Course Code: ACC506 Course Title: FINANCIAL ACCOUNTING AND ANALYSIS

Course Instructor: Dr. Anil Kumar

Academic Task No.: 02 Academic Task Title: Academic Task-2

Date of Allotment: 5/09/2019 Date of submission: 27/09/2019

Student’s Roll no: 13 Student’s Reg. no: 11907300

Evaluation Parameters:

Learning Outcomes: Understood with the practical aspects of ratio analysis and able to interpret the financial
Performance and position of the organization.

Declaration:

I declare that this Assignment is my individual work. I have not copied it from any other student’s work
or from any other source except where due acknowledgement is made explicitly in the text, nor has any
part been written for me by any other person.

Student’s Signature: Saketh Buddala…

Evaluator’s comments (For Instructor’s use only)

General Observations Suggestions for Improvement Best part of assignment

Evaluator’s Signature and Date:

Marks Obtained: _______________ Max. Marks: ______________

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 KKV AGRO POWER LIMITED

 KKV Agro Powers is an Independent Power Producer (IPP)

and Renewable Power Generation company located in Coimbatore.
 They have an installation capacity of 9.6 MW that includes an installation of
7.6 MW Wind Energy and 2 MW Solar energy. The Company adopts a
nature-friendly approach to Wind Generation by using the most advanced
technology that have been sourced from experienced nations across the
world.
 KKV Agro Powers Limited is a Public incorporated on 05 June 2012. It is
classified as Non-government Company and is registered at Registrar of
Companies, Coimbatore. Its authorized share capital is Rs. 120,000,000 and
its paid up capital is Rs. 13,535,000. It is involved in Production, collection
and distribution of electricity.
 KKV Agro Powers Limited's Annual General Meeting (AGM) was last held
on 14 September 2018 and as pe
 Tirupur Kulandaivel Chandiran is the current Chairman and the Managing
Directore of KKV Agro Power Limited.
 Directors of KKV Agro Powers Limited are Ammasi Chandiran
Vineethkumar, Selvi, Varadharaja Nadar Chandrasekaran, , Bhagavan
Mohan.
 Current status of Kkv Agro Powers Limited is - Active

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 LIQUIDITY RATIOS

Current ratio

 Current Ratio establishes the relationship between Current Assets and

Current Liabilities.
 It measures the ability of a firm to meet its current obligations
 The Ideal Current Ratio is 2:1

𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕𝒔
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑹𝒂𝒕𝒊𝒐 =
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

𝟐. 𝟏𝟏(𝒊𝒏 𝒄𝒓𝒐𝒓𝒆𝒔)
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑹𝒂𝒕𝒊𝒐 =
𝟒. 𝟎𝟐(𝒊𝒏 𝒄𝒓𝒐𝒓𝒆𝒔)

 Comparison of Current Ratio of KKV AGRO Ltd. in 2018 with that of its
competitors JSW ENERGY and NTPC.

CURRENT KKV AGRO JSW ENERGY NTPC

RATIO
0.52 0.48 0.84

SOURCES:

https://www.moneycontrol.com/financials/kkvagropowers/ratiosVI/KAP#KAP

https://www.moneycontrol.com/financials/jswenergy/ratiosVI/JE01#JE01

https://www.moneycontrol.com/financials/ntpc/ratiosVI/NTP#NTP

3
INTERPRETATION:

The Current ratios of KKV AGRO Ltd. 0.52:1 that is less than the ideal current
ratio 2:1; which means 0.52 are the current assets against 1 current liability but the
current assets are less than current liabilities so they have insufficient current assets
to pay off the current liabilities. Also they have insufficient margin of safety to
current liabilities. They cannot fulfil short term obligations properly. They have
unsatisfactory liquidity position.

COMPETITORS:

JSW ENERGY: The Current ratio of JSW ENERGY is 0.48:1,that is less than the
ideal current ratio 2:1; which means 0.48 are the current assets against 1 current
liability but the current assets are less than current liabilities. JSW ENERGY has
insufficient current assets to pay off the current liabilities. They have insufficient
margin of safety to current liabilities. The company doesn’t have the ability to
fulfill short term obligations properly and the company has unsatisfactory liquidity
position.

