A

SUMMER PROJECT REPORT

ON

“FINANCIAL STATEMENT ANALYSIS”

OF
LAKSHMI PRECISION SCREWS LTD.

Submitted in partial fulfillment for the award of

MASTER OF BUSINESS ADMINISTRATION (MBA)

Submitted by
LALIT KUMAR VERMA
Enroll no: 10312303909

DELHI INSTITUTE OF ADVANCED STUDIES

Guru Gobind Singh Indraprastha University, Delhi
JUNE-JULY 2011
 DECLARATION

Research scholar LALIT KUMAR VERMA, Roll no. 10312303909 student of M.B.A. (2 years)
III rd semester DELHI INSTITUTE OF ADVANCED STUDIES, ROHINI, hereby Declare that
the summer training report titled “Financial Statement Analysis” of “ Lakshmi Precision
Screws Ltd. ” is a record of critical & independent work carried out by me under supervision &
guidance of Mr. SHRI NIWAS BANSAL. This has not been previously submitted for the
award of any other diploma, degree or other similar title.
 ACKNOWLEDGEMENT

It is scholar’s proud privilege to put on record my gratitude to all those who have been the source
of guidance, cooperation & help during my summer training at LAKSHMI PRECISION
SCREWS LTD.
An undertaking of study like this is never the outcome of the efforts of a single person. My
project is not an exception to this. It was not possible to accomplish it without the help of others.
I would hereby take the opportunity to express my indebtedness to people who have helped me
to accomplish this task.
I wish to express my deep sense of gratitude to my guide Mr. SHRI GOPAL BHUTANI for the
keen interest, inspiring guidance, continuous encouragement, valuable suggestions &
constructive criticism throughout the pursuance of his report.
Further words of thanks are expressed to all other staff members without hose help it would not
have been possible to collect information & data. I am beholding to my parents for their blessing
& encouragement.
 PREFACE

Practical training constitutes an integral part of management studies. Training gives an

opportunity to the students to expose themselves to the industrial environment, which is quite
different from the classroom teachings. One cannot rely on theoretical knowledge. It has to be
coupled with practical to be fruitful. Training also enables the management students to see
themselves the working condition under which they have to work in the future. It thus enables
the students to undergone those experiences, which will help them later when they join any
organization.
After liberalization the Indian economic sense is changed. Industrial activity in India has become
a thing to watch & I really wanted to be a part of it &it is essential for me being a finance
student.
I underwent eight weeks of training at LAKSHMI PRECISION SCREWS LTD. I consider
myself lucky to get my summer training in such a big Company. It really helped me to get a
practical insight into actual business environment & provide me an opportunity to make my
financial management concepts more clear.
 EXECUTIVE SUMMARY

To reach the zenith alone, attempt is proved to be failure most of the times. Although today’s
business practices have evolved out of the past but there are complex practices, which
are followed. The business market place environment has become very dynamic and very fast
changing. Lakshmi Precision Screws Limited is marching ahead from national to global level.
Lakshmi Precision Screws Limited, India's premier information enabling and integration
company, has received the ISO 9001:2000 certification specifies requirements for a quality
management system where an organization needs to demonstrate its ability to consistently
provide product and services that meets customer and applicable regulatory requirements. ISO
9001:2000 also aims to enhance customer satisfaction through the effective application of the
system, including processes for continual improvement of the system and the assurance of
conformity to customer and applicable regulatory requirement.
The menu of Lakshmi Precision Screws Limited global services broadly covers the steel industry
and lighting industry. The products are marketed under the brand name of “LPS” all over the
country. The division is the country’s largest manufacturer of FTLs. And lighting division is the
second largest producer of the lighting products in India. All factories are ISO 9002. Exporting
to more than 40 countries. It is very difficult to make enlightened decision on the usual annual
financial statement of an organization. For evaluating the financial position and performance of
the organization, ratio analysis is attempted to comprehend and interpret the information to form
conclusion. When ratio analysis is being attempted for internal use, it yields very important
information on such aspects as over or under trading, over or under investment in stock and fixed
assets, over or under capitalization to credit policy.
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated
quotient of two mathematical expressions” and as “the relationship between two or more things.”
In financial analysis a ratio is used as a bench mark for evaluating the financial position and
performance of a firm. The absolute accounting figure reported in the financial statements
doesn’t provide a meaningful understanding of the performance and financial position of a firm.
For the purpose of Financial analysis of LPS and various ratios have been calculated. For
profitability of LPS gross profit, net profit, return on capital employed, return on total asset
have been calculated. In order to find out management efficiency various turnover ratio like
fixed asset turnover ratio, material handling turnover ratio, inventory turnover ratio, working
capital turnover ratio have been calculated. For studying short term liquidity position of LPS
ratios like current ratio, quick ratios are calculated.
 TABLE OF CONTENT

Serial No. CHAPTER NAME Page No.

