A STUDY ON FINANCIAL PERFORMANCE ANALYSIS IN KINEMATIC TRADING

& CO PRIVATE LIMITED

CHAPTER-I

INTRODUCTION

Financial statements are formal record of the financial activities of a business, person or
other entity and provide an overview of a business or person’s financial condition in both short
and long term. They give an accurate picture of a company’s condition and operating results in a
condensed form. Financial statements are used as a management tool primarily by company
executive and investor’s in assessing the overall position and operating results of the company.

Analysis and Interpretation of financial statements help in determining the liquidity

position, long term solvency, financial viability and profitability of a firm. Ratio analysis shows
whether the company is improving or deteriorating in past years. Moreover, comparison of
different aspects of all the firms can be done effectively with this. It helps the clients to decide in
which firm the risk is less or in which one they should invest so that maximum benefit can be
earned.

Industries are capital intensive; hence a lot of money is invested in it. So before investing
in companies one has to carefully study its financial condition and worthiness. An attempt has
been carried out in this project to analyze and interpret the financial statements of a company.

Financial statements are records that provide an indication of the organization’s financial
status. It quantitatively describes the financial health of the company. It helps in the evaluation of
company’s prospects and risks for the purpose of making business decisions. The objective of
financial statements is to provide information about the financial position, Statement and
changes in financial position of an enterprise that is useful to a wide range of users in making
economic decisions. Financial statements should be understandable, relevant, reliable and
comparable.
 They give an accurate picture of a company’s condition and operating results in a
condensed form. Reported assets, liabilities and equity are directly related to an organization's
financial position whereas reported income and expenses are directly related to an organization's
financial Statement. Analysis and interpretation of financial statements helps in determining the
liquidity position, long term solvency, financial viability, profitability and soundness of a firm.
There are four basic types of financial statements: balance sheet, income statements, cash flow
statements, and statements of retained earnings.

The analysis of financial statement is a process of evaluating the relationship between

component parts of financial statement to obtain a better understanding of firm financial position.
Analysis is a process of critically examining the accounting information given in financial
statements. For the purpose of analysis, individual items are studied; their interrelationship with
other related figures is established.

Thus analysis of financial statement refer to treatment of information contain in financial

statement in a way so as to afford a full diagnosis of the profitably and financial position of the
firm concern.

FINANCIAL STATEMENTS

Financial statements (or financial reports) are formal records of the financial activities of
a business, person, or other entity. Financial statements provide an overview of a business or
person's financial condition in both short and long term. All the relevant financial information of
a business enterprise, presented in a structured manner and in a form easy to understand is called
the financial statements.

The analysis of financial statement is a process of evaluating the relationship between

component parts of financial statement to obtain a better understanding of firm financial position.

A complete set of financial statement comprises:

 A statement of financial position as at the end of the period:

 A statement of comprehensive income for the period;
  A statement of changes in equity for the period:
 A statement of cash flow for the period.
 Notes of Account comprising a summary of significant accounting policies and other
explanatory information.

THERE ARE FOUR BASIC FINANCIAL STATEMENTS:

1. Balance sheet:
It is also referred to as statement of financial position or condition, reports on a
company's assets, liabilities, and ownership equity as of a given point in time. The
Balance Sheet shows the health of a business from day one to the date on the balance
sheet.
2. Income statement
It is also referred to as Profit and Loss statement (or "P&L"), reports on a company's
income, expenses, and profits over a period of time. Profit & Loss account provide
information on the operation of the enterprise. These include sale and the various
expenses incurred during the processing state.
The income statement shows a presentation of the sales, the main expenses and the
resulting net income over the period. Net income is based on accounting principles
which gives guidance/rules on when to recognize revenues and expenses, whereas
cash from operating activities, obviously is cash based.
3. Statement of Retained Earnings:
It explains the changes in a company's retained earnings over the reporting period.
The statement of retained earnings shows the breakdown of retained earnings. Net
income for the year is added to the beginning of year balance, and dividends are
subtracted. This results in the end of year balance for retained earnings.
4. Cash Flow Statement
It reports on a company's cash flow activities; particularly it’s operating, investing
and financing activities. The statement of cash flows the ins and outs of cash during
the reporting period. The statement of cash flows takes aspects of the income
statement and balance sheet and kind of crams them together to show cash sources
and uses for the period
 FINANCIAL STATEMENT ANALYSIS:

Financial analysis is the process of examining a company’s Statement in the context of its
industry and economic environment in order to arrive at a decision or environment. For this
purpose, financial reports are one of the most important sources of information available to a
financial analyst. Furthermore, the analyst also uses information contained in the notes to
financial statements and supplementary information (such as management discussion). It is
important that an analyst have a strong understanding of each of these sources of information.

Financial Statement Analysis is a method of reviewing and analyzing a company’s

accounting reports (financial statements) in order to gauge its past, present or projected future
Statement. This process of reviewing the financial statements allows for better economic
decision making.

Globally, publicly listed companies are required by law to file their financial statements
with the relevant authorities. For example, publicly listed firms in America are required to
submit their financial statements to the Securities and Exchange Commission (SEC). Firms are
also obligated to provide their financial statements in the annual report that they share with their
stakeholders. As financial statements are prepared in order to meet requirements, the second step
in the process is to analyze them effectively so that future profitability and cash flows can be
forecasted.

Therefore, the main purpose of financial statement analysis is to utilize information about
the past Statement of the company in order to predict how it will fare in the future. Another
important purpose of the analysis of financial statements is to identify potential problem areas
and troubleshoot those.

FINANCIAL STATEMENT USERS

There are different users of financial statement analysis. These can be classified into
internal and external users. Internal users refer to the management of the company who analyzes
financial statements in order to make decisions related to the operations of the company. On the
other hand, external users do not necessarily belong to the company but still hold some sort of
financial interest. These include owners, investors, creditors, government, employees, customers,
and the general public. These users are elaborated on below:

1. Management

The managers of the company use their financial statement analysis to make intelligent
decisions about their Statement. For instance, they may gauge cost per distribution channel, or
how much cash they have left, from their accounting reports and make decisions from these
analysis results.

2. Owners

Small business owners need financial information from their operations to determine
whether the business is profitable. It helps in making decisions like whether to continue
operating the business, whether to improve business strategies or whether to give up on the
business altogether.

3. Investors

People who have purchased stock or shares in a company need financial information to
analyze the way the company is performing. They use financial statement analysis to determine
what to do with their investments in the company. So depending on how the company is doing,
they will hold onto their stock, sell it or buy more.

4. Creditors

Creditors are interested in knowing if a company will be able to honor its payments as
they become due. They use cash flow analysis of the company’s accounting records to measure
the company’s liquidity, or its ability to make short-term payments.

5. Government

Governing and regulating bodies of the state look at financial statement analysis to
determine how the economy is performing in general so they can plan their financial and
industrial policies. Tax authorities also analyze a company’s statements to calculate the tax
burden that the company has to pay.

6. Employees

Employees need to know if their employment is secure and if there is a possibility of a

pay raise. They want to be abreast of their company’s profitability and stability. Employees may
also be interested in knowing the company’s financial position to see whether there may be plans
for expansion and hence, career prospects for them

7. Customers

Customers need to know about the ability of the company to service its clients into the
future. The need to know about the company’s stability of operations is heightened if the
customer (i.e. a distributor or procurer of specialized products) is dependent wholly on the
company for its supplies.

8. General Public

Anyone in the general public, like students, analysts and researchers, may be interested in
using a company’s financial statement analysis. They may wish to evaluate the effects of the firm
on the environment, or the economy or even the local community. For instance, if the company
is running corporate social responsibility programs for improving the community, the public may
want to be aware of the future operations of the company.

METHODS OF FINANCIAL STATEMENT ANALYSIS

There are two main methods of analyzing financial statements: horizontal or trend
analysis, and vertical analysis. These are explained below along with the advantages and
disadvantages of each method.

HORIZONTAL ANALYSIS
 Horizontal analysis is the comparison of financial information of a company with
historical financial information of the same company over a number of reporting periods. It
could also be based on the ratios derived from the financial information over the same time span.
The main purpose is to see if the numbers are high or low in comparison to past records, which
may be used to investigate any causes for concern. For example, certain expenditures that are
high currently, but were well under budget in previous years may cause the management to
investigate the cause for the rise in costs; it may be due to switching suppliers or using better
quality raw material.

This method of analysis is simply grouping together all information, sorting them by time
period: weeks, months or years. The numbers in each period can also be shown as a percentage
of the numbers expressed in the baseline (earliest/starting) year. The amount given to the
baseline year is usually 100%. This analysis is also called dynamic analysis or trend analysis.

ADVANTAGES AND DISADVANTAGES OF HORIZONTAL ANALYSIS

When the analysis is conducted for all financial statements at the same time, the complete
impact of operational activities can be seen on the company’s financial condition during the
period under review. This is a clear advantage of using horizontal analysis as the company can
review its Statement in comparison to the previous periods and gauge how its doing based on
past results.

A disadvantage of horizontal analysis is that the aggregated information expressed in the

financial statements may have changed over time and therefore will cause variances to creep up
when account balances are compared across periods.

Horizontal analysis can also be used to misrepresent results. It can be manipulated to

show comparisons across periods which would make the results appear stellar for the company.
For instance, if the profits for this month are only compared with those of last month, they may
appear outstanding but that may not be the case if compared with the same month the previous
year. Using consistent comparison periods can address this problem.

VERTICAL ANALYSIS
 Vertical analysis is conducted on financial statements for a single time period only. Each
item in the statement is shown as a base figure of another item in the statement, for a given time
period, usually for year. Typically, this analysis means that every item on an income and loss
statement is expressed as a percentage of gross sales, while every item on a balance sheet is
expressed as a percentage of total assets held by the firm.

Vertical analysis is also called static analysis because it is carried out for a single time
period.

ADVANTAGES AND DISADVANTAGES OF VERTICAL ANALYSIS

Vertical analysis only requires financial statements for a single reporting period. It is
useful for inter-firm or inter-departmental comparisons of Statement as one can see relative
proportions of account balances, no matter the size of the business or department.

Because basic vertical analysis is constricted by using a single time period, it has the
disadvantage of losing out on comparison across different time periods to gauge Statement. This
can be addressed by using it in conjunction with timeline analysis, which shows what changes
have occurred in the financial accounts over time, such as a comparative analysis over a three-
year period. For instance, if the cost of sales comes out to be only 30 percent of sales each year
in the past, but this year the percentage comes out to be 45 percent, it would be a cause for
concern.

IMPORTANCE OF ANALYSIS OF FINANCIAL STATEMENT

Financial statement is prepared at a certain point of time according to established

convention. These statements are prepared to suit the requirement of the proprietor. For
measuring the financial soundness, efficiency, profitability and future prospects of the concern, it
is necessary to analyze the financial statement. Following purposes are served by the Financial
analysis: -

Help in Evaluating the operational efficiency of the Concern:- It is necessary to analyze

the financial statement for matching the total expenses incurred in manufacturing, Advertising,
selling and distribution of the finished goods and total financial expanses of the current year
comparing with the total expanses of the previous year and evaluate the managerial efficiency of
concern.

Help in Evaluating the short and long term financial position:- It is necessary to analyze
the financial statement for comparing the current assets and current liabilities to evaluate the
short term and long term financial soundness.

Help in calculating the profitability:- It is necessary to analyze the financial statement to

know the gross profit and net profit.

Help in indicating the trend of achievements:- Analysis of financial statement helps in

comparing the Financial position of previous year and also compare various expenses, purchases
and sales growth, gross and net profit. Cost of goods sold, total value of assets and liabilities can
be compare easily with the help of Analysis of financial statement.

Forecasting, budgeting and deciding future line of action:-The potential growth of the
business can be predicts by the analysis of financial statement which helps in deciding future line
of action. Comparisons of actual performance with target show all the shortcomings.

FINANCIAL ACCOUNTING:

Financial accounting is the process of systematic recording of the business transactions in the
various books of accounts maintained by the organization with the ultimate intention of
preparing the financial statement there from. These financial statements are basically in two
forms. One, profitability statement which indicates the result of operations carried out by the
organization during a given period of time and second balance sheet which indicates the state of
affairs of the organization at any given point of time in terms of its assets and liabilities.

 Main purpose of financial accounting is to ascertain profit or loss and to indicate financial
position of an enterprise.
 Two fundamental statements of financial accounting are income and expenditure
statement and balance sheet.
  The profit and loss account or income and expenditure account is prepared for a
particular period to find out the profitability of the firm and balance sheet is prepared on a
particular date to determine the financial position of the firm.
 Financial accounting summaries transactions taking place during a period with the
objective of preparing the financial statement.

FINANCIAL STATEMENT ANALYSIS

Financial Statement analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing the relationship between the items of balance
sheet and profit and loss account.

It also helps in short-term and long-term forecasting and growth can be identified with
the help of financial Statement analysis.

The dictionary meaning of ‘analysis’ is to resolve or separate a thing in to its element or

components parts for tracing their relation to the things as whole and to each other.

