INTRODUCTION

Finance is viewed as the most important factor in every enterprise

and it is provision of money at the time when it is required. Every
enterprise whether big, medium or small needs finance to carry on its
operations and to achieve its targets. Finance is so indispensable today that
it is rightly said that it is the lifeblood of an enterprise. Without adequate
finances, no enterprise can possibly accomplish its objectives.

Capital required for a business can be classified under two main

categories i.e., fixed capital and working capital. Fixed capital stands for
the amount of capital which is required for long term to create production
facilities through purchase of fixed assets such as plant, machinery, land
and buildings etc, working capital refers to that part of the firms capital
which is needed for financing short terms or current assets such as
marketable securities, debtors and inventories etc, working capital in
brief, is the amount of funds necessary to cover the cost of operating the
enterprise. Just as circulation of blood is essential in the human body for
maintaining life of a person, working capital is very essential to maintain
the smooth running of a business.

The modern thinking in financial management gives greater

importance to management decision making and policy. Today, the
financial manager is not in a passive role of score keeper of the
accounting information and arranging funds. Whenever directed to do so.
Rather, he occupies a key role in solving the complex management
problems. He is not responsible for shaping the fortunes of the enterprise
and is involved in the most vital management decision of allocation of
resource
 INDUSTRY PROFILE

ELECTRONIC INDUSTRY

Electronics is a branch of technology dealing with the motion and

behavior of electrons. Although the term derives vacuum tube
technology, it now encompasses the sold state circuits and devices used
in computing and communications.

HISTORY IN INDIA

The Electronics Industry in India was nucleated in the late forties

with the setting up of production base for radio receivers by a few private
firms using foreign collaborations. In the initial stages, the production
activities were mainly in the fields of consumer electronics and certain
type of components. Two public sector units, namely BHEL and Indian
Institute of Technology (IIT) both at Bangalore, were also manufacturing
professional electronic items to meet the requirements of P&T.
Introduction of transistor radio I early 60’s led to phase which witnessed
steady growth in production of import substitutions, diversification of
product range and entry into export market.

Production of electronic equipment and components has come a

long way since the days of radio receivers in the 1950’s. the electronics
industry in India has grown with domestic demand, as a result of import
substitution effort.

During the 1970’s electronics industry in the country derived its

strength as a labor-intensive industry. Production techniques had large
manual labor content. Dispersal of industry was given an important place
in the promotional policy framework and industry capacities were
approved based on the estimated demand over the next five years. In the
growth and development of this industry, emphasis was placed on
indigenization of applications of electrons.

While on the one hand, this had enabled development of

largely decision consumer electronics industry (except from 1982
onwards when policy decision was taken to introduce color TV and
resulted in import of CTV tubes and semiconductors required for
assembly), it is has generated enough demand of components to enable
mass production using some degree of automation.
PRODUCTION AND DEFENSE UNDERTAKING
A substantial part of the defense stores needed by the services is
now being developed and produced in the country. The responsibility for
this has been entrusted to the Department of Defense Production and
supplies, which organizes, directs and coordinates production of material
and equipment required by the Armed Forces. It carries our its
responsibility through the Directorate of standardization, Defense
Research and Development (DRDO) and eight public sector
undertakings.

There are 36 ordinances, factories whose main thrust is aimed at

meeting the twin objectives of modernization of the factories and
increasing productivity. The need for self-reliance underlines the
existence of ordinance factories. The factories widely dispersed over the
length and breadth of the country on strategic consideration, necessarily
function interdependently. The spectrum of technology leading to self
reliance. The range of products in these factories include armored
vehicles, sophisticated anti tank guns, anti-aircraft guns, field guns, self
propelled guns, mounted guns, motors, small arms and their related
ammunitions. In addition software items combat clothing, high attitude
clothing, parachutes, and mountaineering equipment are also being
manufacturing.

There are Eight Public Sector enterprises under the department

of defense production and supplies. These are

1. Hindustan Aeronautics Limited (HAL).

2. Bharat Electronic Limited(BHEL)
3. Bharat Earth Movers Limited(BEML)
4. Mozagan Dock Limited(MDL)
5. Garden Reach Ship Builders & Engineers Limited(GRS&E)
6. Goa Ship Yard Limited (GSL)
 7. Bharat Dynamics Limited (BDL)
8. Misra Dhatu Nigam Limited (MIDHANI)

A STUDY ON RATIO ANALYSIS

The BHEL was established in 1954 with a single unit at
Jalahalli, Bangalore to develop the indigenous electronic industry. Since
then, it has gone into leader in professional electronics with its eight more
units.
 COMPANY PROFILE

BHEL is one of the pioneers in engineering industries in the

world. The vital role played by BHEL today in the country is the mark of
its continuous efforts to improve the service in the nation by consultancy,
manufacturing and offering services in power sector.

The success story of BHEL however goes back in 1956 when its
first plant was setup in Bhopal. The three major plants in HARIDWAR,
HYDERABAD AND THRICHIRAPALLI followed this. These plants
have been the core of BHEL’S efforts to grow, diversify, and become one
of the most integrated power and industrial equipment manufacturers in
the world. The company now has 14 manufacturing units, 8 service
centers and 4 power sectors regional centers, besides project sites spread
all over India and abroad.