1 INTRODUCTION
 COMPANY PROFILE
 OBJAECTIVE OF THE STUDY
 RESEARCH METHODOLOGY

2 FINANCIAL & DATA ANALYSIS

ANALYSIS OF FINANCIAL DATA OF LPS LTD.
COMPARATIVE STATEMENTS
CASH FLOW STATEMENT
RATIO ANALYSIS

3 FINDINGS & LIMITATIONS

 FINDINGS
 LIMITAIONS
 SUGGESTIONS
 CONCLUSIONS
BIBLIOGRAPHY

ANNEXURES
CHAPTER -1

 Introduction of the company

 Objectives of the Study
 Research Methodology
 COMPANY PROFILE

LPS Limited was promoted by Late Sh. Bimal Prasad Jain. LPS was incorporated as a Pvt.
Limited Company on 27th Dec., 1968. It was converted into a Public Limited Company in August
1971. At present it is operating as LPS Limited.
LPS Plant-II is another step forward in progress of the company.
The company has started with only one machine 3/8’’ Bolt Maker. Now it has wide range of
machine producing a wide range of products. Today the company is the leading manufacturer of
High Tensile Fasteners in India. The Quality of the product is well accepted in the market so
demand is growing very fast and to meet the demands and expand its production range the
company is adding more production facilities.
Besides LPS the other leading companies are Sundram Fasteners of TVC group, Un-Brako and
Guest Keen Williams. Recently Pandatogon Screws and Fasteners Limited have also been
introduced.
The installed capacity at present is about 18,996 M.Tons and annual turnover of the company is
207crores approximately. The number of employee are more than 2000 which only 20 at the time
of installation.
Company has covered 23500 sq. yards. The screws, nuts and bolts range from 3mm to 24mm in
diameter. The products are marked under name and style of LPS.

CHRONOLOGICAL HISTORY OF LPS

1959 Established Nav Bharat Industries as small parts manufacturer.

1972 Established Lakshmi Precision Screws Pvt Ltd as Socket Head Screws
1973 Technical tie-up with the German firm M/s Richard Bergner.
1977 Acknowledged quality source of fastener.
1978 Technical tie-up with M/s Richard Bergner expires.
1983 Secured self certification status from FORD.
1984 Declared Public Limited Company.
1986 Secured self certification status from M/s Lakshmi Machine Works.
1988 Established as manufacturer-exporter.
1991 Received Regional Export Award from Engineering Export Promotion Council,
(EEPC) India.
1992 Received Regional Export Award from EEPC for the second Consecutive year.
1993 Received Regional Export Award from EEPC for the third consecutive year.
History (Contd.)
1993 Established Plant - II.
1994 Received Employment Generation Award from Director of Industries, Haryana
State.
1995 Accredited in Mechanical & Chemical Testing by A2LA, USA to meet Fastener
Quality Act of US.
1995 Accredited in Mechanical Measurement, Mechanical & Chemical
Testing by National Accreditation Board for Calibration & Testing
Laboratories (NABL). Government of India.
1996 Certified to ISO-9002.
1998 Installed Bolt Maker(AF 2525) to add production capacity
to 12200 MT.
- Self Certification status from TELCO.
- Technical Tie-up with Sunil Machinery Corporation, Korea.
- Joint Venture with Bossard AG-Switzerland.
1999 Licenced Manufacturers of TORX Screw from Camcar Co. –USA.
2000 QS 9000 Certification.
2001 ISO/TS-16949 Certification.

- ISO-14001 Certification.
2002 Implemented ERP–SAP R/3.

- Golden Peacock Award.