FINANCIAL STATEMENTS

‘FINANCIAL STATEMENT’ refers to formal ad original statements prepared by a

business concern to disclose its financial information

According to John. N.Meyer, “The financial statement provides summary of accounts of

a business enterprise, the balance sheet reflecting assets, liabilities and capital as on a certain
date and the income statement showing the result of operation during a certain period”

The financial statements are prepared with a view to depict the financial position of the
concern. They are based on the recorded facts and are usually expressed in monetary terms. The
financial statement are prepared periodically that is generally for the accounting period
 The term financial statement has been widely used to represent two statements prepared by
accountants at the end of specific period. They are :

 Profit and loss a/c or income statement

 Balance sheet or statement of financial position

LIMITATION OF FINANCIAL STATEMENT:

 Information shown in financial statement is not precise since it is based on practical

experience and the conventions and rules developed therefore
 Financial statements do not always disclose the correct financial position of the business
concern as they are influenced by the personal opinions, judgement, subjective view and
whims of accountant of each concern
 Balance sheet of a concern is a statics document it disclose the financial position of a
concern on a particular date.
 Information disclosed by profit& loss a/c may not be the real profit as many items shown
in the profit & loss a/c may not the real
 Financial statements are dumb, because they speak themselves. The statements require
further detailed analysis and interpretation.
 Financial statement of the one period may not be comparable.
 Financial statement does not disclose the contribution of man towards the efficiency of
the business.

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

The various tools of financial statement are used for decision-making process. The
financial statement becomes a tool for future planning and forecasting. The analysis of these
statements involves their division according to similar groups and arranged in desired form. The
interpretation involves the explanation of financial facts in a simplifier’s manner

OBJECTIVES OF ANALYSIS AND INTERPRETATION:

 The users of financial statement have definite objectives to analysis and interpret .Therefore;
there are variations in the objectives of interpretation by various classes of people. However,
there are certain specific and common objectives which are listed below:

 To interpret the profitability and efficiency of various business activities with the help of
profit and loss account;
 To measure managerial efficiency of the firm;
 To ascertain earning capacity in future period;
 To measure short-term and long -term solvency of the business;
 To determine future positional of the concern;
 To measure utilization of various assets during the period;
 To compare operational efficiency of similar concerns engaged in the same industry

Type of Analysis:

The process of financial statement analysis is of different types. The process of analysis
is classified on the basis of information used and ‘modus operandi’ of analysis. The classification
is as under:

Financial statement analysis

On the basis of information on basis of ‘modus operandi’ of

Used: analysis:

(a) External analysis (a) Horizontal analysis

(b) Internal analysis (b) Vertical analysis

LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is a very important device but it has certain limitation which is to be
kept in mind. Following are the limitations of financial statement analysis.
 1. Based on past data:

The nature of financial statements is historical. Past cannot be the index of future estimation,
forecasting, budgeting and planning.

2. Financial statement analysis cannot be a substitute for judgment :

Analysis is tools which can be utilized usefully by an expert may lead to erroneous conclusion by
unskilled analysis. Thus the result analysis cannot be considered as judgment or conclusion

3. Reliability of figures:

The accuracy and reliability of analysis depends on reliability of figures derived from financial
statement.

4. Different interpretation:

Result of the analysis may be interpreted differently by different user

5. Change in accounting methods:

Analysis will be effective if the figures taken from financial statements comparable. If there are
frequent change in accounting policies and method, figures of different periods will be different
and comparable.

6. Price level change:

The ever rising inflation erodes the value of money in the present day economic situation, which
reduces the validity of analysis.

7. Limitations of the tools of analysis:

Different techniques of analysis are used by an analyst. These tools are suitable for different
type of analysis. Application of a particular tool or technique depends on the skill and expertise
of the analyst. If an unsuitable technique is used, it give misleading result. It may lead to wrong
conclusions and prove harmful to the business concern.

METHODS OF ANALYSIS AND INTERPRETATION

The analysis and interpretation of financial statement is used to determine the financial
position and result of operation as well. The following are the tools that are used for analyzing
the financial position of the company:

 Ratio Analysis
 Comparative balance sheet
 Common size balance sheet
 Trend analysis

RATIO ANALYSIS

Ratio analysis is an important and age-old technique. It is a powerful tool of financial

Analysis. It is defined as “The indicated quotient of two mathematical expressions” and as “the
relationship between two or more things” .Systematic use of ratio is to interpret the financial
statement so that the strength and weakness of a firm as well as its historical Statement and
current financial condition can be determined.

A ratio is only comparison of the numerator with the denominator .The term ratio refers
to the numerical or quantitative relationship between two figures. Thus, ratio is the relationship
between two figures and obtained by dividing a former by the latter. Ratios are designed show
how one number is related to another.

The data given in the financial statements are in absolute form and are dumb and are
unable to communicate anything. Ratios are relative form of financial data and are very useful
technique to check upon the efficiency of a firm. Some ratios indicate the trend or progress or
downfall of the firm.
 In the view of the requirements of the various users of ratio, it is divided in to the following
important categories.

 1. Liquidity ratios
 2. Activity ratios
 3. Profitability ratios
 4. Earnings ratios

LIQUIDITY RATIOS:

Liquidity ratios measure the ability of the firm to meet it’s a current obligation. In fact,
analysis of liquidity needs the preparation of cash budgets and cash and fund flow statements;
but liquidity ratios, by establishing a relationship between cash and other current asset to current
obligations provide a quick measure of liquidity.

A firm should ensure that it does not suffer From lack or liquidity, and it does not have
excess liquidity .the failure of the company to meet its obligations due to its lack of liquidity,
will result in a poor creditworthiness, loss of creditor’s confidence, or even in legal tangles
resulting in the closure of the company a very high degree of liquidity is also bad idle assets earn
nothing. The firms fund will be unnecessarily tied up in current assets. Therefore it is necessary
to strike a proper balance between high liquidity and lack of liquidity.

ACTIVITY RATIO OR TURNOVER RATIO:

Activity Ratio highlights the activity and the operational efficiency of the business
concern. The better managements of asserts the larger the amount of sales. Activity ratio
measures the relationship between the sales and the assets. Turnover ratios are employed to
evaluate the efficiency with which the firm manages and utilize s its assets. Their ratio indicates
the speed with which assets are brought converted as turn over into sales.

PROFITABILITY RATIOS:
 Profitability reflects the final result of the business operations. Profit earning is
considered essential for the survival of the business. There are two types of profitability ratios
profit margin ratio and the rate of return ratios. Profit margin ratio shows the relationship
between profit and sales.

Popular profit margin ratios are gross profit margin and net profit margin ratio. Rate of
return ratio reflects between profit and investment. The important rates of return measures are
rate of return on total assets and rate in equity.

EARNINGS RATIOS:

Earnings are income to the shareholders of the share invested by them. Hence the
earnings ratio will be useful to the investors to the value of the shares that is been holding by
them

COMPARATIVE BALANCE SHEET:

The comparative balance sheet is helpful in analysing and evaluating the financial
position of the firm over a period of years. The comparative balance sheet analyse is the study of
the trend of the same items, group of items, and computed items in two or more balance sheet of
the same business enterprise on different dates.

The changes in periodic balance sheet items reflect the conduct of a business. The
changes can be observed by comparison of the balance sheet at the beginning and at the end of
the period and these changes can help in forming an opinion about the progress of an enterprise

COMMON SIZE BALANCE SHEET:

Financial statements when read in absolute figure are not easily understandable. They are
even miss leading. Each items of asset is converted in to percentage to total asset and each item
of capital and liabilities is expressed to total liability and capital fund. Thus the whole balance
sheet is converted in to percentage form i.e., every individual item stated as a percentage of total
100.such converted balance sheet is known as common size balance sheet. The percentage so
calculated can be easily compared with the corresponding percentages in some other period.
TREND ANALYSIS:

The ‘trend’ signifies a tendency and as such the review and appraisal of tendency in
accounting variables are nothing but the trend analysis. Trend analysis is carried out by
calculating trend ratio. Trend analysis is significant for forecasting and budgeting. Trend analysis
discloses the change in financial and the operating data between specific periods.

CHAPTER-II
REVIEW OF LITERATURE
INTRODUCTION
The review of literature guides the researchers for getting better understanding of
methodology used, limitations of various available estimation procedures and data base
and lucid interpretation and reconciliation of the conflicting results. Besides this, the
review of empirical studies explores the avenues for future and present research efforts
related with the subject matter. In case of conflicting and unexpected results, the
researcher can take the advantage of knowledge of other researchers simply through the
medium of their published works. A large number of research studies have been carried
out on different aspects of the working of public and private sector by the researchers,
economists and academicians in India. Different authors have analyzed financial
performance in different perspective. A review of these analyses is important in order to
develop an approach that can be employed in the context of the study of selected
Manufacturing Enterprises viz. Pipes, Cement, Sugar, Steel ,pipes, Minerals and Metals,
Coal and Lignite, Power, Petroleum and Chemicals and Pharmaceuticals. Therefore, the
present chapter reviews the various approaches to the study on financial analysis and
performance.

REVIEW OF LITERATURE

1. Nizam Mohammed (1985) in his study entitled “Indian Pipes Industry: Heading for a
Bright Future” has analyzed the causes of low capacity utilization during the 1970s. He
 observes that the major problem which causes the relatively low capacity utilization
include the shortage of raw materials, inadequate supply of power, coal and transport
bottlenecks. He has also observed that the capacity utilization in pipes industry is
influenced by several factors.
2. Bansal and Gupta (1985) in their study entitled, “Financial Ratio Analysis and Statistics”
enlightened that the coefficient of variation in the study period had a wide gap varying
between 7.1 per cent and 51.3 per cent for current ratio and ratio of fixed assets to sales.
The correlation of components of short term liquidity ratio generally possesses low
correlation as against long term solvency ratio components but the components of both
ratios independently possess quite satisfactory correlation in cotton textile industry. The
profitability ratio elements in the industry also have quite high correlation in cotton
industry as compared to synthetic industry
3. Arun Ghosh (1987) in his article entitled “ Education and Environment Contribution of
the Pipes Industry” has reported that the growth of the pipes industry was impressive and
that the annual growth rate over the period 1951-1986 was 8.7 per cent for capacity and
that of production, 7.4 per cent. He has observed that the overall capacity utilization had
been declined from ninety six per cent in 1951 to sixty per cent in 1986. He has also
observed that the capacity utilization was not in accordance with the growth of capacity
of the pipes industry.

Reference:

1. Nizam Mohammed, “Indian Pipes Industry: Heading for a Bright Future”, Indian
Journal of marketing: Volume –XVI, No-4, December 1985, Pp.9-12.
2. .Bansal, L.K. and Gupta, R.K., “Financial Ratio Analysis and Statistics”, The
Management Accountant, Volume-20(12), December 1985, Pp. 673-676.
3. Arun Ghosh, “Education and Environment Contribution of the Pipes Industry”.
Economic and Political Weekly: Volume – XXII, No.41, October 1987, P-173.

4. Kulkarni (1989) in his article entitled “Pipes and Pipes Board” has examined the capacity
utilization of the Indian Pipes Industry during the two decades. He has observed that the
capacity utilization declined very sharply from 823 per cent to 66.4 per cent during the
 first decade and to 60.41 per cent during the second decade of the study. He has further
found the installed capacity was increased to 28.51 lakh tonnes per annum during the
year 1988 as against the installed capacity of 9.54 lakh tonnes in the year 1971. The
production of pipes and pipes boards was also increased in a similar manner as from 7.75
lakh tonnes to 17.20 lakh tones during the same period. Thus, it is noted that the capacity
utilization of the pipes industry has an inverse relationship with the installed capacity and
production.
5. Khan and Mohol Tutail Khan (1990) in their study, “Pipes Industry: An appraisal”
pointed out that the pipes industry is a highly capital intensive industry. Due to steady
rise in the cost of inputs, heavy overheads, paucity of power and adverse impact of
control orders over the industry, this industry has been unable to function vigorously.
They have selected some of the important companies for the analysis during the period
1980-81 to 1985-86. The statistical analysis shows that the profitability of these
companies during the period under review is not satisfactory. The profitability of these
companies has been hampered because of controls over prices and production of printing
pipes. The study concluded that the control over price and production of printing pipes
should be removed.
6. Praveen Kumar Jain (1993) conducted a study among seven pipes companies in India to
“Analyze the basic components of Working Capital”. The study revealed that the current
ratio in public sector undertakings during the study period was found to be highly erratic
while the same in private sector undertakings registered continuous decrease. As far as
the inventory was concerned, the study revealed that it was highly unplanned in public
sector undertaking units when compared to private sector units. The study contributed
much in terms of realizing the importance of effective management of working capital.