NTPC: The Current ratio of NTPC is 0.84:1 that is less than the ideal current ratio
2:1; which means 0.84 is the current asset against 1 current liability. The current
assets are less than current liabilities. NTPC has insufficient current assets to pay
off the current liabilities. They have insufficient margin of safety to current
liabilities. The company doesn’t have the ability to fulfil short term obligations
properly and the company has unsatisfactory liquidity position.

4
Quick ratio

 It is supplementary to Current ratio.

 It is a more stringent and severe test of a firm's ability to pay its short-term
obligations as and when they become due.
 Quick ratio establishes the relationship between Quick assets and Current
liabilities.
 Quick Assets = Current Assets – Inventory – Prepaid Expenses

𝑸𝒖𝒊𝒄𝒌 𝑨𝒔𝒔𝒆𝒕𝒔
𝑸𝒖𝒊𝒄𝒌 𝑹𝒂𝒕𝒊𝒐 =
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

𝟐. 𝟏𝟏 − 𝟎. 𝟎𝟗 − 𝟎. 𝟎𝟏(𝒊𝒏 𝒄𝒓𝒐𝒓𝒆𝒔)
𝑸𝒖𝒊𝒄𝒌 𝑹𝒂𝒕𝒊𝒐 =
𝟒. 𝟎𝟐(𝒊𝒏 𝒄𝒓𝒐𝒓𝒆𝒔)

Comparison of Quick Ratio of KKV AGRO Ltd. in 2018 with that of its
competitors JSW ENERGY and NTPC .

QUICK RATIO KKV AGRO JSW ENERGY NTPC

0.50 0.33 0.7

SOURCES:

https://www.moneycontrol.com/financials/kkvagropowers/ratiosVI/KAP#KAP

INTERPRETATION:

The quick ratio of KKV AGRO Ltd. is 0.5:1, which means 0.5 are quick assets
against 1 current liability; the quick ratio of KKV AGRO Ltd. is less than the ideal
quick ratio 1:1.The quick assets are less than the current liabilities. KKV AGRO

5
Ltd. has insufficient quick assets to pay off the current liabilities. So, they have no
margin of safety to current liabilities. Also it has unsatisfactory short term solvency
position. The liquidity position of KKV AGRO Ltd. is unsatisfactory.

COMPETITORS:

JSW ENERGY:

The quick ratio of JSW ENERGY is 0.33:1, which means 0.33 are quick assets
against 1 current liability, the quick ratio of JSW ENERGY is less than the ideal
quick ratio1:1.The quick assets of this company are less than the current liabilities
,so JSW ENERGY has no sufficient quick assets to pay off the current liabilities.
They have insufficient margin of safety to current liabilities. The liquidity position
of JSW ENERGY is unsatisfactory.

NTPC:

The quick ratio of NTPC is 0.7:1, which means current assets are 0.7 are quick
assets against 1 current Liability. The quick ratio of NTPC is less than the ideal
quick ratio1:1.The quick assets of this company are less than the current liabilities
so NTPC has insufficient quick assets to pay off the current liabilities. They have
no sufficient margin of safety to current liabilities. The liquidity position of NTPC
is unsatisfactory.

6
 EFFICIENCY RATIOS

Asset Turnover Ratio

 The asset turnover ratio is an efficiency ratio that measures a company’s

ability to generate sales from its assets by comparing net sales with average
total assets.
 In other words, this ratio shows how efficiently a company can use its assets
to generate sales.
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔
𝑨𝒔𝒔𝒆𝒕 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝑹𝒂𝒕𝒊𝒐 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑨𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆

𝟐𝟎.𝟐
𝑨𝒔𝒔𝒆𝒕 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝑹𝒂𝒕𝒊𝒐 =
𝟒𝟒.𝟐

ASSET RATIO KKV AGRO JSW ENERGY NTPC

0.18 0.21 0.27

Interpretation :

In 2019 Fixed assets turnover ratio of KKV is 0.18 times and the ratio of JSW and
NTPC is 0.21 & 0.07 times .