2003 Approved Volvo Global Suppliers.

MAIN PRODUCTS

Division Products
Precision Cold Forming parts for Automobile
Engine Parts ( Con Rod, Cylinder Studs,
Counter Weights, Cylinder Head, Rocker Arm, Engine
Mounting, Main Bearing etc.)
Bolts & Nuts Chasis Parts (Wheel Bolts, Wheel Hub Bolts & Nuts,
for Axle Bolts/Pin, Flanged Bolts, Collar Bolt, Shock
Automobiles Absorber Mounting Pins etc.)
Washer Assemblies Bolts
The other critical & safety parts bolts
Construction parts (Friction Grip)
Bolts & Nuts for Agriculture Industry
FASTENERS Bolts & Nuts for Industrial Machinery
Cold formed parts for Automobile (Piston Pins, Switch Body, Ball Joints,
Gear Blanks, Rocket Shaft, Ball Pins, Plunger etc.)
Pins for Hydraulics & Pumps
Bolt for Refrigeration Compressor
Friction Grip Bolts & Nuts for Construction Industry
Socket Head Cap Screw
Low Head Socket Bolt
Shoulder Bolt
Button Head
CSK
Standard Set Screws
Fasteners Hex Wrench Keys
Hex Head Bolt
Dovel Pin
Nuts
Friction Grip Bolts
Track Shoe Bolts
Stainless Steel Hex Head
Stainless Steel Socket Head Cap Screws

VISION

“Make LPS a ‘Most Sought After’ Brand”.

Achieve Rs.500 Crores in Sales
Become a Deming Organization
Improve EBIDTA to 25%
Expand Manufacturing to 2 more locations

CORE VALUES :

Customer Obsession
Continuous Improvement
Respect for people

MISSION OF LPS

 To be a growth-oriented professional company promoting high standards of business ethics

and producing best quality products thereby achieving international standards of excellence.
 To establish a strong R & D facility to fulfill the demands of the automotive industry as
comprehensively as possible.
 To make each member of the company feel proud and empowered by fostering a culture of
participation and innovation.
 To strive for reduction in defects and achieve 6 sigma and beyond so as to make quality a
way of life in LPS.
 To reduce cycle time in all processes as a step towards over-all improvement.
 To provide prompt and excellent service to customers anywhere in the world.
 To maximize shareholder’s wealth.
 QUALITY SYSTEMS

Lakshmi Precision Screws Ltd is committed to produce Quality High Tensile Precision
Fasteners. The most important criterion of Quality is the satisfaction of customer, both
National & International.
Each lot that moves out of our production facilities undergoes mechanical, Chemical and
metallurgical inspection at over 20 inspection nodes, beginning from raw material receipt to
packaging.
A2LA, USA and NABL, India have accredited LPS test facilities. We are certified ISO-9002,
QS-9000, ISO-14001 & TS-16949 company. The ‘Advanced Product Quality (APQP),
Production Part Approval Process (PPAP) and Failure Mode Effect Analysis (FMEA) have
already been implemented. Strict on- line visual SPC techniques to monitor product quality on
a real time basis have also been incorporated.
'LPS' is equipped with state of the art Laboratory and Standard Room. Some of the major
equipments we have are:
• Optical Emission Spectroscope : For ascertaining chemical composition of Raw Material.
Metallographic examination involving Microstructure, Inclusion rating.
• Image Analyser : Grain size, Decarb, Microstructure, Inclusion, Thread life etc along with
statistical analysis. Decarburisation, Gram size, Thread laps etc. along with statistical analysis.
• Fisheroscope (X-ray analysis) : For ascertaining coating thickness by x-ray method and
material analysis by spectrum needless to mention the other equipment, we have i.e.
Metallurgical Microscope, Magna Hardness Tester, Major flux testing, Universal Tensile
Testing M/c, Hydrogen De-embrittlement Testing, Torque testing etc. Eddy current testing,
Rockwell cum superficial hardness Tester, Stereo Microscope & salt spray testing.
• Mahr's Perthometre Concept : For measurement of any type of contour (Including threads
and surface toughness).
• 'NIKON' measuring microscope : For all complex geometry measurement to a high precision
with image transfer provision.
To ensure the best quality, we source raw materials, like wires and wire rods, from the best
steel plants in South East Asia. With the latest advances in machinery automation, LPS has in-
house capability to carry out all the operations for fasteners manufacturing. Cold forging with
multi-station boltmakers of National, USA, Sakamura, Japan and Asahi Sunac. LPS is
equipped with sixth generation machines where rolling can be done after heat treatment to
ensure perfect lap free threading. Machining is done with CNC machines to form intricate
shapes for specific applications. Continuous heat treatment improves product quality and the
finish of the product is detemined by applications specifications. All under the eagle eyes of an
experienced quality assurance team.
Our dedicated team of engineers identifies the most suitable material to enhance the quality of
fastening and ensure greater protection against corrosion or loosening of fasteners under
stringent applications.
A case in point : LPS simultaneous engineering capability has proved a boon to New Holland.
After studying product design issues, our engineers customizes a fastening solution to meet
their application need. LPS has, indeed achieved benchmark status in time-to market for new
specials.
RESEARCH & DEVELOPMENT