7. Srinivasa Rao and Indrasena Reddy (1995) in their study entitled “Financial Performance
in Pipes Industry- A Case Study” stated that the financial position of the company had
been improving from year to year. The company’s performance in relation to generating
internal funds in the form of reserves and surplus was excellent and also was doing well
in mobilizing outside funds. The liquidity position of the company was sound as it was
revealed by current and liquid ratios which were above the standard. The solvency ratios
 showed that the company had been following the policy of low capital gearing from
1990-91 as these ratios had been decreasing from this year. The performance of the
company 22 in relation to its profitability was not up to the expected level. The
company’s ability to utilize assets for generation of sales had not been improved much
during the study period as it was revealed by its turnover ratios.
8. Sukamal Datta (1995) in his study entitled “Working Capital Management through
Financial Statements: Analysis of Pipes Industry in West Bengal” found that most of the
firms were suffering from shortage of working capital. One of the primary causes of such
shortage of working capital was that most of the firms under study were not capable of
earning adequate profit and were also suffering from losses. The expansion of fixed
asserts also caused the working capital crisis. The utilization of fund had not been
covered by sufficient amount of fund by way of long-term investment.

REFERENCE
1. Kulkarni, A.V., “Pipes and Pipes Board”, The Economic times, August- 1989, P-
9. 5. Khan and Mohol Tutail Khan, “Pipes Industry: An appraisal,” Yojana,
Volume-34, No.11, June 1990, Pp.16-30.
2. Praveen Kumar Jain, Analyze the Basic Components of Working Capital”,
Management of working Capital, Jaipur: RBS Publishers, 1993.
3. Srinivasa Rao, G. and Indrasena Reddy, P., “Financial Performance in Pipes
Industry- A Case Study”, The Management Accountant, May 1995, Pp. 327-336.
4. Sukamal Datta, “Working Capital Management Through Financial Statements:
Analysis of Pipes Industry in West Bengal”, The Management Accountant,
Volume-30(1), November 1995, Pp.826-832.

9. Roger M. Shelor & et al. (1998) this study examines changes in “Operating Performance
among Real Estate Investment Trusts” following an Initial Public Offering (IPO). The
purpose is to determine whether there is an enhancement in the value of the underlying
asset that is related to the IPO. They analyze equity, mortgage and diversified REITs
separately. They also compare the operating performance of recent IPOs to those of
earlier years to address the impact of the 1993 Revenue Reconciliation Act on
 institutional investors‟ demand for REIT stock. Unlike previous analyses of industrial
firms, REITs were found to have significant increases in return on Assets and selected
measures of financial performance. The post-IPO cumulative stock price decline and
recovery is illustrated.
10. Gangadhar (1998) has made an attempt on “Financial Analysis of Companies in Criteria:
A Profitability and efficiency focus” one of the objectives of the study is to analyze the
liquidity position of the companies and to point out the factors responsible for such a
position. It is concluded that the liquidity position was quite alarming since these are
facing chronic liquidity problems. Their proportion current assets in relation to the
current liabilities are very low. It is suggested that, they may be improved by reducing
excessive burden of current liabilities or increasing the level of current assets depending
upon the requirements.
11. Muhammad Rafiqul Islam (2000)“Working Capital Management of Pipes Mills in
Bangladesh-An Overall View” concluded that all the units of the pipes industry had
failed to manage their working capital requirements properly. The reasons for working
capital crisis were improper use of short-term funds, operating losses, over stocking to
stores and spares; and non-availability of rawmaterials.
12. Harris (2001) analyses the link between market orientation and performance has been
claimed largely on the basis of the analysis of subjective measures of performance.
Consequently, the aim of this study is to examine the links between market orientation
and objectively measured financial performance. The pipes begins with a brief
examination of the definition and components of market orientation. Thereafter, extant
research into the consequences of developing market orientation is reviewed critically,
leading to the development of a number of research hypotheses. After detailing the
research design and methodology adopted in this study, the findings of a survey of UK
industry are presented. Briefly, the results indicate that when subjective measures of
performance are adopted, market orientation is associated with company performance in
certain environmental conditions. However, when objective measures of performance are
adopted, there is a narrower range of environmental conditions where market orientation
is positively associated with performance. The pipes concludes with a series of
implications for both theorists and practitioners.
 REFERENCE

1. Roger M. Shelor and Dwight C. Anderson, “Operating Performance Among Real

Estate Investment Trust”, Journal of Real Estate Research, Vol.16, Issue No.3,
1998, Pp.375-388.
2. . Gangadhar, V., “Financial Analysis of Companies in Criteria: A Profitability and
efficiency focus”, The management Accountant, Vol.33, No.11, November 1998,
Pp.810-817. 39
3. Muhammad Rafiqul Islam, “Working Capital Management of Pipes Mills in
Bangladesh- An Overall View,” South Asian Journal of Management, Volume-
7(1&2), January-2000, Pp.78-90.
4. . Harris, L.C., “Market orientation and performance: Objective and subjective
empirical evidence from UK companies”, Journal Of Management Studies.,
Volume -16, July- 2001, Pp. 333-358.

13. Mahes Chand Garg and Chander Shekhar (2002) found that the asset composition is to be
significantly negatively related with total Debt equity and long term dept equity in
cement industries. Value of the assets and life of the company were significantly
positively related to total debt equity. Life of the 24 company was significantly positively
related with long term debt equity in cement industries. The regression coefficient of
collateral value of assets was significant at 10 per cent level and was positively associated
with total debt equity.
14. Bortolotti & et al. (2002) examine the financial and operating performance of thirty one
national telecommunication companies in twenty five countries that were fully or
partially privatized through public share offering. Using conventional pre-versus post-
privatization comparisons and panel data estimation techniques, they find that the
financial and operating performance of telecommunications companies improves
significantly after privatization, but that a sizable fraction of the observed improvement
results from regulatory changes-alone or in combination with major ownership changes-
rather than from privatization alone.
15. Sahu (2002) in his article titled “A Simplified Model for Liquidity Analysis of Pipes
Industry” has examined the liquidity of pipes industry. The model developed by him has
been based on the assumption that the liquidity management of a company in a particular
year is effective if its‟ earnings before depreciation is positive and not effective if its‟
earnings before depreciation is negative. The findings have revealed a very high
predictive ability of the estimated discriminant function.
16. Feroz & et al. (2003) Ratio analysis is a commonly used analytical tool for verifying the
performance of a firm. While ratios are easy to compute, which in part explains their
wide appeal, their interpretation is problematic, especially when two or more ratios
provide conflicting signals. Indeed, ratio analysis is often criticized on the grounds of
subjectivity that is the analyst must pick and choose ratios in order to assess the overall
performance of a firm. In this pipes they demonstrate that Data Envelopment Analysis
(DEA) can augment the traditional ratio analysis. DEA can provide a consistent and
reliable measure of managerial or operational efficiency of a firm. They test the null
hypothesis that there is no relationship between DEA and traditional accounting ratios as
measures of 25 performance of a firm. Their results reject the null hypothesis indicating
that DEA can provide information to analysts that is additional to that provided by
traditional ratio analysis.

REFERENCE
1. Mahes Chand Garg and Chander Shekhar, “Determinants of capital structure in
India”, The Management Accountant, Volume No. 37(2), February 2002, Pp. 86-
92.
2. Bortolotti, B.D., Souza, J.F., Antini, M., Megginson, W.L., “Privatization and the
sources of performance improvement in the global telecommunications industry”
Telecommunications Policy, Volume- 13, July- 2002, Pp. 465-474.
3. Sahu, R.K., “A Simplified Model for Liquidity Analysis of Pipes Industry”, The
Management Accountant. Volume-37, No.8, August -2002, Pp.622-625.
4. Feroz, E.H., Kim, S., Raab, R.L., “Financial statement analysis: A Data
Envelopment Analysis Approach” Journal of the Operational Research Society,
Volume- 24, February-2003, Pp.299-319
17. Anshan Lakshmi (2003) made “A Study of the Financial Performance with Reference to
Steel Industries Kerala Ltd”. This study covered from 1977-1998 to 2001-2002. The
objectives of the study was to analyze and evaluate the working capital management, to
analyze the liquidity position of the company, to evaluate the receivables, payables and
cash management and to suggest ways and means to improve the present date of working
capital. The major tools used for the analysis said that the working capital management
suggested that the inventory management have to be corrected.
18. Sudarsana Reddy (2003) under took a study on “Financial Performance of Pipes Industry
in Andhra Pradesh” for the period from 1989-90 to 1998-99. The primary objective of the
study was to analyze the investment pattern and utilization of fixed assets, ascertaining
the working capital condition, reviewing the profitability performance and suggesting
measures to improve the profitability. He concluded that the introduction of additional
funds along with restructuring of finances and modernization of technology were needed
for better operating performance.
19. Sukudev Singh & et al. (2003) undertook a study entitled “Status and Growth of Pipes
and Pulp Board Industry in North India – A Case study”. The study has revealed that due
to the availability of raw materials and labour, eighty per cent of the mills are running
with the optimum capacity utilization. The authors have observed that more than three
thousand people have got employment in ten pipes and pipes board mills with proportion
of thousand eight hundred skilled workers and thousand two hundred unskilled labors.
The authors have found out that the major problem faced by the industry is frequent
breakdown of pipes production especially during the summer season due to scarcity of
power supply.
20. Alovsat Muslumov (2005) “The Financial and Operating Performance of Privatization
Companies in Turkish Cement Industry”. This pipes examines the post- privatization
performance of privatized companies in the Turkish cement industry. The findings
 indicate that, when performance criteria for both the state and private enterprises are
considered, privatization in the cement industry results in significant performance
deterioration. Total value added and the return on investment declines significant after
privatization. This decrease mainly stems from deterioration in asset productivity. The
decline in asset productivity, however, is not caused by an increase in capital investment,
since post- privatization capital investment did not change significantly. Significant
contraction in total employment and an increase in financial leverage after privatization
are among the key research findings. Privatization through public offering, gradual
privatization and domestic ownership are found to stimulate the financial and operating
performance of firms.

REFERENCE
1. Anshan Lakshmi, K.A., “A Study of the Financial Performance With Reference
To Steel Industries Kerala Limited”, JMS8M, Vol.10, July-Sep 2003, Pp. 62-64.
2. Sudarsana Reddy, H., “Financial Performance of Pipes Industry in Andhra
Pradesh”, Finance India, Volume –XVII, No.3, September- 2003, Pp.1027-1033.
3. Sukhdev singh and Gill, S.S., “Status and Growth of Pipes and Pulp Board
Industry in North India – A Case study”, Indian Economic Panorama, Volume-13,
No.1, 2003, Pp. 49-52. 40
4. Alovsat Muslumov, “The Financial and Operating Performance of Privatization
Companies in Turkish Cement Industry”, METU Studies in Development, Dogus
University, Volume.32, No.1, 2005, Pp.59-100.

21. Ooghe & et al. (2006) in their pipes examine the financial performance of the acquiring
firm after the acquisition, using statistical analysis of industry adjusted variables. Their
findings show that following: the acquisition, the profitability, the solvency and the
liquidity of most of the combined companies decline. This decline is also reflected in the
failure prediction scores. With respect to the added value, acquisitions are found to be
accompanied by increases in the lab our productivity, but this is caused by the general
improvement of gross added value per employee of Belgian companies in the last ten
 years. So, it seems that, contrary to the general expectations and beliefs, acquisitions
usually do not seem to improve the acquirer's financial performance.
22. Sudarsana Reddy & et al. (2006) examined the internal funds availability for financing
fixed assets in pipes industry in Andhra Pradesh. The study found that the owner funds
were insufficient to finance fixed assets and observed that fixed assets did not have
significant relationship with the sales.
23. Vishnani and Shah (2007) investigated the impact of working capital management
policies on the corporate performance of the India consumer electronics industry. They
noted that inventory holding period, debtors‟ collection period and net working capital
cycle had negative relationship on the profitability of firms. Whereas, the average
payment periods positive correlation with profitability
24. Krishnaveni (2008) studied the performance appraisal might be said that the adoption of
liberalization measure and above suggestions would doubtlessly help the Indian chemical
industry to improve their performance individually and other industry as a whole. This
study also suggests that the policy of liberalization should further be strengthened. Thus,
the dreams of our planners to accelerate the economic growth in the country are still
possible to be translated into reality

REFERENCE
1. Ooghe, Hubert, Van Laere, Elisabeth, De langhe, Tine, “Are acquisitions
worthwhile? An empirical study of the post-acquisition performance of privately
held Belgian companies”. Small Business Economics, Volume 4200, July 2006,
Pp. 127-135.
2. Sudarsana Reddy, Ragunatha Reddy and Mohan Reddy, “Financing Factor and
Utilization of Fixed Assets in Large Scale Pipes Industry in Andhra Pradesh – A
Study”, The Management Accountant, September 2006, Pp.729-736.
3. Vishnani, S. and Shah. B, “Impact of Working Capital Management Policies on
corporate Performance an Empirical Study”, Global Business Review, Volume 8,
2007, Pp.267-281.
4. Krishnaveni, M, “ Performance appraisal of an Indian chemical industry after
liberalization, Finance India”, Volume 22, No.3, 2008, Pp.571-580.
25. Adolphus (2008) showed that there was a statistically significant relationship between
measure of liquidity and selected measures of profitability, efficiency and indebtedness in
Nigerian quoted manufacturing companies. The impact of one per cent increase in
average liquidity measures produces a more significant increase in average profitability
(21.9 per cent), efficiency (16.1 per cent) and indebtedness (16.6 per cent).
26. Burange & et al. (2008)2 deals with the “Performance of Indian Cement Industry - The
Competitive Landscape”. The Cement Industry is experiencing a boom on account of the
overall growth of the Indian Economy primarily because of increased industrial activity,
and expanding investment in the cement sector. The industry experienced a complete
shift in the technology of production. The competitiveness among the firms in Indian
Cement Industry has also been 28 evaluated for the year 2006-2007, out of seventeen
firms (90.21 per cent of the total market share), about 47 per cent have been recorded,
above industry average performance in the overall competitiveness index.
27. Ramanchandran and Janakiraman (2009) analyzed the relationship between working
capital management efficiency and earnings before interest and tax of the pipes industries
in India. The study revealed that cash conversion cycle and inventory days had negative
correlation with earning before interest and tax. While accounts payable days and
accounts receivable days related positively with earning before interest and tax.
28. Pieter Van Beurden & et al. (2009reported the “Relation between Corporate Social and
Financial Performance”. One of the older questions in the debate about Corporate Social
Responsibility (CSR) is whether it is worthwhile for organizations to pay attention to
societal demands. This debate was emotionally, normatively, and ideologically loaded.
Up to the present, this question has been an important trigger for empirical research in
CSR. However, the answer to the question has apparently not been found yet, at least that
is what many researchers state.

