratio was fluctuat- ed during the period 4. From the above it is evident that debt equity ratio explains the relationship of the tenders contribution for each of owners contribution.05 to 4.FINDINGS 1. But in the year 2008-09 the company having the lower debtors turnover ra- tio. The standard ratio of absolute liquidi- ty ratio is 0. They meet the demands of customer requirements without fail.19.47. From the above study it is clear that CAPOL maintains the high debtors turnover ratio. It indicates company is maintaining over liquid assets than current liabilities. Higher turnover means shorter average collection period. From the above it is evident that working capital turnover ratio is steadily increasing except in 2008-09.5:1 5. The trend of working capital turnover ratio is satisfactory. 2. CAPOL maintains the good inventory ra- tio. 4. 105 . 6.87 in last 5 years. The continuous decline in this ratio in found.90 to 3.

It may be suggested that the company is having the high debtors collec- tions period. 4. 7. 106 . It may be suggested that company maintains high inventory level and they having the high inventory holding period. The current ratio of CAPOL was varing between 5. It is suggested that the company may go for the production of oils like sunslower. The liquidity ratio of CAPOL company was satisfactory. ground nuts and so on for higher turnover and sales and there by enhance its financial position and prositability through devel- oping its own brands and improved product mix. 5. 8. It may be suggested that the company should improve its debtors turno- ver ratio towards collecting debt from customers more promptly 6. 2. So it should decreases investment from the current assets. So it is suggested to re- duce the inventory level and maintain proper inventory level instead of high inventory level.The liquidity ratio also increased year by year from 1.87 in last 5years it is very high when comparing to standard ratio 2:1 it indicates that CAPOL company has over interested in current assets. SUGGESTIONS 1.05-4.It indicates company is maintaining over liquid assets than current liabilities. It may be suggested that the company should make proper utilization of current asets to increase sales.19. So it is suggested to reduce the collection period. It may be suggested that the company is investing more in current assets leading to higher current ratio. 3.70-3.

I.com 2. PRASANNA TATA MC GRAW – AGEMENT THEORY CHANDRA HILL PUBLISHING.com 107 .com 3. NEW DELHI 2 FINANCIAL MAN.capol/org..capol@mlgroup. LTD. AND PRACTICE NEW DELHI WEB SITES 1.com 4. www. www.M. NEW DELHI 3 FINANCIAL MAN.Y KHAN & TATA Mc GRAW- MENT TEXT AND P. V.. BIBLIOGRAPHY S.microsolpower. ICY NEW DELHI 4 FINANCIAL MAN. TIONS PVT.PANDEY VIKAS PUBLISH- AGEMENT ING HOUSE PVT.No TITLE OF THE AUTHOR NAME PUBLICATIONS BOOK 1 FINANCIAL STATE. M.BHALLA ANMOL PUBLICA- AGEMENT AND POL.investopedia. www.K..K. www. LTD.JAIN HILL PUBLISHING PROBLEMS COMPANY LIM- ITED.