To clearly understand our process capabilities and the customer’s requirements, our team
gives a new product at the rate of one per day.
An integrated engineering team and high technology engineering inputs have been
instrumental in producing world-class fasteners. The fasteners you can rely on. Because LPS
fasteners has always set itself the highest standards. Standards it keeps to every inch of the
way. To name a few our team has successfully developed critical components for customers
like John Deere, Ford, Daewoo, Carraro, Volvo, Honda Motorcycle & Scooter, Honda Siel,
Matsushita, New Holland Tractors and most of the other automotive multinational joint
ventures in India.
In the domestic market we have achieved a long standing business relationship with all the
major players like Telco, Bajaj Auto, Maruti-Suzuki, Escorts Yamaha, Hero-Honda , ISRO,
BHEL, LML, Micro-Bosch, TVS Suzuki etc.
We are also equipped with latest in-house designing capabilities like :
Tie-up with a company from Germany and developed a special software "SIMULATION", in
order to improve tool life.
JOINT VENTURES
LPS-Bossard Pvt. Ltd. is a joint venture company of LPS and Bossard. AG of Switzerland.
This venture gives state of the art fastening solution/ technology to customer in India. The
latest inventory management technique through logistic support is also provided by this
company.
Recoil Business Division of 'LPS'
This division of LPS is sole master distributor of fastening solutions from Alcoa Fastening
Systems, USA. Alcoa. This company ensures global consistency of quality design standards in
manufacturing wire thread, Inserts, STI Taps, Thread Repair Kits etc.
Textron Inc. U.S.A.
'LPS' has entered into a licensing agreement with Textron Inc, USA for manufacturing and
marketing 'Torx®' brand of proprietary products. Textron is 10 billion USD multi-specialty
company, with 1.8 billion USD as revenue from fastening division.
Torx® drive systems improve assembly line productivity thereby reducing cost
MAJOR CLIENTS
Heavy Commercial
Vehicles

  Light Commercial Vehicles

  Tractors

  Cars

  Two Wheelers
 

  Earthmoving Equipment

   

  Textile Machinery

     

  Machine Tools

 
     

  Hydraulic Equipment

  Heavy Electrical Equipment

 

  Refrigeration / Air Cond.

  Others

OBJECTIVES

 The main objective of the study was to analyze the financial statements prepared by LPS Ltd
and also to understand and analyze the cash flow statement.
 Another objective was to identify the deficiencies or the weak points of the company, if found
during the analysis phase.
 And then finally to draw conclusion and make recommendations for the company so that
corrective actions should be taken to improve the position of the company.

RESEARCH METHODOLOGY

The procedure adopted for conducting the research requires a lot of attention as it has
direct bearing on accuracy, reliability and adequacy of results obtained. It is due to this reason
that the research methodology, which used at the time of conducting the research, needs to be
elaborated upon. Research methodology is a way to systematically study & solve the research
problems. If a researcher wants to claim his study as a goods study, he must clearly state the
methodology adopted in conducting the research so that it may be judged by the reader whether
the methodology of work done is sound or not.
Research problem here was to analyze the financial data of LPS Ltd. to come out with some
underlying facts behind the financial statements of the company.

Research Design:
The research design implemented in this research is descriptive in nature, as it seeks to
discover facts, ideas, insight & to bring out new relationship among the data items already
existing. Research design is Hexble enough to provide opportunity for considering different
aspects of problems under study. It helps in bringing into focus some inherent study can be
conducted by the mgt.

Sample: taken for the purpose of my study are the financial statements of last 4 years.

Information Collection:
For the purpose of analysis I have gone for the secondary information. As this is the base
of the study so the data which is reliable has been taken. And also annual reports of the company
& information through internet are taken.
The data collected in the aforesaid manner have been tabulated in condensed form to draw the
meaningful results, then different techniques are use to analyze the data.
Chapter – 2
Analysis And Findings
Meaning of financial statements
Analysis of financial Data of LPS Ltd.
Comparative Statements
Common size Statement
Cash Flow Statement
Ratio Analysis

FINANCIAL ANALYSIS

Finance is defined as the provision of money at the time when it is required.

The role of finance in business enterprises needs no emphasis. Every
Enterprises whether big or small needs to carry on and expand its operations.
Finance holds the key to all the business activities and a company services,
Infect, its survival is depend on how efficiently it is able to acquire and
Utilize there funds.
MEANING OF FINANCIAL STATEMENT

Financial statement refers to such statements, which contain financial

Information about enterprises. These statements are a collection of data
Presented on the basis of logical and consistent accounting principles. They
report the profitability and financial position of the business at end of
accounting period. The term financial statement includes at least two
statements, which the accountant prepares at the end of an accounting period. The two statements
are:-
 The statement of financial position or balance sheet
 Income statement and profit & loss account

Various types of financial statements are prepared in comparative form

For the purpose of analysis. Out of these the most important financial
Statements are:

1. COMPERATIVE BALANCE SHEET

2. COMPARATIVE PROFIT & LOSS ACCOU

COMPARATIVE BALANCE SHEET

The comparative balance sheet as on two or more dates can be prepared to show the
increase or decrease in various assets, liabilities & capital. Such a comparative balance sheet is
useful in studying the trends in business enterprises.