REFERENCE
1. Adolphus, J. Toby, “Liquidity performance relationship in Nigerian
manufacturing companies (1990-2002)”, Finance India, Volume II, Issue 3,
March 2008, Pp.117-131.
 2. Burange. L.G, and Shruti Yamini, “Performance of Indian Cement Industry: the
Competitive Landscape”, Journal of Finance, Volume. 39, No.1, April 2008,
Pp.127-145.
3. Ramanchandran, A. and Janakiraman. M, “The Relationship between Working
Capital Management Efficiency and EBIT” Managing Global Transitions,
Volume-7(1), 2009, Pp.61-74
4. Pieter Van Beurden and Tobias Gossling, “The European Identity in Business and
Social Ethics, The Worth of Values, A Literature Review on the Relation
Between Corporate Social and Financial Performance”, The EBEN 20 th Annual
Conference in Leuven"-2009.
29. Protopappa & et al. (2009) reported that financial flows are often frosted in a fragmented
and discounted way from the physical product flow. Managers‟ false division from an
operational point of view concerning inventory, service level of capacity needs. The
implementation of such division influences financial performance informs of profit
margin working capacity requirements and return on investment. However, the
interdependency of operational and financial objectives is rarely well understood. Such
proactiveness has serious implication on the profitability of a company and its
responsiveness to market needs. Therefore, companies increasingly acknowledge the
importance of financial supply chain management as an effective way approved to
optimize the working capital levels and to direct the cash flow efficient working capital
allocation and visibility of accounts payable and receivables can achieve significant cost
savings, enhance cash flow predictability and boost company performance.
30. Choi Jaepil & et al. (2009) examined the effect of a firm's relationship with its non-
financial stakeholders, including its employees, suppliers, customers, and communities,
on the persistence of both superior and inferior financial performance. In particular,
integrating and extending the resource-based view of the firm and stakeholder
management literatures, develops the arguments that good stakeholder relations not only
enable a firm with superior financial performance to sustain its competitive advantage for
a longer period of time, but more importantly, also help poorly performing firms to
recover from disadvantageous positions more quickly. The arguments are supported by
the analysis of a series of first-order autoregressive models. The findings further suggest
 that the positive effect of good stakeholder relations on the persistence of superior
performance is not as strong as that of some other firm resources, such as technological
knowledge, but it is the only factor examined that promises to help a firm to recover from
inferior performance. Therefore, the role of positive stakeholder relations in helping
poorly performing firms recover is found to be more critical than its role in helping
superior firms sustain their performance advantage.
31. Kaur Raghvir & et al. (2009) 31 observed that the factors determinant of Capital
Structure - Experience of Indian Cotton Textile Industry. This study has 30 two
objectives: First, to identify important determinants of capital structure and secondly to
test for the applicability of trade-off and pecking order theories based on sample data
drawn from the Indian Cotton Textile Industry for the five year period 2003-04 to 2007-
08. Multiple Regression Analysis and Step-wise regression analysis have been carried out
taking total debt to equity ratio as the dependent variable. Profitability, growth
opportunities, liquidity and business risk turned out to be the most important
determinants, followed by non-debt tax shield and uniqueness. Only firm size and asset
structure, two of the eight explanatory variables of the study, were not found to be
significant even at ten per cent level. On the basis of the signs of the regression
coefficients trade-off theory has been found to be applicable, rather than pecking order
theory, a position upheld by other empirical research works in the area.
32. Sumathi (2009) stated that the Indian Textile industry occupies an important place in the
economy of the country because of its contribution to the industrial output, employment
generation and foreign exchange earnings. One of the earliest to come into existence in
India, it accounts for 14 per cent of the total Industrial production, contributes to nearly
30 per cent of the total exports and is the second largest employment generator after
agriculture. Profit earning is the aim of business. In the course of analysis of this study
various Statistical techniques have been made. The Statistical techniques used are
correlation, t-test, and Multiple Regression analysis to find out the relationship between
the variable and to identify the factor influencing the profitability. Based on the analysis
net sales and net profit have some relationship and working capital management was a
highly influencing factor to find out profitability of selected textile companies in
 Coimbatore district. Companies must concentrate with other influencing factor for better
profit of the company.

REFERENCE
1. Protopappa, Margarita, Seifert and Ralf, “Interrelating operational and financial
performance measurement in inventory theory - Federal de Lausanne EPFL”,
College du management, 2009, ISSN 4229 – 5534.
2. Choi Jaepil , Wang and Heli, “Stakeholder relations and the persistence of
corporate financial performance”, Strategic Management Journal, Volume. 30
Issue 8, August.2009, Pp.895-907.
3. Kaur Raghvir and Rao N. Krishna, “Determinants of Capital Structure,
Experience of Indian Cotton Textile Industry”, The XIMB Journal of
Management, Vol. 6, Issue 2, September.2009, Pp.97-112.
4. . Sumathi, N., “A Study on Relationship and Factors influencing the Profitability
of selected Textile Companies in Coimbatore District”, Finance India, Volume
23, Issue 4, December.2009, Pp.1325-1334.

33. Amalendu Bhunia (2010) has undertaken an analysis of financial performance of

pharmaceutical companies to understand how management of 31 finance plays a crucial
role in the growth. The study covers to public sector drug & pharmaceutical enterprises
listed on Bombay Stock Exchange (BSE). The study has been undertaken for the period
of twelve year from 1997-98 to 2008-09. In order to analysis financial performance in
terms of liquidity, solvency, profitability and financial efficiency, various accounting
ratios have been used. Statistical measures namely Liner Multiple Regression Analysis
and Test of Hypothesis – t test has been used.
34. Dharmendra Mistry (2010) in his study “A Comparison of Financial Performance of
Major Gujarat Pharma” players through value added and economic value added”. The
purpose of this study is to classify major Gujarat pharmacy players in cohesive categories
on the basis of their financial characteristic revealed by the financial statements. The
study also revealed that economic value added has also positive correlation with firm
 size, funds of proprietors, and funds of money lenders and have significant impact on
economic value added.
35. Gaur Jighyasu (2010) focuses on the financial performance measures of business group
companies of India non-metallic mineral products industries. The study uses financial
data of fifty seven business group companies of Indian non-metallic mineral products
industries namely cement, glass, gems & jewellery, refractories, ceramic tiles, over a
period of ten years (1999-2008) and examines the firm‟s financial performance using
performance measures through Operating Profit and Return on net worth, the size,
Leverage, Working Capital Ratio and Age of the firm are included as determinants of
firm performance. Non-metallic mineral product categories consist of important
industries of the manufacturing sector (which contributes almost fifteen per cent to the
GDP) and three- four per cent to the GDP.
36. Prasanta Paul (2011) reported that “Financial Performance Evaluation - A Comparative
Study of Some Selected NBFCs”. In this study, five listed NBFCs 32 have been
considered for analyzing comparative financial performance. Different statistical tools
like, Arithmetic mean, Standard Deviation, Coefficient of Variance, Correlation and
Analysis of Variance have been used extensively. Arithmetic Mean (AM) is an ideal
measure of central tendency, which is rigidly defined, easy to calculate, based on all
observations and affected least by fluctuations of sampling has been applied in this study.
It has been used to get a stable average and it is easy to understand the results of the
study. It concludes that the selected companies differ significantly in terms of their
financial performance indicators from one to another, may be for the different services
they provide. There are no significant differences in the last five years in the management
of financial performance of each selected NBFCs, except marginal deviation in some
cases in the year 2006-07 may be for the effect of general recession in that period
REFERENCE
1. Amalendu Bhunia, “Financial Performance of Indian Pharmaceutical Industry – A
case study”, Asian Journal of Management Research, 2010, ISSN 2229 – 3795,
Pp.427-451.
 2. Dharmendra S. Mistry, “A Comparison of Financial performance of major
Gujarat pharma players through value added and economic value added”, Gitam
journal of management, Volume-4, No.4, Oct-Dec 2010, Pp.84-97
3. Gaur Jighyasu, “Financial Performance Measures of Business Group Companies:
A study of Indian Non-Metallic Mineral Products Industries”, Journal of Business
Strategy, Volume -7, Issue-4, Decmber-2010, Pp.45-53.
4. Prasanta Paul, “Financial Performance Evaluation-A Comparative Study of some
selected NBFCs”, Indian Journal of Finance, May 2011, Pp.13-22.