A high ratio indicates efficient utilization of fixed assets in generating sales. In

case of JSW the ratio was 0.21 in the year 2019 . KKV company generates a sales
revenue invested in fixed assets as compared to JSW and NTPC Based on the
above comparison, It can be said that Company JSW is slightly more efficient in

7
utilizing its fixed assets. If we simply see the equation, higher the ratio better is the
efficiency of the firm in utilizing the assets and vice versa

Inventory Turnover Ratio

 This ratio shows how effectively inventory is managed by comparing cost of

goods sold with average inventory for a period.
 This measures how many times average inventory is “turned” or sold during
a period.

𝑪𝒐𝒔𝒕 𝒐𝒇 𝑮𝒐𝒐𝒅𝒔 𝑺𝒐𝒍𝒅

𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝑹𝒂𝒕𝒊𝒐 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚

𝑪𝒐𝒔𝒕 𝒐𝒇 𝑮𝒐𝒐𝒅𝒔 𝑺𝒐𝒍𝒅

𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝑹𝒂𝒕𝒊𝒐 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚

INVENTORY KKV AGRO JSW ENERGY NTPC

RATIO
69.67 59.15 9.28

Interpretation: In 2019, The Inventory turnover proportion KKV is 69.67

occasions which is exceptionally high its shows productive administration
arrangement of stock and demonstrates that organization is having a quick moving
stock.

In 2019, The Inventory turnover proportion of JSW is 59.15 occasions which is

high its shows proficient administration arrangement of stock and demonstrates
that organization is having a quick moving stock .This implies the organization
8
JSW is having fast deals and the supply of the organization is immediately changed
over into money. On a normal the stock is sold by the organization 59.15 occasions
in a year and it takes 6 days to sell the stock in the market.

In 2019, The Inventory turnover proportion of NTPC is 9.28 occasions which

shows effective administration arrangement of stock and demonstrates that
organization is having a moving stock .This implies the organization NTPC is
having deals and the supply of the organization is changed over into money. On a
normal the stock is sold by the organization 9.28 occasions in a year and it takes 40
days to sell the stock in the market.

KKV is at better position than JSW and NTPC.

Profitability Ratios :

EBITDA Margin
 EBITDA means Earnings before Interest, Tax, Depreciation and
Amortization (EBITDA) Margin
 EBITDA Margin is an assessment of a firm's Operating Profitability as a
percentage of its Total Revenue.
 EBITDA Margin can be calculated as:

𝑬𝑻𝑫𝑨 ∗ 𝟏𝟎𝟎
𝑬𝑩𝑰𝑻𝑫𝑨 𝑴𝒂𝒓𝒈𝒊𝒏 =
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔

9
 Comparison with last two years

KKV 2019 2018 2017

EBITDA 25.42 23.41 22.67

Interpretation:

The EBITDA of KKV in 2017 was 32.67 . It increment in 2018 and become 33.41.
In 2019 it had increment to 35.42 which demonstrates that organization's gross
benefit proportion increments from 2017 to2019 .

Higher estimation of EBITDA it means cost of generation is low and selling cost is
high. Furthermore, bring down the estimation of EBITDA it means cost of creation
is high and selling cost is low. A high gross generally speaking income suggests
that the association did well in managing its cost of offers. It furthermore exhibits
that the association has more to cover for working, financing, and various costs.
All things considered, the higher the gross in general income the better. A high
gross net income suggests that the association did well in managing its cost of
offers. It moreover exhibits that the association has more to cover for working,
financing, and various costs. The gross net income may be improved by extending
arrangements cost or lessening cost of offers. In any case, such gauges may have
negative effects, for instance, decrease in arrangements volume as a result of
extended expenses, or lower thing quality due to cutting costs. Regardless, the
gross by and large income ought to be commonly relentless except for when there
is significant change to the association's game plan.