BHEL manufactures over 180 products under 30 major product

groups and caters to core sectors of the Indian Economy viz., Power
Generation & Transmission, Industry, Transportation,
Telecommunication, Renewable Energy, oil business etc. Its products
have been established an enviable reputation for high quality and
reliability. This is due to the emphasis placed all along on design,
engineering and manufacturing to international standards by acquiring
and adopting some of the best technologies developed in its own R&D
centers. BHEL has acquired ISO 9000 certification for quality
management and ISO 14001 certification for environment management.
BHEL caters to the needs of different sectors by designing and
manufacturing according to the needs of its clientele in power sector.

ABOUT B.H.E.L HARIDWAR UNIT

Forging ahead on a sturdy foundation of over five decades of engineering
excellence and embracing the glorious next phase of its growth, BHEL is
an integrated power plant equipment manufacturer and one of the largest
engineering and manufacturing companies of its kind in India engaged in
the design, engineering, manufacture, construction, testing,
commissioning and servicing of a wide range of products and services for
core sectors of the economy, viz. Power, Transmission, Industry,
Transportation (Railways), Renewable Energy, Oil & Gas, Water and
Defence with over 180 products offerings to meet the needs of these
sectors. BHEL has been the bedrock of India's Heavy Electrical
Equipment industry since its incorporation in 1964.

BHEL's growth has been synchronous with achieving self-sufficiency in

the indigenous manufacturing of heavy electrical equipment. Out of the
available 35,000 MW per annum capacity for power plant equipment
manufacturing in the country, BHEL alone constitutes a mammoth
20,000 MW per annum capacity. A widespread network of 17
Manufacturing Divisions, 2 Repair Units, 4 Regional Offices, 8 Service
Centres, 4 Overseas Offices, 6 Joint Ventures, 15 Regional Marketing
Centres and current project execution at more than 150 project sites
across India and abroad corroborates the humungous scale and size of its
operations.

In FY 2016-17, the company commissioned/synchronized 8,539 MW of

power generating equipment. With this, the company’s global installed
power generating capacity has gone up to 178 GW. Notably, enhanced
focus on project execution has resulted in BHEL achieving a capacity
addition of 45,274 MW during the 12th Five Year Plan period (2012-17),
surpassing the target of 41,661 MW set by the government for BHEL, by
9%. With this, BHEL continues to remain the single largest contributor to
the country’s power generation capacity addition.
During the year, BHEL-built thermal power generating sets generated an
all-time high 549 Billion Units of electricity which was 58.2% of the total
thermal power generated in the country.

BHEL also has a widespread overseas footprint in 82 countries across all

the six continents with cumulative overseas installed capacity of BHEL
manufactured power plants nearing 10,000 MW including Belarus,
Bhutan, Egypt, Indonesia, Iraq, Kazakhstan, Malaysia, New Zealand,
Oman, Rwanda, Sudan, Tajikistan and UAE. A major highlight of the
year was the largest ever export order, valued at US$1.5 billion
(Rs.10,000 Crore), for setting up 1,320 MW (2x660 MW) Maitree Super
Thermal Power Project in Bangladesh. Significantly, won against stiff
international competitive bidding, this is BHEL’s largest power project
order in the international market.

Leveraging its experience of over three decades in Solar PV (SPV), the

company is capitalising on emerging opportunities in the segment.
During the year, BHEL set a new record in its Solar PV business, by
supplying 176 MW of SPV modules in a single year, marking a
significant contribution to the nation’s green initiatives.

The high level of quality & reliability of BHEL products is due to

adherence to international standards by acquiring and adapting some of
the best technologies from leading companies in the world, together with
technologies developed in its own R&D centres. BHEL divisions like
Manufacturing units, Engineering centres and Business Sectors like
Power Sector, Industry sector, International Operations are accredited to
Quality Management Systems (ISO 9001). Major Manufacturing units
and Power Sector Regions are also accredited to Environmental
Management Systems (ISO 14001) and Occupational Health & Safety
Management Systems (OHSAS 18001).
BHEL's greatest strength is its highly skilled and committed workforce of
around 39,821 employees that have been the cornerstone of BHEL's
journey ensuring success. Excellence of the company and its people has
been recognised at various national and international platforms. ‘Top 25
Best Companies to Work for in India’, ‘Prime Minister’s Shram Awards’,
‘Vishwakarma Rashtriya Puraskars’, ‘National Safety Award’ and,
recognition by Hon’ble Prime Minister for contribution in skill
development are a few notable ones.

Further, the concept of sustainable development is inculcated in the DNA

of BHEL which is evident from its mission statement-"providing
sustainable business solutions in the fields of energy, industry and
infrastructure". As part of this, focus is on creating new verticals within
the company to capitalize on the massive infrastructure spending by the
Govt. of India, with a special focus on sustainable energy development by
offering EPC solutions in solar and environment-friendly supercritical
technology in the thermal sector, besides transportation, defence and
other industrial products to drive the next wave of growth.
COMPANY’S VISION, MISSION AND VALUES

VISION

A world class, innovative, competitive and profitable engineering

enterprise providing total business solutions.