37. Neha Mittal (2011) studies the determination of capital structure choice of the selected
Indian industries. The main objective is to investigate whether and to what extent the
main structure theories can explain the capital structure choice of Indian firms. It has
applied multiple regression models on the selected industries by taking data for the period
2001-2008. It examines the relevance of capital structure in selected Indian industries
based on a regression analysis and data study. It concludes that the main variables
determining capital structure of industries in India are agency cost, assets structure, non-
debt tax shield and size. The coefficients of these variables are significant at one per cent
and five per cent levels.
38. Velmathi and Ganesan (2012) in their article entitled “Inventory Management of
Commercial Vehicle Industry in India” reported that the overall analysis of inventory
management of all units in the Indian commercial vehicle industry is very good. Among
the firms in the commercial vehicle industry TML occupies the first place in the
management of inventory. It is evidently proved through strong correlation between
inventory and sales. FML‟s average growth 33 rate of sales has been more than the
growth rate of inventory which indicates that very good administration of inventory. The
study concluded that the proper management of inventory is important to maintain and
improve the health of an organization. Efficient management of inventories will improve
the profitability of the organization.
39. Mehran Ali Memon and Izah Mohd Tahir (2012) in their study entitled “Performance
Analysis of Manufacturing Companies in Pakistan” stated that the main objective is to
examine the performance of fourteen manufacturing companies in Pakistan using
 financial accounting ratios. The study suggested as ENGRO being the largest company
by total assets over three years (2006, 2007, 2008) spent more, making low sales, having
less PBT and ROA than the other thirteen smaller companies: FCC being second largest
company by assets it shows high sales, high PBT and ROA during the five year period.
On the other hand, NRL being the fourth largest company by total assets shows highest
sales in five years, lowest expenditures in 2010 as compared to other thirteen listed
companies but it has decreasing PBT and ROA during the period under investigation.
Finally, they concluded that in highlighted companies incurred higher expenses as a
result of Expense Preference Behavior Theory and low productivity growth.
40. Kartik Chandra Nandi (2012) in his study “Trends in Liquidity Management and Their
Impact on Profitability: A Case Study”. Made an attempt to observe the trend values of
liquidity position of the company and study the correlation between liquidity and
profitability. An attempt has also been made to establish the linear relationship between
liquidity and profitability with the help of a multiple regression model. The study used
various statistical tests viz. t-test, F-test and Durbin-Watson test and has been applied in
order to test the significance of the results obtained. He concluded that the selected
company always tries to maintain adequate amount of net working capital in relation to
current liabilities so as to keep a good amount of liquidity throughout the study period.
REFERENCE
1. Neha Mittal, “Determinants of capital structure of Indian industries”, Journal of
Accounting and Finance, Volume 25, No.1, 2011, Pp.32-40.
2. Velmathi, N. and Ganesan, R. "Inventory management of commercial vehicle
industry in India”, International Journal of Engineering and Management
Research, Volume. 2, Issue.1, January 2012. 42
3. Mehran Ali Memon and Izah Mohd Tahir, “Performance Analysis of
Manufacturing Companies in Pakistan”, Business Management Dynamics,
Volume.1, No.7, January 2012, Pp.12-21.
4. Kartik Chandra Nandi, “Trends in Liquidity Management and Their Impact on
Profitability: A Case Study”, Great Lakes Herald Volume 6, No. 1, March 2012,
Pp. 16-30.
41. Amir Hossein Jamali and Asghar Asadi (2012) in their study investigated the relationship
between the management efficiency and the firms profitability for a sample of thirteen
auto manufacturing companies listed on the Bombay Stock Exchange. The analysis is
carried out using Minitab 14 and conducting Pearson Coefficient correlation test on
variables of the study including Gross Profit Ratio and Assets Turnover Ratio. The
central conclusion of the study is that profitability and management efficiency are highly
correlated to each other and based on the results of the study recommendations for
improving the management efficiency and profitability in this industry are suggested.
42. Owolabi and Obida (2012) in their article titled “Liquidity Management and Corporate
Profitability: Case Study of Selected Manufacturing Companies Listed on The Nigerian
Stock Exchange” an attempt is made to measures the relationship between liquidity
management and corporate profitability using data from selected manufacturing
companies quoted on the floor of the Nigerian Stock Exchange. The result of the study
was obtained using descriptive analysis and the finding shows that liquidity management
measured in terms of the companies Credit Policies, Cash Flow Management and Cash
Conversion Cycle has significant impact on corporate profitability. They found that
managers can increase profitability by adopting good credit policy, short cash conversion
cycle and effective cash flow management procedures.
43. Hima Bindu and Subrahmanyam (2012) in their study dealt with the evaluation of
earning power, analysis of operating efficiency, analysis of financial efficiency and
measurement of financial health of Dairy Industry in Andhra Pradesh using Z score
analysis. The financial health of Amrit Corp Limited, GSKCH Limited, Heritage Foods
India Limited and NDDB differs and these companies fall under too healthy zone. The
financial health of Ravi Leela Dairy Products Limited is in danger and the unit is
considered to be in bankruptcy zone. Its failure is certain and it would occur probably
within a period of two years. 35
44. Venkataramana and Ramakrishnan (2012) evaluate the profitability and financial position
of selected cement companies in India through various financial ratio and applied
correlation, mean, standard deviation and variance. The study uses liquidity and
profitability ratios for assessment of impact of liquidity ratios on profitability
performance of selected cement companies.
 REFERENCE
1. Amir Hossein Jamali and Asghar Asadi, “Management Efficiency and
Profitability in Indian Automobile Industry: From Theory to Practice”, Indian
Journal of Science and Technology, Volume. 5 No. 5, May 2012, Pp.2779 -2781.
2. Owolabi, Ajao & Obida, “Liquidity Management and Corporate Profitability:
Case Study of Selected Manufacturing Companies Listed on The Nigerian Stock
Exchange” Business Management Dynamics, Volume.2, No.2, August 2012,
Pp.10-25.
3. Hima Bindu, T. and Subrahmanyam, S.E.V, “A Study on Financial Health Of
Dairy Industry in Andhra Pradesh Based on Z Score Analysis”, International
Journal of Marketing, Financial Services & Management Research, Volume.1,
Issue 12, December 2012, ISSN 2277 3622, Pp.54-61.
4. Venkataramana, M.N., and Ramakrishnaian, K, “Profitability and Financial
Performance: A Study on Selected Cement Companies in India”, International
Journal of Business and Management Tomorrow, Volume. 2, No. 5, 2012
45. Seyed Mohammad Alavinasab and Esmail Davoudi (2013) in their study examined the
relationship between working capital management and profitability for listed companies
on Tehran stock exchange. Hundrden forty seven companies were selected for the period
of 2005-2009. The effect of various variables of working capital management including
cash conversion cycle, the current ratio, current asset to total asset ratio, current liabilities
to total asset ratio and debt to total asset ratio on return on assets and return on equity are
studied. Multivariate regression and Pearson correlation are used to test the hypothesis.
The results of the statistical test of the hypothesis show a negative significant relationship
exist between cash conversion cycle and return on assets and cash conversion cycle and
return on equity. However, the relationship between current ratio and return on equity is
insignificant.
46. Hari Govinda Rao & et al. (2013) in their study entitled “An Empirical Analysis on
Financial Performance of Public Sector Housing Corporation in India: A Case Study of
HUDCO”, stated that the main concept of their study is Profitability and liquidity
management is of crucial importance in financial management decision. The most
favorable financial performance could be achieved by a company that can trade off
 between profitability and liquidity performance indicators. The purpose of this study is to
find out the financial position of and know the significance of them. Descriptive statistics
discloses that performance of the selected unit in terms of liquidity, solvency and
profitability position is very satisfactory and relatively efficient financial position is
found in 36 all the cases. They suggested that both the institutions under the study should
concentrate on financial profitability, especially unexplained variables in purpose of
creating shareholders‟ wealth
47. . Vivek Kumar and Major Singh (2013) conducted a study on “Profitability of Indian
Banks – A Comparative Study of SBI and HDFC”. The study revealed that the various
profitability ratios of two banks as the measure of profitability. The common
denominator used for developing the various profitability ratios is business volume
(deposits plus advances). The study analyses the published five-year data from 2007-08
onwards for the two largest banks, i.e., SBI- the largest public sector bank and HDFC-
the largest private sector bank. The comparative analysis of the profitability of the two
banks clearly reveals that there is a large difference between the profitability of the two
banks. HDFC‟s profitability is more than that of SBI.
48. Dharmaraj and Kathirvel (2013) in their study related to “Analysing the Financial
Performance of Selected Indian Automobile Companies”, suggested that the financial
performance of Atul Auto Ltd, Ashok Leyland, HMT Ltd, Tata Motors Ltd, and SML
ISUZU Ltd are highly improved as compared to the group average value for all ratios. In
India there is a huge scope for automobile companies. They are financially strong and
they are growing at the rate of 17 per cent per annum and contributing to the Indian
economy reasonably. Finally, the study provides companies with understanding of the
activities that would enhance their financial performances. The results of this study imply
that it might be necessary for all companies to take all required decisions to enhance their
financial position.
REFERENCE
1. Seyed Mohammad Alavinasab and Esmail Davoudi, “Studying the relationship
between working capital management and profitability of listed companies in
Tehran stock exchange”, Business Management Dynamics, Volume.2, No.7,
January 2013, Pp.01-08. Hari Govinda Rao, C.H., Apparao, N., and Venkat Rao,
 B., “An Empirical Analysis on Financial Performance of Public Sector Housing
Corporation in India: A Case Study of HUDCO”. InternationalJournal of
Research in Commerce & Management, Volume No. 4, Issue No. 02, February
2013, Pp. 76-80. 43
2. Vivek Kumar and Major Singh, “Profitability of Indian Banks – A Comparative
Study of SBI and HDFC”. International Journal of Research in Finance &
Marketing, Volume 3, Issue 1, February 2013, Pp.11-20. 48. Dharmaraj, A. and
Kathirvel, N, “Analysing the Financial Performance of Selected Indian
Automobile Companies”. Global Research Analysis, Volume: 2, Issue 4, April
2013, Pp 18-20
49. Moses Joshuva Daniel (2013) in his study “A Study on Financial Status of TATA Motors
Ltd” stated the main objectives to analyzing the overall financial status of the TATA
Motors Ltd by using various financial tools. In order to analyze financial status in terms
of Profitability, Solvency, Activity and Financial stability various accounting ratios have
been used. It is cleared from the study that 37 the company’s financial performance is
satisfactory. The company has stable growth and it shows a greater status in all the areas
it works. The company has been suggested to reduce the expenditure as it increases every
year. Decrease in expenses will increase the profitability.
50. Kavitha and Palanivelu (2013) main objectives of their study is know about the financial
health of the steel industries and to analyze and compare the financial performances of
NSE listed steel industries based on ratio analysis and „Z‟Score (Altman/s model). They
suggested that the companies‟ try to increase production and sales get maximize profit to
strengthen financial position of the NSE listed companies. The management may utilize
maximum production capacity and reduce interest burden increase profit. The policy of
borrowed financing in selected steel group of companies under study was not proper. So
the companies may use widely borrowed funds and can try to reduce the fixed charges
burden gradually by decreasing borrowed funds and enhancing the owner„s fund. They
concluded that the companies might enlarge their equity share capital by issuing new
equity shares. For regular supply of raw materials and the final product infrastructure
facilities are required further improvement.

REFERENCE
 1. Moses Joshuva Daniel, A, “A Study on Financial Status of Tata Motors Ltd”, Indian
Journal of Applied Research, Volume 3, Issue 4, April 2013 ISSN - 2249-555X, Pp.320-
322.
2. . Kavitha, K.S, and Palanivelu. P, “An Analysis on Financial Health of NSE Listed Steel
Industries”. International Journal of Scientific Research, Volume 2, Issue No.9,
September 2013, ISSN No 2277-8179, Pp. 46-48

CHAPTER III

RESEARCH METHODOLOGY

RESEARCH DESIGN:

The research approach used for the study is descriptive. The form of the study is on the financial
statement analysis in general and specific to the cash position.

DATA COLLECTION

PRIMARY DATA:

The primary data is collected from the personnel interview.

SECONDARY DATA:

The study has been made using secondary data, which are obtained from annual reports and
statements of accounts. The study is period for the annual reports and statements of accounts extended
form the year 2012 to2017

ANALYTICAL TOOLS FOR THE STUDY:

The researcher for the purpose of analysis and interpretation of the following tools have been need

 Ratio analysis
 Comparative balance sheet
 Comparative income statement
PERIOD OF STUDY:

The study includes 5 years (2012-2017 ) financial rates of the firms. The study was conducted
for 1 month’s period.

OBJECTIVES OF THE STUDY

Financial statement is helpful in assessing the financial position and profitability of the
concern. Keeping in the view of accounting ratio the accountant should calculate the ratio in
appropriate form as early as possible for presentation for management for managerial decisions.
Following are the main objectives of analysis of financial statements: -
 To evaluate the business in terms of profit in present and future.
 To evaluate the efficiency of various parts or department of the business.
 To evaluate the short term and long term solvency of business for distributing profit to
the trade creditor and debenture holders.
 To evaluate the chances of growth of business in the future by preparing budgets and
forecasting.
 To evaluate the operational efficiency of one firm with another firm by study the
comparative statements.
 To evaluate the financial and economical stability of the business.
 To evaluate the actual meaning and consequence of financial data.
 To evaluate the long-term liquidity of the fund of the business.

SCOPE OF THE STUDY

 The scope of the study to find out the financial Statement of the KINEMATIC
TRADING & CO PRIVATE LIMITED last five years

 The sincere attempt has been made to include all the aspect relating to the study
  for this purpose of analysis financial Statement of the company has done from the last
four year published financial statement and all the aspects the researcher should be
included in the report

NEED FOR THE STUDY:

 Financial Statement analysis is an important tool for measuring the financial Statement of

any company.
 The main aspect of financial management is working capital management and it should
be done on day-to-day basis.
 Hence the company permits me to do in the area of finance. This study helps to review
the financial Statement of the company.

LIMITATIONS OF THE STUDY:

 It is Suffering from the limitations of financial statements

 There is Absence of standard universally accepted terminology in financial
analysis
 Price level changes is ignored in financial analysis
 Quantity aspect is ignored in financial analysis
 Financial analysis provides misleading result in absence of absolute data

CHAPTERIZATION SCHEME

 Chapter I deal with the introduction, company profile, and industry profile
 Chapter II deals with the review of literature
 Chapter III deals with the research methodology
 Chapter IV deals with the data analysis and interpretation
 Chapter V deals with the finding, suggestion, and conclusion
 CHAPTER IV
DATA ANALYSIS AND INTERPRETATION

INTRODUCTION OF THE TOPIC

MEANING OF FINANCIAL STATEMENTS

Financial statements refer to such statements which contains financial information about an
enterprise. They report profitability and the financial position of the business at the end of
accounting period. The team financial statement includes at least two statements which the
accountant prepares at the end of an accounting period. The two statements are: -

 The Balance Sheet

 Profit And Loss Account

They provide some extremely useful information to the extent that balance Sheet mirrors the
financial position on a particular date in terms of the structure of assets, liabilities and owners
equity, and so on and the Profit And Loss account shows the results of operations during a
certain period of time in terms of the revenues obtained and the cost incurred during the year.
Thus the financial statement provides a summarized view of financial positions and operations of
a firm.

MEANING OF FINANCIAL ANALYSIS

1. The term financial analysis is also known as ‘analysis and interpretation of financial
statements’ refers to the process of determining financial strength and weakness of the
firm by establishing strategic relationship between the items of the Balance Sheet, Profit
and Loss account and other operative data.
2. The first task of financial analysis is to select the information relevant to the decision
under consideration to the total information contained in the financial statement. The
second step is to arrange the information in a way to highlight significant relationship.
 The final step is interpretation and drawing of inference and conclusions. Financial
statement is the process of selection, relation and evaluation.

FEATURES OF FINANCIAL ANALYSIS

 To present a complex data contained in the financial statement in simple and
understandable form.
 To classify the items contained in the financial statement in convenient and rational
groups
 To make comparison between various groups to draw various conclusions.