Earnings per Share (EPS)

 EPS ratio measures the earning capacity of the concern from the owner’s
point of view and it is helpful in determining the profit of the equity share in
the market place.
 It is good indicator of financial health of the company.

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  EPS ratio can be calculated as :

𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝒂𝒇𝒕𝒆𝒓 𝑻𝒂𝒙 𝒂𝒏𝒅 𝑷𝒓𝒆𝒇𝒆𝒓𝒆𝒏𝒄𝒆 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅

𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒑𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 =
𝑵𝒐.𝒐𝒇 𝑬𝒒𝒖𝒊𝒕𝒚 𝒔𝒉𝒂𝒓𝒆𝒔

2018 – 2019 2017 – 2018 2016 – 2017

2.57 2.70 2.53

Interpretation:

The Earning per Share ratio of KKV was 2.53 in 2017. And in 2018 there is
increase in the earning per share and it becomes 2.70. In 2019, it goes on decrease
and become 2.53 in 2019. Since we know higher the ratio, better it is, it means
company is more profitable in 2018 than in 2019. The company had more profits to
distribute to its shareholders in 2018 than in 2019. The company had good
financial position in 2018 than in 2019. It means on one share of company,
company was getting Rs 2.70 in 2018 and now getting Rs.2.57 as profit.

The Earning per Share ratio is decreasing then increasing but still they are earning
profit so it is reliable to invest in company.

Net Profit Ratio

 This ratio reveals the firm's overall efficiency in operating the business.
 Net Profit Ratio is used to measure the relationship between net profit and
sales.
 Net Profit Ratio can be calculated as:

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 𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝒂𝒇𝒕𝒆𝒓 𝒕𝒂𝒙 𝒂𝒏𝒅 𝑷𝒓𝒆𝒇𝒆𝒓𝒆𝒏𝒄𝒆 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅
𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝑹𝒂𝒕𝒊𝒐 =
𝑵. 𝒐𝒇 𝑬𝒒𝒖𝒊𝒕𝒚 𝑺𝒉𝒂𝒓𝒆𝒔

Camparison with last two years

KKV. 2019 2018 2017

Net Profit 32.23 39.90 38.44
ratio

Interpretation:

Net profit ratio of the company is 38.44 in 2017. And in increase and become
39.90 in 2018. And it get decrease in 2019 become 32.23. It shows that net profit
ratio is firstly increase and then decrease.

The net overall revenue, otherwise called net edge, demonstrates how much total
compensation an organization makes with absolute deals accomplished. A higher
net overall revenue implies that an organization is increasingly proficient at
changing over deals into real benefit. Net overall revenue investigation isn't
equivalent to gross net revenue. Under gross benefit, fixed expenses are rejected
from count. With net overall revenue proportion all expenses are incorporated to
locate the last advantage of the salary of a business. Comparative terms used to
portray net revenues incorporate net edge, net benefit, net benefit proportion, net
revenue rate, and then some. To figure net revenue and give net overall revenue
proportion examination requires abilities extending from those of an entrepreneur
to an accomplished CFO. Accordingly, this relies upon the size and multifaceted
nature of the organization.

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Return on Assets
 It measures the net income produced by total assets during a period by
comparing net income to the average total assets.
 ROI measures efficiency a company can manage its assets to produce profits
during a period.

𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆
𝑹𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝑨𝒔𝒔𝒆𝒕𝒔 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
Camparison with last two years

KKV 2019 2018 2017

Return on Assets 28.17 28.24 28.61

Interpretation:

The return on Assets in 2017 is 28.61 and in 2018 it becomes 28.24 and get more
decrease in 2019 and become 28.17.

It means overall efficiency of company was higher in 2017 and then it get slowed
down. Higher the ratio, better it is so it means the in 2017 the position of company
was much better than the position of company in 2019. Primary objective of
business is to maximize earning of its investor. This means in 2017, the primary
objective was achieved better in 2017 than 2019. Since the slowed down is in small
amount so causing less effect

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 Solvency ratio:

Debt to Equity Ratio

 This ratio compares a company's total debt to total equity.
 This ratio shows the percentage of company financing that comes from
creditors and investors.