MISSION

To be the leading engineering enterprise providing quality

Products systems and services in the field of energy, transportation
industry, infrastructure and other potential areas.

VALUES

 Meeting commitment made to external & internal customers.

Fosters learning, creativity & speed of response.
 Respect for dignity & potential of individuals. Loyalty and pride in
the company.
 Team
playing.
 Zeal to excel.

 Integrity and fairness in all matters.

History of Bharat Heavy Electricals Ltd.

Bharat Heavy Electricals Ltd - Comp. was set up at Bhopal in the name

of M/s Heavy electrical Indias limited in collaboration with AEI, UK.

Subsequently, three more plants were set up at Hyderabad, Hardwar &

Trichy. The Bhopal Unit was controlled by company, the other three were

under the control of Bharat Hevey Electricals Ltd.

  The Company object is to manufacture of heavy electrical
equipments. ---1972
 In July the Operations of all the four plants were integrated. ----
1974
 In January Heavy electrical [Indias] Ltd was merged with BHEL.
 For the manufacture of wide variety of products, the Comp. has
developed technological infrastructure, skills & quality to meet the
stringent requirements of power plants, transportation, petro
chemicals, oil etc.
 BHEL has entered into collaboration which are technical in nature.
Under these agreements, the collaborators have transferred,
furnished the information, documentation, including know-how
relating to design, engineering, manufacturing assembly etc.
 captive power plant at a steel plant in West Bengal.
 -Bharat Heavy Electricals Ltd [BHELs]has informed that a Joint
Venture agreement between the Comp. & NTPC Ltd has been
singed on December 17, 2007 for Establishment & Operation of
Joint Venture Comp. for taking up EPC business.

2014- 2016

o Bharat Heavy Electricals Limited [BHELs], Haridwar, has secured

orders worth Rs 15,000 crore, its all-time high. BHEL, said the
recent MoU with the TNEB for setting up two 500 Mw thermal
power stations near Chennai had resulted in the power plant major
bagging orders.

o Bharat Heavy Electricals Ltd [BHELs] has informed that pursuant

to order dated March 04, 2016 issued by Ministry of Heavy
Industries & Public Enterprises, Department of Heavy Industry,
 Shri. K Ravi Kumar Director [Powers]/BHEL has been entrusted
with additional charge of post of Chairman & Managing
Director/BHEL w.e.f. March 01, 2016.

SUDY ON RATIO ANALYSIS

 SWOT ANALYSIS

The strengths, weakness, opportunities and threats which are

experienced by BHEL as a growing concern, have been summed up in the
following lines.

Strengths
o Vast pool of trained manpower.
o Excellent state of all factors.
o Good working condition.
o Rapport between management and union.
o Products manufactured to international
standards.
o Low labor cost and low manufacturing cost.

Weakness
 Excess manpower.
 System implementation inadequate.
 No financial parlage.
 Inadequate compensation payable to employees.

Opportunities
 Growing power sector machinery.
 Liberalizations has opened up the market.
 Navaratna company status.
 Dominate players in domestic market.
 Export potential growing.
Threats
 Liberalizations – Entry of MNC’s / private sector – More

compensation.

 MNC wearing away good employees with good attractive salaries.

 Govt. Taxation policy – against manufacturing sectors.

 Dumping of goods Attractive credit policy by FFI and MNC.

 PRODUCT PROFILE

Figure-1

BHEL manufactures a wide range of Power plant equipments and

also caters to the industry sector.

THE PRODUCTS PROFILE INCLUDES

 Gas Turbines

 Turbo generators

 Pumps

 Solar Water Heating Systems

 Electrics for Urban Transportation System
A
GAS TURBINES

Figure-2

BHEL - the largest Gas Turbine manufacturer in India, with the

state-of-art facilities in all areas of Gas Turbine manufacture provide
complete engineering in-house for meeting specific customer
requirement.

With over 100 machines and cumulative fired hours of over four million
hours, BHEL has supplied gas turbines for variety of applications in
India and abroad. BHEL also has the world’s largest experience of firing
highly volatile naphtha fuel on heavy duty gas turbines.
TURBO GENERATORS

Figure-3

BHEL presently has manufactured Turbo-Generators of ratings

upto 560 MW and is in the process of going up to 660 MW. It has also
the capability to take up the manufacture of ratings up to 1000 MW
suitable for thermal power generation, gas based and combined cycle
power generation as-well-as for diverse industrial applications like Paper,
Sugar, Cement, Petrochemical, Fertilizers, Rayon Industries, etc. Based
on proven designs and know-how backed by over three decades of
experience and accreditation of ISO 9001, the Turbo-generator is a
product of high-class workmanship and quality. Adherence to stringent
quality-checks at each stage has helped BHEL to secure prestigious
global orders in the recent past from Malaysia, Malta, Cyprus, Oman,
Iraq, Bangladesh, Sri Lanka and Saudi Arabia. The successful completion
of the various export projects in a record time is a testimony of BHEL's
performance.
PUMPS

Figure-4

BHEL started manufacture of Pumps during the mid-sixties under

technical collaboration with M/s Sigma Latin, Czechoslovakia, to meet
the requirements of 60 MW, 110 MW and 210 MW thermal power
stations, the scope of which was widened to meet the requirements of
power plants up to 500 MW, with the help of another collaboration with
M/s Weir Pumps, U.K. BHEL has also made some in-house

product development to gain spin off benefits from the above

collaboration as well as to develop new pumps to meet the requirements
of Combined Cycle Power plants.