PURPOSE OF ANALYSIS OF FINANCIAL STATEMENTS

 To know the earning capacity or profitability.
 To know the solvency.
 To know the financial strengths.
 To know the capability of payment of interest & dividends.
 To make comparative study with other firms.
 To know the trend of business.
 To know the efficiency of mgt.
 To provide useful information to mgt.

PROCEDURE OF FINANCIAL STATEMENT ANALYSIS

The following procedure is adopted for the analysis and interpretation of financial statements:-
 The analyst should acquaint himself with principles and postulated of accounting. He
should know the plans and policies of the management so that he may be able to find out
whether these plans are properly executed or not.
 The extent of analysis should be determined so that the sphere of work may be decided. If
the aim is find out. Earning capacity of the enterprise then analysis of income statement
 will be undertaken. On the other hand, if financial position is to be studied then balance
sheet analysis will be necessary.
 The financial data be given in statement should be recognized and rearranged. It will
involve the grouping similar data under same heads. Breaking down of individual
components of statement according to nature. The data is reduced to a standard form.
 A relationship is established among financial statements with the help of tools &
techniques of analysis such as ratios, trends, common size, fund flow etc.
 The information is interpreted in a simple and understandable way. The significance and
utility of financial data is explained for help in decision making.
 The conclusions drawn from interpretation are presented to the management in the form
of reports.

TYPES OF FINANCIAL ANALYSIS

There are different ways of analysis the financial statements:

1. On The Basis Of Process Of Analysis

a) Horizontal Analysis: This is used when the financial statement of a number of years are
to be analyzed. Such analysis indicates the trends and the increase or decrease in various
items not only in absolute figures but also in percentage form. This analysis indicates the
strengths and weaknesses of the firm. This analysis is also called as dynamic analysis
because it also shows the trend of the business.

b) Vertical Analysis: This is used when financial statements of a particular year or on a

particular date are analyzed. For this type of analysis we generally use common size
statements and the ratio analysis. It involves a study of quantitative relationship among
various items of balance sheet and profit and loss account. This type of analysis is static
analysis because this is based on the financial results of one year. Vertical analysis is
useful when we have to compare the performance of different departments of the same
company.
 c) Among these two types of analysis, horizontal analysis is more useful because it brings
out more clearly the trends of working of a firm. This gives us more concrete bases for
future planning.

2. On The Basis Of Information Available

a) Internal Analysis: This analysis is based on the information available to the business firm
only .Hence internal analysis is made by the management. Internal analysis is more
reliable and helpful for financial decisions.

b) External Analysis: This analysis is made on the basis of published statements, reports
and information’s. This analysis is made by external parties such as creditors, investors,
industry’s, financial analysis etc. external analysis is less reliable in comparison to
internal analysis because of limited and often incomplete information.
3. On The Basis Of Number Of Firms
a) Inter-Firm Analysis: When financial analysis of two or more companies or firms are
analyzed and compared over a number of accounting periods, it is called inter-firm
analysis.

b) Intra -Firm Analysis: intra-firm analysis is concerned with the analysis of financial
performance of different units or departments or segments of the same enterprise or company.
Similarly when financial statements of two or more years of the same firm are analyzed and
compared it is also called as intra-firm analysis.

4. On The Basis Of Objectives

a) Accounting Analysis: Accounting analysis is analysis of past financial performance and

involves examining how generally accepted accounting principles and conventions have been
applied in arriving at the values of assets, liabilities, revenues and expenses.

b) Prospective Analysis: Prospective analysis involves developing forecasted financial

statements keeping in view the changes that are likely to shape and affect the business given the
assumptions about these changes and the limitation of the forecasting technique used. This is
quite complicated analysis.

METHODS/TOOLS OF FINANCIAL ANALYSIS

A number of methods can be used for the purpose of analysis of financial statements.
These are also termed as techniques or tools of financial analysis. Out of these, and enterprise
can choose those techniques which are suitable to its requirements. The principal techniques of
financial analysis are:-

a. Comparative financial statements

b. Common-size statements
c. Trend analysis
d. Ratio analysis
e. Funds flow analysis
f. Cash flow analysis
g. Breakeven point analysis

a. Comparative Financial Statements:

When financial statements figures for two or more years are placed side-side to facilitate
comparison, these are called ‘comparative Financial Statements’. Such statements not only show
the absolute figures of various years but also provide for columns to indicate to increase or
decrease in these figures from one year to another. In addition, these statements may also show
the change from one year to another on percentage form. Such cooperative statements are of
great value in forming the opinion regarding the progress of the enterprise.

Objectives purpose or significance of comparative financial statements

 To simplify data
 To make inter period/inter-firm comparison
  To indicate the trends
 to enable forecasting
 To indicate the strengths and weaknesses of the firm
 To compare the performance
 To analyze expenses
 To analyze profits

TOOLS FOR COMPARISON OF FINANCIAL STATEMENTS

Comparative financial statement is a tool of financial analysis that depicts change in each
item of the financial statement in both absolute amount and percentage term, taking the item in
preceding accounting period as base.

COMPARISON AND ANALYSIS OF FINANCIAL STATEMENTS MAY BE CARRIED

OUT USING THE FOLLOWING TOOLS:

1. Comparative Balance Sheet :

The comparative balance sheet shows increase and decrease in absolute terms as well as
percentages, in various assets, liabilities and capital. A comparative analysis of balance sheets of
two periods provides information regarding progress of the business firm. The main purpose of
comparative balance sheet is to measure the short- term and long-term solvency position of the
business.

2. Comparative Income Statement :

Comparative income statement is prepared by taking figures of two or more than two accounting
periods, to enable the analyst to have definite knowledge about the progress of the business.
Comparative income statements facilitate the horizontal analysis since each accounting variable
is analyzed horizontally.
COMMON- SIZE STATEMENTS:
Common size statements are such statements in which the items of financial statements
are covered into percentage of common base. In common-size income statement, by assuming
net sales as 100(i.e %) and other individual items are converted as percentage of this. Similarly,
in common –size balance sheet, total assets are assumed to be 100 (i.e %) and individual assets
are expressed as percentage.

OBJECTIVES OF COMMON SIZE STATEMENTS

1. Presenting the change in various items in relation to total assets or total liabilities or net
sales.
2. Establishing a relationship.
3. Providing a common base for comparison.

TYPES OF COMMON SIZE STATEMENTS

1. Common-Size Balance Sheet :

A common –size balance sheet is a statement in which total of assets or liabilities is assumed to
be equal to 100 and all the figures are expressed as percentage of the total. That is why it is
known as percentage balance sheet.
Common-size balance sheet facilitates the vertical analysis since each item of the Balance
Sheet is analyzed vertically.

2. Common-Size Income Statement:

Common-size income statement is a statement in which the figures of net sales is assumed to be
equal to 100 and all other figures of “profit and loss A/c” are expressed as percentage of net
sales. This statement facilitates the vertical analysis since each accounting variable is analyzed
vertically. One can draw conclusion, regarding the behavior of expenses over period of time by
examining these percentages.
C. TREND ANALYSIS:

Trend percentage are very useful is making comparative study of the financial statements
for a number of years. These indicate the direction of movement over a long time and help an
analyst of financial statements to form an opinion as to whether favorable or unfavorable
tendencies have developed.
This helps in future forecasts of various items. For calculating trend percentages any year
may be taken as the ‘base year’. Each item of beast year is assumed to be equal to 100 and on
that basis the percentage of item of each year calculated.

RATIO ANALYSIS:

MEANING:

Absolute figures expressed in financial statements by themselves are meaningfulness.

These figures often do not convey much meaning unless expressed in relation to other figures.
Thus, it can be say that the relationship between two figures, expressed in arithmetical terms is
called a ratio.
“According to R.N. Anthon “A ratio is simply one number expressed in terms another. It
is found by dividing one number into the other.”

TYPES OF RATIOS

1. Proportion or Pure Ratio or Simple ratio.

2. Rate or so many Times.
3. Percentage
4. Fraction.

OBJECTS AND ADVANTAGES OR USES OF RATIO

ANALYSIS
 1. Helpful in analysis of financial statements.
2. Simplification of accounting data.
3. Helpful in comparative study.
4. Helpful in locating the weak spots of the business.
5. Helpful in forecasting
6. Estimate about the trend of the business
7. Fixation of ideal standards
8. Effective control
9. Study of financial soundness.

LIMITATION OF RATIO ANALYSIS

1. False accounting data gives false ratios
2. Comparisons not possible of different firms adopt different
3. Accounting policies.
4. Ratio analysis becomes less effective due to price level
5. change
6. Ratios may be misleading in the absence of absolute data.
7. Limited use of a single Ratio.
8. Window-Dressing
9. Lack of proper standards.
10. Ratio alone are not adequate for proper conclusions
11. Effect of personal ability and bias of the analyst.

CLASSIFICATION OF RATIOS

In view of the financial management or according to the tests satisfied,various ratios have been
classified as below:

Liquidity Ratios:
 These are the ratios which measure the short-term solvency or financial position of a
firm. These ratios are calculated to comment upon the short-term paying capacity of a concern or
the firm’s ability to meet its current obligations.
Long –Term Solvency and Leverage Ratios: Long-term solvency ratios convey a firm’s
ability to meet the interest cost and repayment schedules of its long-term obligation e.g. Debit
Equity Ratio and Interest Coverage Ration. Leverage Ratios.

Activity Ratios:
Activity ratios are calculated to measure the efficiency with which the resource of a firm
has been employed. These ratios are also called turnover ratios because they indicate the speed
with which assets are being turned over into sales e.g. debtors turnover ratio.

Profitability Ratios:
These ratios measure the results of business operations or overall performance and
effective of the firm e.g. gross profit ratio, operating ratio or capital employed. Generally, two
types of profitability ratios are calculated.
o In relation to Sales, and
o In relation in Investment

FUNCTIONAL CLASSIFICATION IN VIEW OF FINANCIAL MANAGEMENT OR

CLASSIFICATION ACCORDING TO TESTS

Liquidity Ratios Long-term Activity Ratios Profitability Ratios

Solvency and
Leverage Ratios
-Current Ratio Financial Operating Inventory Turnover In Relation to Sales.
-Liquid Ratio Composite Ratio. Gross Profit Ratio.
(Acid) Test or -Debt. Equity Debtors Turnover Operating Ratio.
Quick Ratio. Ratio Ratio Operating Profit
-Absolute liquid or -Debt to Total Fixed Assets Ratio.
-Cash Ratio. Capital Ratio Turnover Ratio Net Profit Ratio.
-Debtors -Interest Total Asset Expenses Ratio
Turnover Ratio Coverage Ratio Turnover Ratio In relation to
-Creditors Turnover -Capital Gearing Working Capital investments
Ratio Ratio Turnover Ratio. Return on
-Inventory Turnover Payables Turnover Investments.
ratio Ratio Return on capital.
Capital Employed Return on Equity
Turnover Ratio Capital.
Return on total
Resources
Earning per share.
Price Earning Ratio.

CASH-FLOW STATEMENT
Cash – flow statement is a statement showing inflows (receipts) and outflows (payments)
of cash during a particular period. In other words, it is summary of sources and applications of
each during a particular span of time.

OBJECTIVES OF CASH FLOW STATEMENT:

1. Useful for Short-Term Financial Planning.

2. Useful in Preparing the Cash Budget.
3. Comparison with the Cash Budget.
4. Study of the Trend of Cash Receipts and Payments.
5. It explains the Deviations of Cash from Earnings.
6. Helpful in Ascertaining Cash Flow from various Separately.
7. Helpful in Making Dividend Decisions.
COMPARITIVE FINANCIAL STATEMENTS
Comparative financial statements are ones, which have been prepared in a systematic manner
and provides statistical information about a particular event (financial transaction) or aspect,
taking place on different dates or during different periods.
The comparative financial statements are chalked out in a columnar form (in majority of the
cases). One is also able to view comparative accounts of different companies.

Comparative financial statements, like all other financial statements have the following types of
financial statements:
 Income statements
 Balance sheet

Income statements:
Also known as profit and loss financial statement, these types of comparative financial
statements suggest profit amount earned by a company as well as amount of money lost by a
company. Loss or profit may not always mean, loss or profit of money, it may also include any
asset or stock, which has an economic value. Income statements also include expenditure
incurred for conducting activities, related to operations. This type of a financial statement is
referred to as an operating financial statement.

Balance sheet:
Information pertaining to expenses and profit earned by a company are recorded in the balance
sheet.