Particulars as on 31st as on 31st Increase/ % Increase/

march march Decrease Decrease
 over
2009(Rs) 2008(Rs) 2008(Rs) over 2008
   
SOURCES OF FUNDS:  
A. Shareholders' fund
Share Capital 109416670 109416670 0 0
Reserves & Surplus 702763197 640930298 61832899 8.79

TOTAL (A) 812179867 750346968 61832899 7.61

 
B. Loan funds
Secured Loans 1013165757 646382561 366783193 36.2
Unsecured Loans 80788070 40807011 39981059 49.4
 
TOTAL (B) 1093953827 687189572 406764255 37.2
 
C.Deferred Tax Liabilities
(Net) 24861745 19756519 5105226 20.53
 
TOTAL (A+B+C) 1930995439 1457293059 473702380 24.50
 
APPLICATIONS OF FUNDS
A. Fixed Assets
Gross Block 1232340039 1076319572 156020467 12.6
less: Depreciation 718647794 634387452 84260342 11.7
Net Block 513692245 441932120 71760125 13.9
Add: Capital Work in Progress 26090174 826717 25263457 96.8
 
TOTAL (A) 539782419 442758837 97023582 17.9
 
B. Investments 42236580 41361580 875000 2.07
 

C. Current Assets Loans &

Advances
Inventories 1160949153 992640743 168308410 14.5
Sundry Debtors 577401593 399605167 177796426 30.8
Cash & Bank Balances 104460761 49663819 54796247 52.5
Other Current Assets 3707885 413807 3294078 88.9
Loans & Advances 162007036 117716337 44291699 27.3
  2007527428 1560039873 448487555 22.3

Less: Current liabilities &

Provisions
Current Liabilities 606448827 519511707 86937120 14.3
Provisions 56046844 72062166 (16015322) (28.6)
  662495671 591573873 70921798 10.7
 
 TOTAL ( C ) 1346031757 968466000 377565757 28.1
 
D.MisceIIaneous Expenditure 2944683 4706642 (1761959) (59.8)
 
TOTAL (A+B+C+D) 1930995439 1457293059 473702380 24.5
     

Comments: -
Comparative B & S

 Current assets have increased by 22.3% whereas current liabilities by 10.7%. Which
reflects the policy of the co. is to purchase current assets from short term sources of
finance.

 Reserve & surplus has increased by 8.79% due to increase in current year profits by
31.58% which shows increase in profitability. This year investment is increase by
2.07%.

 Overall liquidity position is not much satisfactory as al liquid assets are increasing
while cash is increasing by 52.5% over the previous year.

 An increase in inventory by 14.5% may increase working capital but it will not be
good for the business as become more money is in inventory.

COMPARATIVE PROFIT & LOSS ACCOUNT

Profit & loss A/c shows the net and loss of a particular year whereas comparative profit &
loss a/c for a number of a number of years provides the Following information:-
 Rate of increase or decrease in sales.
 Rate of increase or decrease in cost of goods sold.
 Rate of increase or decrease in operating profit.
  Rate of increase or decrease in gross profit.
 Rate of increase or decrease in net profit.

%
Increase
Net Increase / /
PARTICULARS
As on 31st As on 31st Decrease Decrease
March March over over
2009(Rs) 2008(Rs) 2008(Rs) 2008

A. INCOME
Sales 2070161481 1934209608 135951873 6.57
Job Work Receipts 896690 1433953 (537263) (59.9)
Other Income 35722340 17239550 18482790 51.7

Deferred Tax Liability Written

Back 0 5716029 5716029
2106780511 1958599140 148181371 7.03
B. EXPENDITURE
Materials & Finished Goods 782790261 703008396 79781865 10.19
Manufacturing 453189913 508370762 55180849 (12.18)
Personnel 305977039 252345754 53631285 17.53
Office &Administration 128662294 114713258 13949036 10.84
Selling & Distribution 94127990 84136507 9991483 10.61
Interest & Financial Charges 117325714 83924902 33400812 28.47
Managerial Remuneration 15837200 11836800 4000400 25.26