BHEL has undertaken a design up-gradation and retrofit of the

existing 200 KHI Boiler Feed pumps Inside Stators with energy efficient
hydraulics and cartridge design internals under technical tie-up with M/s
Sulzer Pumps, Germany; and recommended the upgraded 200 KHI-S
Boiler Feed pump to all customers of 110 MW & 210 MW Power
Stations operating with the earlier Czech design for increase of pump
availability and reliability and also considerable reduction in operational
costs.
SOLAR WATER HEATING SYSTEMS

Figure-5

BHEL a pioneer in the field of design manufacturing and installation

of solar water heating systems (SWHS) in the country till date have
2
installed systems covering more than 74,000 m of absorber area of
capacity over 37 Lakh liters per day. The largest over SWHS of 40000
LPD for space heating is in use at Dr. Willmar Schwab India Pvt. Ltd.
Noida.

Solar water heating systems are environmental friendly, pollution free

equipments, harnessing the abundantly available Sun's energy. They find
application at homes, hostels, hotels, and hospitals (swimming pool,
bathing, washing, cleaning and cooking); in industrial process heating
(Textile, Food processing, Pharmaceutical, Dyeing, Breweries, Metal
Plating industries); Milk dairies and chilling plants; space heating in
central air conditioning systems; pre-heating of boiler feed water.

In the BHEL make Solar Collector, stabilized efficiency values up to

65% is assured under normal circumstances over a long period without
degradation.
 ELECTRICS FOR URBAN TRANSPORTATION
SYSTEM

Figure-6

 25 KV AC, 50 HZ, single phase, broad gauge/meter gauge,

Electrical Multiple Units with DC Drives.

 1500V DC, broad gauge/meter gauge, Electric Multiple Units with
DC Drives.

 25 KV AC/1500 VDC broad gauge Electrical Multiple Units with
3 phase drive.

 Diesel Electric at Multiple Units

 Metro Railway.

 Tram Cars
Some of the other products manufactured by BHEL are:

THERMAL POWER PLANT

Steam turbines, boilers and generators of up to 500 MW capacities to

manufacture boilers and steam turbines with super critical steam cycle
parameters and matching generators up 660 MW unit facilities available
for 1000MW size.

HYDRO POWER PLANT

o Mini/Micro hydro sets

o Spherical, butterfly, rotary values auxiliaries for hydro station.

BOILERS

 Heat recovery steam generators, pressure vessels chemical

recovery boilers for paper industry ranging from capacity of 100 to
100t/day of dry solids.

POWER DEVICES

 High power capacity silicon diodes, Thyristor devices and solar

Photovoltaic cells.

SYSTEM AND SERVICES

 Power generation system

 Transmission system

 Transportation system

 Industrial system

PIPING SYSTEM
Constant load hangers clamp and hanger components, variable, spring
hanger for power station up to 850 MW capacities combined cycle plants,
industrial boilers and process industries.

TRANSFORMERS

o Power transformers for voltage up to 400 KV

o HVDC transformers and reactors of up to + or – 500 KV

CAPACITORS

o Power capacitors for industrial and power systems of up to 250

KVA rating for application up to 400 KV

o Coupling/CVVT capacitors for voltages up to 400 KV

STUDY OBJECTIVES OF THE

• To find out the cash fluctuations of liquidity,profitability position

in the BHEL

• To find out the different types of ratios in the BHEL company

• To find out the financial performance & financial distributions of

the BHEL

• To examine the feasibility of present system of managing

Working Capital turnover ratios in the Company

• To find out the working capital turnover ratios to analyze from

2007 – 08 to 2011-12.

SCOPE OF THE STUDY :

The study is confirmed to the management of RATIO

ANALYSIS in BHEL. Hyderabad. The main aim of the study is to
 asses the necessary of managing Current Assets and Current
liabilities.

NEED FOR STUDY

The most important functions of the business firm are
production, marketing finance. It is very difficult to separate finance
functions from production, marketing and other functions. The
functions of raising funds, investing them in assets and distributing
returns earned from assets to share holders are respectively known as
financing, investing and dividend decisions. In doing so, a firm
attempts to balance cash inflow and outflows. Finance function call
for skillful planning control and execution of firm’s activities.

Hence, the study is taken to analyze the firm’s activities

through “RATIO ANALYSIS”
 RESEARCH METHODOLOGY

The methodology to be followed here is –

 Preparation of numeric data tables with data of accounting year wise

factors of ratios with calculated ratios.
 Graphical presentation of the ratios indicating changes.
 Interpretation with the help of numeric and graphical
presentation. Opinion based on result on result of the analysis
with conclusion.