𝑻𝒐𝒕𝒂𝒍 𝑳𝒊𝒂𝒃𝒍𝒊𝒕𝒆𝒊𝒔
𝑫𝒆𝒃𝒕 𝒕𝒐 𝑬𝒒𝒖𝒊𝒕𝒚 𝑹𝒂𝒕𝒊𝒐 =
𝑻𝒐𝒕𝒂𝒍 𝑬𝒒𝒖𝒊𝒕𝒚

COMPETITOR

KKV JSW NTPC.

Debt-Equity 0.60 0.17 0.11

Ratio (2019)

Interpretation:

The The debt-equity ratio of KKV is 0.60. The ideal debt equity ratio is 1:2. Since
we know that the low debt equity ratio means they cannot take advantage of
trading on equity. And this shows that they are less dependent on outsider funds.

The debt-equity ratio of JSW is 0.17. The ideal debt equity ratio is 1:2. Since we
know that the low debt equity ratio means they cannot take advantage of trading on
equity. And this shows that they are less dependent on outsider funds.

14
The debt-equity ratio of NTPC is 0.11. The ideal debt equity ratio is 1:2. Since we
know that the low debt equity ratio means they cannot take advantage of trading on
equity. And this shows that they are less dependent on outsider funds.

Comparison of KKV with JSW and NTPC :

Debt equity ratio of all the three company is less than ideal ratio which is 1:2. This
means these companies can’t take advantage of trading on equity. But all the
companies are not dependent on outsider funds.

Debt Ratio
 This ratio measures a firm's total liabilities as a percentage of its total assets.
 The debt ratio shows a company’s ability to pay off its liabilities with its
assets.
 In other words, this shows how many assets the company must sell in order
to pay off all of its liabilities.

𝑻𝒐𝒕𝒂𝒍 𝑳𝒊𝒂𝒃𝒍𝒊𝒕𝒊𝒆𝒔
𝑫𝒆𝒃𝒕 𝑹𝒂𝒕𝒊𝒐 =
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔

COMPETITOR

KKV JSW NTPC

Debt Ratio 0.57 0.17 0.29

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Interpretation:

The Debt ratio of KKV is 0.57. Since the Debt ratio is more than one it means
company is not enough to pay Debt of company through their profits. This shows
company is in bad condition.

The Debt ratio of JSW is 0.17. Since the Debt ratio is more than one it means
company is enough to pay interest charges of company through their profits. This
shows company is in good condition.

The Debt ratio of NTPC is 0.29 . Since the Debt ratio is less than one it means
company is not able to pay Debt of company. This shows company is not at the
good condition.

16
Whether we have to invest in business or not ?

The Earning per Share ratio of KKV was 2.53 in 2017. And in 2018 there is
increase in the earning per share and it becomes 2.70. In 2019, it goes on decrease
and become 2.53 in 2019. Since we know higher the ratio, better it is, it means
company is more profitable in 2018 than in 2019. The company had more profits to
distribute to its shareholders in 2018 than in 2019. The company had good
financial position in 2018 than in 2019. It means on one share of company,
company was getting 2.70 in 2018 and now getting 2.57 as profit.

The Inventory turnover proportion KKV is 69.67. It is better than NTPC and JSW.

The Current ratio of NTPC is quite better than that of KKV AGRO Ltd. and JSW
ENERGY They should try to improve their current assets.

It means overall efficiency of company was higher in 2017 and then it gets slowed
down. Higher the return of assets, better it is so it means the in 2017 the position of
company was much better than the position of company in 2019. Primary objective
of business is to maximize earning of its investor. This means in 2017, the primary
objective was achieved better in 2017 than 2019. Since the slowed down is in small
amount so causing less effect.

On seeing balance sheet, a ratio of the company is good in the maintaining

inventory, debtors, liquidity. So that debtors or creditors will satisfy with the
company. The investor will invest in this as this slow-moving company even
through will recover in future. The Earning per Share ratio is decreasing then
increasing but still they are earning profit so it is reliable to invest in company.

17