Depreciation 85334527 80415367 4919160 5.76

Total 1983244938 1838751746 144493192 7.28
Profits Before Tax 123535573 119847394 3688179 2.98
Provision For Tax Expenses:
Wealth tax 185400 95000 90400 48.76
Income Tax 46155830 50570581 (4414751) (9.56)
Profit for the After Tax 77194343 69181813 8012530 10.37

Appropriations:
Transfer To General Reserve 2000000 5200000 (3200000) (160)
Proposed Dividend 13130000 19695001 (6565001) (50)
Corporate Dividend Tax 2231444 3347165 (1115721) (49.9)
Total 17361444 28242166 (10880722) (62.6)
Net Profits for the Year 59832899 40939647 18893252 31.58

Comments:-
Comparative P& L A/c

 Sale has been increased by 6.57%

  Manufacturing expenses has decreased by 12.18 % large than proportion of sales.

 Selling expenses has been increased by 10.61%

 Net Profit Margins are improving by 10.37%

CASH FLOW STATEMENT

 A Cash Flow Statement is a statement showing inflows & outflows cash during a
particular period. A Cash Flow Statement summarizes the causes of changes in cash position
between dates of two Balance Sheets. It indicates the sources and uses of cash. This Statement
analyses changes in non current accounts to determine the flow of cash.

Description Year
ending Year ending
31.03.09
A . Cash flow from operating activities
Net Profit after tax 93549390
Adjustment for
Tax 56644900

Net Profit before tax and extraordinary items 150194290

Adjustment for
Depreciation 91952829
Deferred payment interest and Technical know 2062459
how fee written off
Rent and Interest received (Gross) (4612333)
Income Tax Refund 0
Dividend Income 0
Interest and Financial charges 119839237
Miscellaneous expenses written off 6327
Provision for Bad and Doubtful Debts 104380
Profit/Loss on sale of assets 527328
Operating Profit before working capital changes 360074517
Adjustments for :
Trade payables 39304065
Trade and other receivables (218760517)
Inventories (171438055)
Cash generated from operations 9180010

Interest and financial charges (119029452)

Direct Taxes (16395308)
Net Cash from operating activities (126244750)

B. Cash flow from investing activities

Purchase of Fixed Assets (193813546)

Proceeds from sale of fixed assets 1008777
Purchase of investment (1777928)
Rent and interest received (Net of TDS) 3287910
Dividend income 0
 Income Tax Refund 0
Deferred payment interest and technical know (300500)
how fee provided during the year
Net cash used in investing activities (191595287)

C. Cash flow from financing activities

Proceeds from issue of Share Capital (Inc. Share
Premium) 0
Right issue expenses 0
Proceeds from short term borrowings 278728558
Repayment of short term borrowing (21220029)
Proceeds from long term borrowings 229867728
Repayment of long term borrowings (80248391)
Proceeds from Directors and others 0
Repayment to Directors and others (22548114)
Dividend paid .(100.32)
Total 384579752

D. Net increase in cash and cash equivalents

(A+B+C) 66739715

Cash & Cash equivalents (Opening Balance) 49302020

Cash & Cash equivalents (Closing Balance) 116041735
Comments:-

 Cash flow from operating activities have been increased due to depreciation net profit
and trade payables

 Cash flow from investing activities has been decreasing do to purchase of fixed assets
and investment.

 Cash flow from financing activities is improving because the company issues right
share and raises long term loan.
 RATIO ANALYSIS

Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of
ratio to interpret the financial statement so that the strength & the weakness of a firm as well as
historical performance & current financial condition can be determined. The term ratio refers to
the numerical or quantitative relationship between two variables.

Current Ratio

This ratio explains the relationship between the current assets and current liabilities. The higher
ratio, the better it is, because the firm will be able to pay its current liabilities more easily. But
much higher ratio, even it is Beneficial to creditors, is not necessarily good for company. It may
indicate the poor management policy.

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

CURRENT ASSETS 1163300174 1343485583 1560039873 2007527428

 CURRENT LIABILITIES 409821776 512620198 591573873 662495671
CURRENT RATIO 2.84 2.62 2.64 3.03

Interpretation

Current Ratio : Generally a current ratio of 2 : 1 is considered satisfactory. In earlier

years ratio was much higher i.e. 3.64 : 1 but now there is improvement in current ratio
as it is decreasing over the years & shows good policy .

Quick ratio

Quick ratio indicates whether the company is in position to pay its current liabilities within a
month or immediately. The quick ratio is a more rigorous and penetrating test of the liquidity
position of the firm.