LIMITATIONS

 As the time span of the study is only eight weeks gathering

total information is not possible.

 There is very less scope of gathering the confidential data as

we are only vocational trainees.

 During the project period as some executives were busy with

their work they could not afford to give full information.

 The analysis and interpretation of collected data is restricted

to necessary information.

 Working Capital standards pertains to relevant industry is

also a limiting factor for comparative analysis.
 THEORETICAL FRAME WORK

RATIO ANALYSIS

Financial ratios are useful indicators of a firm's performance and

financial situation. Financial ratios can be used to analyze trends and to
compare the firm's financials to those of other firms. Ratio analysis is the
calculation and comparison of ratios which are derived from the
information in a company's financial statements. Financial ratios are
usually expressed as a percent or as times per period. Ratio analysis is a
widely used tool of financial analysis. It is defined as the systematic use
of ratio to interpret the financial statements so that the strength and
weaknesses of a firm as well as its historical performance and current
financial condition can be determined. The term ratio refers to the
numerical or quantitative relationship between two variables. With the
help of ratio analysis conclusion can be drawn regarding several aspects
such as financial health, profitability and operational efficiency of the
undertaking. Ratio points out the operating efficiency of the firm i.e.
whether the management has utilized the firm’s assets correctly, to
increase the investor’s wealth. It ensures a fair return to its owners and
secures optimum utilization of firm’s assets. Ratio analysis helps in inter-
firm comparison by providing necessary data. An inter firm comparison
indicates relative position. It provides the relevant data for the
comparison of the performance of different departments. If comparison
shows a variance, the possible reasons of variations may be identified and
if results are negative, the action may be initiated immediately to bring
them in line. Yet another dimension of usefulness or ratio analysis,
relevant from the View point of management is that it throws light on the
degree efficiency in the various activity ratios measures this kind of
operational efficiency.
Significance or Importance of Ratio Analysis

It helps in evaluating the firm's performance

With the help of ratio analysis conclusion can be drawn regarding

several aspects such as financial health, profitability and operational
efficiency of the undertaking. Ratio points out the operating efficiency of
the firm i.e. whether the management has utilized the firm’s assets
correctly, to increase the investor’s wealth. It ensures a fair return to its
owners and secures optimum utilization of firms assets.

It helps in inter-firm comparison

Ratio analysis helps in inter-firm comparison by providing

necessary data. An inter firm comparison indicates relative position. It
provides the relevant data for the comparison of the performance of
different departments. If comparison shows a variance, the possible
reasons of variations may be identified and if results are negative, the
action may be initiated immediately to bring them in line.

It simplifies financial statement

The information given in the basic financial statements serves no

useful Purpose unless it s interrupted and analyzed in some comparable
terms. The ratio analysis is one of the tools in the hands of those who
want to know something more from the financial statements in the
simplified manner.
It helps in determining the financial position of the concern

Ratio analysis facilitates the management to know whether the

firms financial position is improving or deteriorating or is constant over
the years by setting a trend with the help of ratios The analysis with the
help of ratio analysis can know the direction of the trend of strategic ratio
may help the management in the task of planning, forecasting and
controlling.

It is helpful in budgeting and forecasting

Accounting ratios provide a reliable data, which can be compared,

studied and analyzed. These ratios provide sound footing for future
prospectus. The ratios can also serve as a basis for preparing budgeting
future line of action.

Liquidity position

With help of ratio analysis conclusions can be drawn regarding the

Liquidity position of a firm. The liquidity position of a firm would be
satisfactory if it is able to meet its current obligation when they become
due. The ability to met short term liabilities is reflected in the liquidity
ratio of a firm.

Long term solvency:

Ratio analysis is equally for assessing the long term financial

ability of the Firm. The long term solvency is measured by the leverage
or capital structure and profitability ratio which shows the earning power
and operating efficiency, Solvency ratio shows relationship between total
liability and total assets.
Operating efficiency:

Yet another dimension of usefulness or ratio analysis, relevant

from the View point of management is that it throws light on the degree
efficiency in the various activity ratios measures this kind of operational
efficiency.

Ratio analysis is a widely used tool of financial analysis. It is

defined as the systematic use of ratio to interpret the financial statements
so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined. The term
ratio refers to the numerical or quantitative relationship between two
variables.

There are four important categories of ratios related to the

RATIO

ANALYSIS of the firms. They are

1. Liquidity ratios
2. Leverage ratios
3. Profitability ratios
4. Activity ratios
1. LIQUIDITY RATIOS

It is extremely essential for a firm to be able to meet its obligations

as they become due. Liquidity ratios measure the ability of the firm to
meet its current obligations.

The most common ratios, which indicate the extent of liquidity, are

1.A. Current ratio

1.B.Quick ratio

1.A.CURRENT RATIO

The current ratio is calculated as per the following formula

Current ratio = Current assets

Current liabilities

Current assets include cash and those assets, which can be

converted into cash within a year. All obligations maturing within a year

are included in current liabilities.

As a conventional rule, a current ratio of 2:1 or more is considered

satisfactory. The higher the current ratio, the greater the margin of safety.