TABLE NO: 1
COMPARATIVE BALANCE SHEET FOR THE YEAR OF 2012-2013
Increase Increase
PARTICULARS 2012 2013
or Decrease or Decrease
 (Amount) (Percentage)
ASSETS
Fixed Assets:
Net Block 553851 527947 -25904 -4.68
Capital Work in Progress 2870 2090 -780 -27.18
Current Assets:
Inventories 387717 378623 -9094 -2.35
Sundry Debtors 72097 71838 -259 -0.36
Cash and Bank Balances 10794 11041 247 2.29
Loans and Advances 53826 64067 10241 19.03
Investments 2739 2588 -151 -5.51
Miscellaneous Expenses 298 149 -149 -50.00
Profit and Loss Account 33384 74138 40754 122.08
TOTAL ASSETS 1117576 1132481 14905 1.33
LIABILITIES
Share Capital:
Equity 84873 84873 0 0
Preference 46000 46000 0 0
Reserves and Surplus 41296 41296 0 0
Secured Loan:
Term Loans 449763 503717 53954 12.00
Others 253798 240060 -13738 -5.41
Unsecured Loan 6784 6808 24 0.35
Current Liabilities 199897 174234 -25663 -12.84
Provisions 33328 35493 2165 6.50
Deferred Tax Liability 1837 0 -1837 -100.00
TOTAL LIABILITIES 1117576 1132481 14905 1.33

Table No: 2
COMPARATIVE BALANCE SHEET FOR THE YEAR OF 2013-2014
Increase Increase
PARTICULARS 2013 2014 or Decrease or Decrease
(Amount) (Percentage)
ASSETS
Fixed Assets:
Net Block 527947 477999 -49948 -9.46
Capital Work in Progress 2090 40153 38063 1821.20
Current Assets:
Inventories 378623 366324 -12299 -3.25
Sundry Debtors 71838 80975 9137 12.72
Cash and Bank Balances 11041 11930 889 8.05
Loans and Advances 64067 37054 -27013 -42.16
Investments 2588 3611 1023 39.53
Miscellaneous Expenses 149 0 -149 -100.00
Profit and Loss Account 74138 52285 -21853 -29.48
TOTAL ASSETS 1132481 1070331 -62150 -5.49
LIABILITIES
Share Capital:
Equity 84873 84873 0 0.00
Preference 46000 46000 0 0.00
Reserves and Surplus 41296 41296 0 0.00
Secured Loan:
Term Loans 503717 341188 -162529 -32.27
Others 240060 243361 3301 1.38
Unsecured Loan 6808 10509 3701 54.36
Current Liabilities 174234 249398 75164 43.14
Provisions 35493 53706 18213 51.31
Deferred Tax Liability
TOTAL LIABILITIES 1132481 1070331 -62150 -5.49

TABLE NO: 3
COMPARATIVE BALANCE SHEET FOR THE YEAR OF 2014-2015
 Increase Increase
PARTICULARS 2015 2016 or Decrease or Decrease
(Amount) (Percentage)
ASSETS
Fixed Assets:
Net Block 477999 494547 16548 3.46
Capital Work in Progress 40153 0 -40153 -100.00
Current Assets:
Inventories 366324 383094 16770 4.58
Sundry Debtors 80975 83306 2331 2.88
Cash and Bank Balances 11930 13424 1494 12.52
Loans and Advances 37054 46674 9620 25.96
Investments 3611 5631 2020 55.94
Miscellaneous Expenses 0
Profit and Loss Account 52285 0 -52285 -100.00
TOTAL ASSETS 1070331 1026676 -43655 -4.08
LIABILITIES
Share Capital:
Equity 84873 84873 0 0.00
Preference 46000 138327 92327 200.71
Reserves and Surplus 41296 41720 424 1.03
Secured Loan:
Term Loans 341188 241060 -100128 -29.35
Others 243361 23985 -219376 -90.14
Unsecured Loan 10509 23904 13395 127.46
Current Liabilities 249398 196773 -52625 -21.10
Provisions 53706 60634 6928 12.90
Deferred Tax Liability
TOTAL LIABILITIES 1070331 1026676 -43655 -4.08

TABLE NO: 4
COMPARATIVE BALANCE SHEET FOR THE YEAR OF 2015-2016

PARTICULARS 2015 2016 Increase Increase

 or Decrease or Decrease
(Amount) (Percentage)
ASSETS
Fixed Assets:
Net Block 494547 450754 -43793 -8.86
Capital Work in Progress 0 3456 3456 100.00
Current Assets:
Inventories 383094 424145 41051 10.72
Sundry Debtors 83306 97695 14389 17.27
Cash and Bank Balances 13424 29272 15848 118.06
Loans and Advances 46674 42515 -4159 -8.91
Investments 5631 5632 1 0.02
Miscellaneous Expenses
Profit and Loss Account 0
TOTAL ASSETS 1026676 1053469 26793 2.61
LIABILITIES
Share Capital:
Equity 84873 84873 0 0.00
Preference 138327 138327 0 0.00
Reserves and Surplus 41720 84488 42768 102.51
Secured Loan:
Term Loans 241060 241729 669 0.28
Others 239385 238286 -1099 -0.46
Unsecured Loan 23904 19635 -4269 -17.86
Current Liabilities 196773 186623 -10150 -5.16
Provisions 60634 59508 -1126 -1.86
Deferred Tax Liability
TOTAL LIABILITIES 1026676 1053469 26793 2.61

TABLE NO: 5
COMPARATIVE BALANCE SHEET FOR THE YEAR OF 2016-2017

Increase Increase
PARTICULARS 2016 2017
or Decrease or Decrease
 (Amount) (Percentage)
ASSETS
Fixed Assets:
Net Block 450754 415081 -35673 -7.91
Capital Work in Progress 3456 0 -3456 -100.00
Current Assets:
Inventories 424145 417870 -6275 -1.48
Sundry Debtors 97695 112722 15027 15.38
Cash and Bank Balances 29272 47558 18286 62.47
Loans and Advances 42515 47589 5074 11.93
Investments 5632 5632 0 0.00
Miscellaneous Expenses
Profit and Loss Account
TOTAL ASSETS 1053469 1046452 -7017 -0.67
LIABILITIES
Share Capital:
Equity 84873 84873 0 0.00
Preference 138327 138327 0 0.00
Reserves and Surplus 84488 121790 37302 44.15
Secured Loan:
Term Loans 241729 234704 -7025 -2.91
Others 238286 235082 -3204 -1.34
Unsecured Loan 19635 18256 -1379 -7.02
Current Liabilities 186623 145105 -41518 -22.25
Provisions 59508 51316 -8192 -13.77
Deferred Tax Liability 16999 16999 100.00
TOTAL LIABILITIES 1053469 1046452 -7017 -0.67

TABLE NO: 6
COMPARATIVE INCOME STATEMENT FOR THE YEAR OF 2012-2013
Increase Increase
PARTICULARS 2012 2013 or Decrease or Decrease
(Amount) (Percentage)
INCOME        
Sales 491595 499305 7710 1.57
Other Income 4966 91193 86227 1736.35
Deferred Tax Liability 11763 1837 -9926 -84.38
Increase/Decrease in Stock 49315 -4114 -53429 -108.34
TOTAL INCOME 557639 588221 30582 5.48
EXPENDITURE        
Purchase of Finished Goods 1231 752 -479 -38.91
Material consumed 126652 14135 -112517 -88.84
Power And Fuel 112466 128447 15981 14.21
Salaries, Wages and Bonus 85381 78030 -7351 -8.61
Repairs and Maintenance 15955 21169 5214 32.68
Insurance 2425 2579 154 6.35
Travelling Expenses 3476 3635 159 4.57
Miscellaneous Expenses 8743 4933 -3810 -43.58
Packing and Forwarding 25494 25812 318 1.25
Commission and Discount 11533 8095 -3438 -29.81
Advertisement Expenses 496 489 -7 -1.41
Research and Development 219 196 -23 -10.50
Interest on Fixed Assets 48005 61650 13645 28.42
Interest on other loans 38001 31470 -6531 -17.19
Excise Duty 55464 54277 -1187 -2.14
Prior Period Adjustment 630 428 -202 -32.06
Bad And DD Written off 397 0 -397 -100.00
Provision for Doubtful Debts 2237 2375 138 6.17
Provision for Taxation 0 0 0  
Depreciation 0 41764 41764 100.00
Other Expenditure 18102 21518 3416 18.87
TOTAL EXPENDITURE 556907 628975 72068 12.94
PROFIT AND LOSS ACCOUNT 732 -40754 -41486 -5667.49

TABLE NO: 7
COMPARATIVE INCOME STATEMENT FOR THE YEAR OF 2013-2014
 Increase Increase
PARTICULARS 2013 2014 or Decrease or Decrease
(Amount) (Percentage)
INCOME
Sales 499305 858160 358855 71.87
Other Income 91193 1519886 1428693 1566.67
Deferred Tax Liability 1837 0 -1837 -100.00
Increase/Decrease in Stock -4114 -25403 -21289 517.48
TOTAL INCOME 588221 984743 396522 67.41
EXPENDITURE
Purchase of Finished Goods 752 1297 545 72.47
Material consumed 14135 229678 215543 1524.89
Power And Fuel 128447 153703 25256 19.66
Salaries, Wages and Bonus 78030 143519 65489 83.93
Repairs and Maintenance 21169 27879 6710 31.70
Insurance 2579 6108 3529 136.84
Travelling Expenses 3635 5938 2303 63.36
Miscellaneous Expenses 4933 11049 6116 123.98
Packing and Forwarding 25812 65560 39748 153.99
Commission and Discount 8095 13564 5469 67.56
Advertisement Expenses 489 935 446 91.21
Research and Development 196 464 268 136.73
Interest on Fixed Assets 61650 60659 -991 -1.61
Interest on other loans 31470 5654 -25816 -82.03
Excise Duty 54277 99601 45324 83.50
Prior Period Adjustment 428 47 -381 -89.02
Bad And DD Written off 0 33015 33015 100.00
Provision for Doubtful Debts 2375 16052 13677 575.87
Provision for Taxation 0 1246 1246 100.00
Depreciation 41764 65721 23957 57.36
Other Expenditure 21518 21201 -317 -1.47
TOTAL EXPENDITURE 628975 962890 333915 53.09
PROFIT AND LOSS ACCOUNT -40754 21853 62607 -153.62

TABLE NO: 8
COMPARATIVE INCOME STATEMENT FOR THE YEAR OF 2014-2015
 Increase Increase
PARTICULARS 2014 2015 or Decrease or Decrease
(Amount) (Percentage)
INCOME        
Sales 858160 328091 -530069 -61.77
Other Income 1519886 25500 -1494386 -98.32
Deferred Tax Liability 0 9134 9134 100.00
Increase/Decrease in Stock -25403 20466 45869 -180.57
TOTAL INCOME 984743 383191 -601552 -61.09
EXPENDITURE        
Purchase of Finished Goods 1297 310 -987 -76.10
Material consumed 229678 95400 -134278 -58.46
Power And Fuel 153703 54302 -99401 -64.67
Salaries, Wages and Bonus 143519 47949 -95570 -66.59
Repairs and Maintenance 27879 9558 -18321 -65.72
Insurance 6108 2169 -3939 -64.49
Travelling Expenses 5938 1257 -4681 -78.83
Miscellaneous Expenses 11049 1665 -9384 -84.93
Packing and Forwarding 65560 23321 -42239 -64.43
Commission and Discount 13564 5571 -7993 -58.93
Advertisement Expenses 935 405 -530 -56.68
Research and Development 464 130 -334 -71.98
Interest on Fixed Assets 60659 1899 -58760 -96.87
Interest on other loans 5654 18896 13242 234.21
Excise Duty 99601 37338 -62263 -62.51
Prior Period Adjustment 47 -1748 -1795 -3819.15
Bad And DD Written off 33015 56 -32959 100.00
Provision for Doubtful Debts 16052 0 -16052 -100.00
Provision for Taxation 1246 2956 1710 100.00
Depreciation 65721 22500 -43221 -65.76
Other Expenditure 21201 6548 -14653 -69.11
TOTAL EXPENDITURE 962890 330482 -632408 -65.68
PROFIT AND LOSS
ACCOUNT 21853 52709 30856 141.20
 TABLE NO: 9
COMPARATIVE INCOME STATEMENT FOR THE YEAR OF 2015-2016
Increase Increase
PARTICULARS 2015- 2016 or Decrease or Decrease
(Amount) (Percentage)
INCOME
Sales 328091 719255 391164 119.22
Extra Ordinary Income 25500 0 -25500 -100.00
Deferred Tax Liability 9134 1282 -7852 -85.96
Increase/Decrease in Stock 20466 21001 535 2.61
TOTAL INCOME 383191 741538 358347 93.52
EXPENDITURE
Purchase of Finished Goods 310 797 487 157.10
Material consumed 95400 205950 110550 115.88
Power And Fuel 54302 109582 55280 101.80
Salaries, Wages and Bonus 47949 83183 35234 73.48
Repairs and Maintenance 9558 20013 10455 109.38
Insurance 2169 4510 2341 107.93
Travelling Expenses 1257 4253 2996 238.35
Miscellaneous Expenses 1665 3513 1848 110.99
Packing and Forwarding 23321 39742 16421 70.41
Commission and Discount 5571 15179 9608 172.46
Advertisement Expenses 405 1177 772 190.62
Research and Development 130 315 185 142.31
Interest on Fixed Assets 1899 21602 19703 1037.55
Interest on other loans 18896 36289 17393 92.05
Excise Duty 37338 82069 44731 119.80
Prior Period Adjustment -1748 1447 3195 -182.78
Bad And DD Written off 56 2466 2410 100.00
Provision for Doubtful Debts 0 0 0 0.00
Provision for Taxation 2956 5630 2674 100.00
Depreciation 22500 46607 24107 107.14
Other Expenditure 6548 14446 7898 120.62
TOTAL EXPENDITURE 330482 698770 368288 111.44
PROFIT AND LOSS
ACCOUNT 52709 42768 -9941 -18.86