LIQUIDITY RATIO = LIQUID ASSETS/CURRENT LIABILITIES

LIQUID ASSETS = CURRENT ASSETS – INVENTORIES

PARTICULARS 2006-2006 2006-2007 2007-2008 2008-2009

QUICK ASSETS 475393260 507493996 544247963 649245757
CURRNT LIABILITIES 409821776 512620198 591573873 662495671
QUICK RATIO 1.16 .99 .94 .98
         

Interpretation
Quick Ratio : 1 : 1 satisfactory.

LEVERAGE OR CAPITAL STRUCTURE RATIO

This ratio indicates the ability of a company to pay the interest regularly as well as repay the
principal when due.
The leverage or capital structure ratios are:

 Debt equity ratio

 Debt to total fund ratio
 Proprietary ratio
 Fixed assets to Proprietor’s fund ratio

Debt equity ratio

These ratios express the relationship between the long - term tax and shareholders’ funds. It
indicates the proportion of funds, which are acquired by long – term borrowing in comparison to
shareholder funds.

DEBT – EQUITY RATIO = LONG TERM LOANS

SHARE HOLDER’S FUNDS
 PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009
       

DEBT 707315611 619335155 687189572 1093953827

EQUITY 377502093 611304379 750346968 812179867

DEBT EQUITY RATIO 1.87 1.01 .91 1.35

         
 
 
Interpretation    
Debt Equity Ratio : Ideal ratio is 2:1 in earlier years it shows a risky financial
position as ratio is more than 2 : 1. it shows a decreasing trend now situation is
satisfactory as it is less than 2 : 1 thus co. has enough funds to pay its long term loans

Debt to total fund ratio

This ratio indicates the ability of a firm to pay its long – term debts. In this ratio,
debt is expressed in relation to total funds.

DEBT TO TOTAL FUND RATIO = LONG TERM LOANS

SHARE HOLDERS FUNDS
+ LONG TERM LOANS

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

DEBT 707315611 619335155 687189572 1093953827

TOTAL FUND 1084817704 1230639534 1437536540 1906133694

DEBT TO TOTAL FUND RATIO 0.65 0.5 0.47 0.57
         
Interpretation
Debt to Total funds Ratio: Long term loans are .67 : 1 satisfactory.
It means debt capital should not be more than 67% of total capital. It indicates that long
term financial position of the co. is sound, as the long term loans of co. according to
acceptable standard should not be more than 67% of total fund of the co.

Proprietary Ratio:

Equity
Proprietary Ratio =
Total Assets

2006 2007 2008 2009

Equity 377502093 611304379 750346968 812179867
Total Assets 1515089009 1761390329 2044160290 2590546427
Proprietary Ratio 0.25 0.347 0.37 0.31

Interpretation
Ratio is not satisfactory for the co. it needs to be improved as it is

not good from shareholders of view.

Interest coverage Ratio :

Net Profits before Interest & Income tax

Interest Coverage Ratio =
Fixed Interest Charges

2006 2007 2008 2009

EBIT 133982653 161913827 203772296 240861287
F.I. Charges 67419751 71809019 83924902 117325714
ICR 1.99 2.25 2.43 2.13

Interpretation
Indicates how many times the interest charges are covered by the profits available to
pay interest charges. It is satisfactory ratio is continuously improving.

Fixed Assets to Proprietor’s Ratio :

Fixed Assets
Fixed Assets to Proprietors’ =
Proprietary funds

2006 2007 2008 2009

Fixed Assets 313427255 376543167 442758837 539782419
Prop. Funds 377502093 611304379 750346968 812179867
Fixed Asset to Prop. Funds 0.83 0.62 0.59 0.66
Interpretation
(for industrial undertakings 60-65% satisfactory ) Indicates the extent to which
shareholder’s funds are sunk into the fixed assets. Here the ratio is less than 100%
implies that owner’s funds are more than total fixed assets & a part of WC is provided
by shareholders. In 2008, it is satisfactory.
Activity Ratios

Inventory Turnover Ratio:

Net Sales
Inventory Turnover Ratios =
Inventory

2006 2007 2008 2009

Net Sales 1380687644 1667513770 1934209608 2070161481
Inventory 686863367 832858713 992640743 1160949153
ITR (times) 2.01 2.00 1.95 1.78
Interpretation
Measures the velocity of conversion of stock in to sales. ITR is decreasing over the
years (due to increase in inventory is more than increase in sale) But in 2008 ITR has
increased as increase in sales is nearly twice the inc. in inventory.