1.B.QUICK RATIO

An asset is quick or liquid if it can be converted into cash

immediately without a loss of value. Cash is the most liquid asset. Other
assets which are considered to be relatively liquid and included in quick
assets are debtors and bills receivables and marketable securities.

The ratio can be calculated by using the following formula

Quick ratio = Quick assets

Current liabilities

Generally a quick ratio of 1:1 is considered to represent a

satisfactory current financial position.

2.LEVERAGE RATIOS

The short term creditors like bankers and suppliers of raw material
are more concerned with the firm’s current debt paying ability. On the
other hand, long term creditors, like debenture holders, financial
institutions etc., are more concerned with the firm’s long term financial
strength.

To judge the long term financial position of the firm, financial

leverage or capital structure ratios are calculated.

Leverage ratios may be calculated form the balance sheet items to

determine the proportion of debt in total financing.

The leverage ratios are calculated in two methods. Such as

2.A. Total debt ratio

2.B.Debt equity ratio

2.A. TOTAL DEBT RATIO

Debt ratio is used to analyze the long term solvency of a firm. The
firm may be interested in knowing the proportion of the interest bearing
debt in the capital structure. It may, therefore, compute the debt ratio by
using following formula

Debt Ratio = Total debt

Total debt+Net worth

2.B. DEBT EQUITY RATIO

From the total debt ratio which clears the percentage of lenders
contribution to owner’s contribution or the relationship describing the
lender’s contribution for each rupee of the owner’s contribution is called
debt equity ratio. It can be calculated by using the following formula

Debt equity ratio = Total debt

Net worth

3.PROFITABILITY RATIOS

The profitability ratios are calculated to measure the operating

efficiency of the company.

A company should earn profits to survive and grow over a long

period of time. Profit is the difference between revenues and expenses
over a period of time. We should continuously evaluate the efficiency of
its company in terms of profit.

Generally, two major types of profitability ratios are calculated

1. Profitability in relation to sales

2. Profitability in relation to investment

3.A. GROSS PROFIT MARGIN

The first profitability ratio in relation to sales is the gross profit

margin. It can be calculated as

Gross profit margin = Sales – Cost of goods sold

Sales
 This ratio indicates the average spread between the cost of goods
sold and sales revenue.

A high gross profit margin ratio is a sign of goods management. It

is relative to the industry average implies the firm able to produce at
relatively lower cost. A low gross profit margin may reflect higher cost of
goods sold due to the firm’s inability to purchase raw materials at
favorable terms, inefficient utilization of plant and machinery or over
investment in fixed assets resulting higher cost of production.
3.B. NET PROFIT MARGIN
Net profit is obtained when operating expenses, interest and taxes
are subtracted form the gross profit. The ratio is measured by using the
following formula

Net profit margin = Profit after tax (PAT)

Sales

This ratio is establishes a relationship between net profit and sales

and indicates management’s efficiency in manufacturing, administering
and selling the products. This ratio is the overall measure of the firm’s
ability to turn each rupee sales into net profit.

3.C. RETURN ON INVESTMENT

The term investment may refer to total assets or net assets. The
conventional approach of calculating return on investment is to divide
profit after tax by investment.

ROI = EBIT (I-T)

Net assets

4.ACTIVITY RATIOS

Activity ratios are employed to evaluate the efficiency with which

the firm manages and utilizes its assets. These ratios are also called
turnover ratios because they indicate the speed with which assets are
being converted or turnover into sales.

Following are the different activity ratios

4.A. Inventory turnover ratio

4.B. Debtors turnover ratio
4.C. Assets turnover ratio
 4.D. Fixed assets turnover ratio

4.A. INVENTORY TURNOVER RATIO

This ratio indicates the efficiency of the firm in producing and selling its
product. It is calculates as

Inventory turnover ratio = Cost of goods sold

Average work-in-progress

4.B DEBTORS TURNOVER RATIO

Debtors are expected to be converted into cash over a short period
and therefore are included in current assets. The liquidity position of the
firm depends on the quality of debtors to a great extent. Debtors turnover
ratio is calculated by using the following formula

Debtors turnover ratio = Credit Sales

Average debtors

4.C. ASSETS TURNOVER RATIOS

Net assets turnover ratio = Sales

Net assets

Net assets include net fixed assets and net current assets minus
current liabilities.

A firm’s ability to produce a large volume of sales for a given

amount of net assets is the most important aspect of its operating
performance.

Total assets turnover ratio = Sales

Total assets
 4.D) FIXED ASSETS TURNOVER RATIO:

The numerator of this ratio is the sales for the period and the denominator

is the balance in the net fixed assets account at the end of the year. This

ratio is supposed to measure the efficiency with which fixed assets are

employed. A high ratio indicates a high degree of efficiency in assets

utilization and a low ratio reflects inefficient use of assets. It is calculated

by dividing sales with fixed assets. It is used to highlight the extent of

utilization of the company’s plant equipment.

Fixed assets turnover ratio = Sales

Fixed assets

DATA ANALYSIS & INTERPRETATION

Current ratio:-
The current ratio is calculated by dividing current assets by current
liabilities.

Current

assets include cash and those assets, which can be converted

into cash within a year, such as marketable securities, debtors and
inventories.

Current liabilities include creditors, bills payable, accrued

expenses, short term bank loans etc.

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITIES
Table 1:-

Year Current Assets Current Liabilities Ratio

2011-12 174043233.60 80007395.82 2.17
2012-13 119472334.50 89258186.27 1.338
2014-15 85350227.24 81488065.33 1.047
2015-16 145292000 117086000 1.24
2016-17 158329780 78980214.39 2.01
Graph no.1:-

Interpretation:-

The normal standard of current ratio is 2:1. The company’s

current ratio is more than the standard ratio in 2015-16, i.e. 1.24, 2016-
17(2.01). in the remaining years 2012-13 (2.17), 2013-14(1.33) ,2014-
15(1.04) the current ratio is lower than the standard ratio.
2. Quick ratio:-

This ratio establishes a relationship between quick or liquid assets

and current liabilities. An asset is liquid if it can be converted into cash
immediately or reasonably soon without a loss of value cash is the most
liquid assets, other assets are bills receivables, debtors and marketable
securities. Inventories are considered to be less liquid.

The ratio shows the assets which are immediately converted into
cash to meet the short term obligations of the firm.

QUICK RATIO = CURRENT ASSETS-(STOCK+PREPAID EXPENCES)

CURRENT LIABILITIEs

Table no. 2:-

Year Quick Assets Current Liabilities Ratio

2012-13 101406887.1 80007395.82 1.267

2013-14 112520280.53 89258186.27 1.261

2014-15 65172524.29 81488065.33 0.799

2015-16 134132000 117086000 1.145

2016-17 93876746.86 78980214.39 1.188

Graph no.2:-
Interpretation:-

The normal standard of Quick Ratio is 1:1. In only one year the
ratio decreased than the standard ratio, i.e. 0.799 in 2014-15. In
remaining years 2013-14(1.26), 2014-15 (1.21), 2015-16 (1.14), 2016-
17(1.18) the quick ratio maintains the ratio higher than the standard
ratio. So the quick ratio is in a satisfied manner.
 3. Inventory turnover ratio:-

The inventory turnover ratio measures how quickly the stock

is converted into sales. It is the test of efficient inventory

management. To measure the efficient, the ratio should be

compared on the basis of trend analysis or with the level of other

firms. The higher the ratio, the better is the performance of the

company. A low ratio may indicate a slow moving inventory.

INVENTORY TURNOVER RATIO = COST OF GOODS SOLD

AVERAGE INVENTOR

Table 3:-

Year Cost of Goods Sold Average Ratio

Inventory

2012-13 227335354 45831224.04 4.96

2013-14 277429458 24784534.25 11.19

2014-15 296868782.6 12932762.70 22.95

2015-16 478057802.39 15046401.20 31.77

2016-17 70274871.73 37806516.57 1.85

Graph no.3:-

Interpretation:-

The above graph indicates the increasing trend of inventory

turnover ratio from the years 2012-13(4.96), 2013-14

(11.19), 2014-2015 (22.5), 2015- 16 (31.77). It indicates the inventory is

effectively onverted into sales. But in the last year the inventory

turnover ratio is decreased to 1.85

4. Fixed assets turnover ratio:-

This ratio is supposed to measure the efficiency with which fixed

assets are employed. A high ratio indicates a high degree of efficiency in
assets utilization and a low ratio reflects inefficient use of assets. It is
calculated by dividing sales with fixed assets. It is used to highlight the
extent of utilization of the company’s plant equipment.

FIXED ASSETS TURNOVER RATIO = SALES

FIXED ASSETS

Table
no.4:-

YEAR SALES FIXED ASSETS RATIO

2012-13 281649206 177111306.4 1.59
2013-14 256485255 179168799.9 1.43
2014-15 307770938.7 181315968 2.22
2015-16 567778000 190266000 2.98
2016-17 378800000 196150122.87 1.93
Graph no.4:-

Interpretation:-
The fixed assets turnover ratio is higher in 2013-14, i.e. 2.3. And in the
remaining years, the ratios are 1.377, 1.277, 1.432 and 1.616 for the
years 2012-13, 2013-14, 2014-15 and 2015-16 respectively.
5. Total assets turnover ratio: -

Assets are used to generate sales. A firm should manage its assets
efficiently to maximize sales. The relationship between sales and assets
is called assets turnover ratio. Assets turnover ratio is computed by
dividing sales with total assets.

TOTAL ASSETS TURNOVER RATIO = SALES

TOTAL ASSETS

Table no.5:-

YEAR SALES TOTAL ASSETS RATIO

2012-13 281649206 582554034.19 0.48
2013-14 256485255 602597207.23 0.42
2014-15 307770938.7 636378314.37 0.62
2015-16 567778000 644256581.33 0.88
2016-17 378800000 656875754.81 0.57
Graph no.5:-

Interpretation:-

The total assets turnover ratio is high in the year 2012-13, i.e.
1.036. In the remaining years it is 0.655 in 2013-14, 0.592 in 2014-15,
0.633 in 2015-16 and 0.729 in 2016-17. It is better to improve the ratio
by converting the total assets into sales.
 6. Working capital turnover ratio:-

This ratio indicates whether or not working capital

has been effectively utilized in making sales. In case a company can
achieve higher volume of sales with relative small amount of working
capital, it is an indication of the operating efficiency of the company.