Turnover
2. Debtors Turnover Ratio =
Debtors

2006 2007 2008 2009

Turnover 1380687644 1667513770 1934209608 2070161481
Debtors 336848256 369048925 399605167 577401593
DTR (Times) 4.19 4.52 4.84 3.58
Interpretation
Debtors Turnover Ratio : Ratio is continuously improving. It shows debtor are
managed by company in efficient manner this is why debt collection period has been
reduced from 99 days to 81 days.

No. of working Days

3. Average Collection Period =
Debtors Turnover Ratio

2006 2007 2008 2009

No. of working Days 365 365 365 365
Debtors Turnover Ratio 4.19 4.52 4.84 3.58
ACP (Days) 87 81.5 75 102

Purchases
4. Creditors Turnover Ratio =
Creditors

2006 2007 2008 2009

Purchases 448995669 621300911 657502521 672408511
Creditors 55188419 42940352 58021254 44768335
CTR (Times) 8.14 9.81 11.3 15.01

Interpretation
Creditors Turnover Ratio : It is satisfactory & average payment period has been
decreased from 159 to141 days. It is improving over the years.
 Turnover
5. Fixed Asset Turnover Ratio =
Fixed Assets

2006 2007 2008 2009

Turnover 1380687644 1667513770 1934209608 2070161481
Fixed Assets 313427255 376543167 442758837 539782419
Fixed Assets Turnover Ratio 4.41 4.43 4.37 3.84
Interpretation
Fixed Assets Turnover : This ratio reveals how efficiently the fixed assets are
being utilized. Increase in ratio over the years indicate the better utilization of fixed
assets.

Net Sales
6. Working Capital Turnover Ratio =
Working Capital

2006 2007 2008 2009

Net Sales 1380687644 1667513770 1934209608 2070161481
Working Capital 753478398 830865384 968466000 1346031757
Working Capital Turnover 1.83 2.01 1.99 1.54
Ratio

Interpretation
Working Capital Turnover Ratio: Reveals how efficiently working capital
turnover ratio has been utilized in making sales. Increase in ratio over the years indicate
the better utilization of working capital .

Profitability Ratios
Net Profits
7. Net Profit Ratio = × 100
Net Sales

2006 2007 2008 2009

Net Profit 40309975 52317541 69181813 77194343
Net Sales 1380687644 1667513770 1934209608 2070161481
Net Profit Ratios 2.92 3.14 3.58 3.73

Interpretation
Net Profit Ratio : Measures the rate of net profit earned on sales. An increase in the
ratio over the previous years shows improvement. But margins needs to be improved
further.

Chapter – 3
 Conclusion
 Suggestions
  Limitations

CONCLUSION
  Liquidity position of the company is good as its current ratio and quick ratio for the year
2008 are 3.03:1 and .98:1 respectively which meets the standard.
 Solvency position of the company is also satisfactory.
 Debtors are converted very quickly. Average collection period of the company is very
good as it is decreasing over the years.
 Fixed assets are utilized efficiently as fixed asset turnover ratio is increasing.
 Overall cash flow position of the company is not satisfactory as both opening and closing
cash balances are in negative. And reasons for the same have been explained in the
preceding chapter.
 Net sales and profits of the company have increased by 6.37% and 31.58% respectively
mainly due to increase in job work receipts.
 Overall financial position of the company is good. There is need to improve the working
capital management only.
 As company is diluting its share capital by issuing right shares so if company is not being
able to increase the earning in that case EPS will be decreased.

SUGGESTIONS
 Since the competition is increasing the company must come up with new cost saving
techniques to reduce the cost and further increase the profit margin.
 The old machinery which need constant repair should be replaced with the new one as it
would decrease the cost further.
 In future company should not dilute the share capital further.
 Company should increase its operating margins so that debt can be paid easily.

LIMITATIONS
 Access to some information was denied by the company officials that affected the findings
to some extent.
 The sample size was limited over just four years, which may not be fully representative of
the universe. A large sample size could not be taken due to time & cost constraints.
 Some accounts are manipulated so that the financial statements may disclose a more
favorable position than the actual position.
 Company provides only secondary data so certain type of bias is in study.
 Lack of experience in this field may have incorporated some shortfalls.
 The greatest limitation of the study was the time constraint, limited to 8 weeks which hinders
the progress of study.
 Audited accounts for the year ending 2005-2006 were not available. There may be some
changes in financial statements after the accounts are audited.

BIBLIOGRAPHY
WEBSITES:

www.lps.com
www.wikipedia.org/wiki/Ratio_analysis
www.investopedia.com/stocks.about.com/od/evaluatingstocks/a/Fundanatools1.htm
www.finpipe.com
www.nseindia.com

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