WORKING CAPITAL TURNOVER RATIO:- SALES

NET WORKING CAPITAL

Table No.6:-

Year Sales Net Working Ratio

Capital

2012-13 281649206.80 94035837.79 2.95

2013-14 256485255.30 30214148.30 11.798

2014-15 402770938.70 3862161.91 104.286

2015-16 567778000 28206000 25.21

2016-17 378800000 79349565.61 6.034

Graph no.6:-

Interpretation:-

The working capital turnover ratio is very peak in the year

2012-13, i.e. 104.28. and in the remaining years 2013-14(2.95),

2014-15 (11.7), 2015-16 (25.2), 2016-17 (6.0) the working capital

ratio is in the normal position. High turnover indicates the sign of

over trading and puts the firm into financial difficulties.

 7. Interest coverage ratio:-

This ratio is very important for the lenders point of view. It

indicates whether the business would earn sufficient profits to pay
periodically the interest charges. The higher the number, the more
secure the lender is in respect of his periodical interest income. It is
calculated as follows:

REST COVERAGE RATIO = EBIT

INTEREST CHARGE

Table no. 7:-

Year Ebit Interest Ratio

2012-13 -16602435 2195337.51 -0.8
2013-14 4175100 3007655 0.2
2014-15 -11935835.30 10552222.98 -0.2
2015-16 55738197 8001000 0.6
2016-17 259934715 10552222.92 0.8
Graph no.7:-

Interpretation:-

Interest coverage ratio should not decrease more than 1.5

times. If it decreases more than this it may cause the financial risk,

and the ideal one is six to seven times. The interest coverage ratio

of Sai global yarntex, ltd is negative in 2012-13 and 2013-14. It is

0.2in 2014-15 and 0.2 in 2015-16, 0.8 in 2016-17. The company

should maintain the ratio in a standard manner to avoid the

problem of financial risk.

8. Gross profit ratio:-

It is calculated by dividing the gross profit with sales. This ratio

shows the profits relative to sales after the direct production costs are
deducted. This ratio establishes the relationship between operating
profit and sales to measure the relative operating efficiency of the
company.

GROSS PROFIT RATIO= GROSS PROFIT*100

NET SALES

(Gross Profit = Net Sales - Cost of Goods Sold)

Table no.8:-

Year Gross Profit or Loss Sales Ratio

2012-13 646651 281649206.80 0.016

2013-14 -24709650.88 256485255.3 -6.93

2014-15 100875904.7 402770938.7 0.20

2015-16 61725000 567778000 9.24

2016-17 65438368.28 378800000 13.66

Graph no.8:-

Interpretation:-

The firm incurred gross loss in 2012-13 i.e.-6.93. And it got profits
in 2013-14(0.016), 2014-15(0.217), 2015-16(9.24) and 2016-17(13.66).
The gross profit ratio of the firm is not satisfactory due to the
fluctuations in the gross profit ratio.
 9. Net profit ratio:-

This ratio is measured by dividing profit after tax by sales. It

indicates management’s efficiency in manufacturing, administering and
selling the products. The ratio is the overall measure of the firm’s ability.

NET PROFIT RATIO= NET PROFIT BEFORE TAX*100

NET SALES

Table no.9:-

Year Net Profit/Loss Sales Ratio

2012-13 -24132675.02 281649206.8 -6.323

2013-14 1107655.17 256485255.3 0.310

2014-15 72425688.91 402770938.7 0.144

2015-16 19742000 567778000 2.95

2016-17 25814892.16 378800000 5.391

Graph no.9:-

Interpretation:-

The company incurred net losses in 2012-13(-6.323) and 2013-

14(5.637) and got profits in 2014-15(0.31), 2015-16(2.95) and 2014-
15(5.391). Hence it is satisfactorily in the year 2016-17 only.
 SUGGESTIONS

 Company should make efforts to utilize its fixed assets in an optimum

manner.

 The company should adopt effective operation research techniques to

reduce cost of production.

 The company should maintain enough reserves to expand the business.

 The company must try for maintenances of proper current assets to

possess the short time solvency.

 The company has already taken action to reduce expenditure. Yet some

more necessary steps need to be taken to reduce expenditure by the

company head.

 The company cash position is low. It is better to increase cash levels.

 CONCLUSION

 Though the finance play the vital role in versatile field. Once should have enough

conscious on each operation.

 Different operating year shows the different growth in different areas. Hence each in

flow and out flow of the company shows the efficiency of the management and

maximum utilization of limited resources in an economical way.

 It was a great experience in this company. According to my experience, it is a well

established organization with entire production is undertaken with highest quality

machinery’s.

 It is a well build organization with great opportunity, good facilities, very well

organized environmental control and most important safely measures for safety of

employees.

 However the success can be achieved through proper utilization of financial

resources, more inventory turnover, and high liquidity, less cost of production and

last but not least making a high volume of sales.