TABLE NO: 10
COMPARATIVE INCOME STATEMENT FOR THE YEAR OF 2016-2017
Increase Increase
PARTICULARS 2016 2017 or Decrease or Decrease
(Amount) (Percentage)
INCOME
Sales 719255 816052 96797 13.46
Other Income 1282 7702 6420 500.78
Increase/Decrease in Stock 21001 -4522 -25523 -121.53
TOTAL INCOME 741538 741538 77694 10.48
EXPENDITURE
Purchase of Finished Goods 797 1037 240 30.11
Material consumed 205950 246220 40270 19.55
Power And Fuel 109582 123158 13576 12.39
Salaries, Wages and Bonus 83183 96317 13134 15.79
Repairs and Maintenance 20013 22732 2719 13.59
Insurance 4510 3112 -1398 -31.00
Travelling Expenses 4253 3586 -667 -15.68
Miscellaneous Expenses 3513 4482 969 27.58
Packing and Forwarding 39742 51182 11440 28.79
Commission and Discount 15179 13026 -2153 -14.18
Advertisement Expenses 1177 2116 939 79.78
Research and Development 315 258 -57 -18.10
Interest on Fixed Assets 21602 23037 1435 6.64
Interest on other loans 36289 32629 -3660 -10.09
Excise Duty 82069 61850 -20219 -24.64
Prior Period Adjustment 1447 3534 2087 144.23
Bad And DD Written off 2466 0 -2466 100.00
Provision for Doubtful Debts 0 10123 10123 0.00
Provision for Taxation 5630 22732 17102 100.00
Depreciation 46607 46599 -8 -0.02
Extra Ordinary Expenses 9964
Other Expenditure 14446 15702 1256 8.69
TOTAL EXPENDITURE 698770 793396 94626 13.54
PROFIT AND LOSS
ACCOUNT 42768 25836 -16932 -39.59

COMMON SIZE FINANCIAL STATEMENTS

Common size ratios are used to compare financial statements of different-size companies or of
the same company over different periods. By expressing the items in proportion to some size-
related measure, standardized financial statements can be created, revealing trends and providing
insight into how the different companies compare.

The ratios often are expressed as percentages of the reference amount. Common size statements
usually are prepared for the income statement and balance sheet, expressing information as
follows:

 Income statement items - expressed as a percentage of total revenue

 Balance sheet items - expressed as a percentage of total assets

 The common-size statement is a financial document that is often utilized as a quick and
easy reference for the finances of a corporation or business. Unlike balance sheets and other
financial statements, the common-size statement does not reflect exact figures for each line item.
Instead, the structure of the common size statement uses a common base figure, and assigns a
percentage of that figure to each line item or category reflected on the document.

 A company may choose to utilize financial statements of this type to present a quick
snapshot of how much of the company’s collected or generated revenue is going toward each
operational function within the organization. The use of a common-size statement can make it
possible to quickly identify areas that may be utilizing more of the operating capital than is
practical at the time, and allow budgetary changes to be implemented to correct the situation.

 The common size statement can also be a helpful tool in comparing the financial
structures and operation strategies of two different companies. The use of percentages in the
common size statements removes the issue of which company generates more revenue, and
 brings the focus on how the revenue is utilized within each of the two businesses. Often, the use
of a common-size statement in this manner can help to identify areas where each company is
utilizing resources efficiently, as well as areas where there is room for improvement.

 Common-size statements can be prepared for any review period desired. Companies that
choose to make use of financial statements of this type may choose to utilize this format for
quarterly, semi-annual, or annual reviews. When there is concern about operational costs, the
common-size statement may be prepared on a more frequent basis, such as monthly. Because the
common-size statement is very easy to read and does not necessarily contain information that
would be considered proprietary, the format can often be employed as part of general
information that is released to the public.

COMMON SIZE BALANCE SHEET 2012-2017

Table No: 11
2012- 2015-
Particulars % 2013-14 % 2014-15 % %
13 16
ASSETS:                
Fixed Assets:                
Net Block 527947 47% 477999 45% 494547 48% 450754 43%
Capital Work in Progress 2090 0.18% 40153 4% 0 0% 3456 0%
                 
Current Assets:                
Inventories 378623 33.43% 366324 34% 383094 37% 424145 40%
Sundry Debtors 71838 6% 80975 8% 83306 8% 97695 10%
Cash and Bank Balances 11041 1% 11930 1% 13424 1% 29272 4%
Loans and Advances 64067 6% 37054 3% 46674 5% 42515 5%
Investments 2588 1% 3611 0.34% 5631 1% 5632 1%
Miscellaneous
Expenditure 149 0.01% 0 0% 0 0% 0 0%
Profit and Loss Account 74138 7% 52285 5% 0 0% 0 0%
                 
113248 100 105346
TOTAL ASSETS 1 100% 1070331 100% 1026676 % 9 100%
LIABILITIES:                
Share Capital:                
Equity 84873 7% 84873 8% 84873 8% 84873 8%
Preference 46000 4% 46000 4% 138327 13% 138327 13%
Reserves and Surplus 41296 4% 41296 4% 41720 8% 84488 8%
Secured Loan:                
Term Loans 503717 44% 341188 32% 241060 23% 241729 23%
Others 240060 21% 243361 23% 239385 22% 238286 22%
                 
Unsecured Loans 6808 1% 10509 1% 23904 2% 19635 2%
Deferred Tax Payments 0 0% 0 0% 0 0% 0 0%
Current Liabilities 174234 15% 249398 23% 196773 19% 186623 18%
Provisions 35493 3% 53706 5% 60634 6% 59508 6%

113248 100 105346

TOTAL LIABILITIES 1 100% 1070331 100% 1026676 % 9 100%

COMMON SIZE INCOME STATEMENT 2012-2017

TABLE NO: 12

2013- 2014- 2015- 2016-

Particulars 2012-13 % % % %
14 15 16 17
INCOME                  
84.88 85816 32809 8160
Sales 499305 % 0 87% 1 86% 7E+05 97%
Extra Ordinary Income 0 0.00%   0% 25500 7% 0 0%
15.50
Other Income 91193 % 2E+06 15% 9134 2% 1282 0.17% 770
Deferred Tax Liability 1837 0.31% 0 0% 0 0% 0 0%
Increase/Decrease in Stock -4114 -1% -25403 -2% 20466 5% 21001 3% -452
98474 38319 7415
TOTAL INCOME 588221 100% 3 100% 1 100% 7E+05 100%
EXPENDITURE                  
Purchase of Finished
Goods 752 0.12% 1297 0.13% 310 0.10% 797 0.11% 103
22967 2462
Material consumed 14135 23% 8 24% 95400 29% 2E+05 29%
Power And Fuel 128447 20% 15370 16% 54302 16% 1E+05 16% 1231
 3
14351
Salaries, Wages and Bonus 78030 12% 9 15% 47949 14% 83183 12% 9631
Repairs and Maintenance 21169 3% 27879 3% 9558 3% 20013 3% 2273
Insurance 2579 0.41% 6108 1% 2169 1% 4510 1% 311
Travelling Expenses 3635 1% 5938 1% 1257 0.48% 4253 1% 358
Miscellaneous Expenses 4933 1% 11049 1% 1665 1% 3513 1% 448
Packing and Forwarding 25812 4% 65560 7% 23321 7% 39742 6% 5118
Commission and Discount 8095 1% 13564 1% 5571 2% 15179 1% 1302
Advertisement Expenses 489 0.05% 935 0.05% 405 0.22% 1177 0.12% 211
Research and Development 196 0.03% 464 0.05% 130 0.04% 315 0.04% 25
Interest on Fixed Assets 61650 10% 60659 6% 1899 1% 21602 3% 2303
Interest on other loans 31470 5% 5654 1% 18896 6% 36289 5% 3262
Excise Duty 54277 9% 99601 10% 37338 11% 82069 12% 6185
Prior Period Adjustment 428 0.06% 47 0.01% -1748 -1% 1447 0.08% 353
Bad And DD Written off 0 0% 33015 300% 56 0.28% 2466 0.15%
Provision for Doubtful
Debts 2375 0.33% 16052 2% 0 0% 0 0% 1012
Provision for Taxation 0 0% 1246 0.13% 2956 1% 5630 1% 2273
Depreciation 41764 7% 65721 7% 22500 7% 46607 7% 4659
Extra Ordinary Expenses 0 0% 0 0% 0 0% 0 0% 996
Other Expenditure 21518 3% 21201 2% 6548 2% 14446 2% 1570
TOTAL 96289 33048 69877 7933
EXPENDITURE 628975 100% 0 100% 2 100% 0 100%
PROFIT AND LOSS -
ACCOUNT -40754 8.16% 21853 2.50% 52709 16.07% 42768 5.94% 2583

TREND ANALYSIS
2012- 2013-14 2014-15 2015-
CULARS 2012-13 2013-14 2014-15 2015-16 2016-14
13 (%) (%) (%) 16(%)
                 
s:                  
527947 477999 494547 450754 415081 100% 91% 94% 85%
k in Progress 2090 40153 0 3456 0 100% 1921% 0% 165%
                  
ets:                  
378623 366324 383094 424145 417870 100% 97% 101% 112%
ors 71838 80975 83306 97695 112722 100% 113% 103% 136%
nk Balances 11041 11930 13424 29272 47558 100% 108% 122% 265%
dvances 64067 37054 46674 42515 47589 100% 58% 73% 66%
2588 3611 5631 5632 5632 100% 140% 218% 218%
us
149 0 0 0 0 100% 0% 0% 0%
oss Account 74138 52285 0 0 0 100% 71% 0% 0%
                 
113248 102667 105346
TAL ASSETS 1 1070331 6 9 1046452 100% 95% 91% 93%
ES:                  
al:                  
84873 84873 84873 84873 84873 100% 100% 100% 100%
46000 46000 138327 138327 138327 100% 100% 301% 301%
d Surplus 41296 41296 41720 84488 121790 100% 100% 101% 205%
an:                  
503717 341188 241060 241729 234704 100% 68% 48% 48%
240060 243361 239385 238286 235082 100% 101% 99% 99%
                 
oans 6808 10509 23904 19635 18256 100% 154% 351% 288%
x Payments 0 0 0 0 16999 100% 0% 0% 0%
ilities 174234 249398 196773 186623 145105 100% 143% 113% 107%
35493 53706 60634 59508 51316 100% 151% 171% 168%
                 
113248 102667 105346
IABILITIES 1 1070331 6 9 1046452 100% 95% 91% 93%

Trend analysis is a form of comparative analysis that is often employed to identify

current and future movements of an investment or group of investments. The process may
involve comparing past and current financial ratios as they related to various institutions in order
to project how long the current trend will continue. This type of information is extremely helpful
to investors who wish to make the most from their investments.

Trend analysis is an important tool of horizontal financial analysis. This is helpful in

making a comparative study of the financial statements for several years. Under this method
 trend percentages are calculated for each item of the financial statements taking the figure of
base year as 100. The starting year is taken as the base year.

The trend percentages show the relationship of each item with its preceding year’s
percentages. These percentages can also be presented in the form of Index Numbers showing
relative change in the financial date of certain period. This will exhibit the direction to which the
concern is proceeding. The trend ratio may be compared with the industry, in order to know the
strong or weak points of a concern. These are calculated only for major items instead of
calculating for all items in the financial statements.

TREND ANALYSIS BALANCE SHEET 2012-17

TABLE 4.13

2016- 2012-13 2013-14

PARTICULARS 2012-13 2013-14 2014-15 2015-16
14 (%) (%)
INCOME              
81605
Sales 499305 858160 328091 719255 2 100% 172%
Extra Ordinary Income 0   25500 0 0 100% 0%
Other Income 91193 1519886 9134 1282 7702 100% 16%
Deferred Tax Liability 1837 0 0 0 0 100% 0%
Increase/Decrease in Stock -4114 -25403 20466 21001 -4522 100% 617%
74153
TOTAL INCOME 588221 984743 383191 741538 8 100% 167%
EXPENDITURE              
Purchase of Finished Goods 752 1297 310 797 1037 100% 173%
24622
Material consumed 14135 229678 95400 205950 0 100% 163%
Power And Fuel 128447 153703 54302 109582 12315 100% 120%
 8
Salaries, Wages and Bonus 78030 143519 47949 83183 96317 100% 184%
Repairs and Maintenance 21169 27879 9558 20013 22732 100% 132%
Insurance 2579 6108 2169 4510 3112 100% 237%
Travelling Expenses 3635 5938 1257 4253 3586 100% 163%
Miscellaneous Expenses 4933 11049 1665 3513 4482 100% 224%
Packing and Forwarding 25812 65560 23321 39742 51182 100% 254%
Commission and Discount 8095 13564 5571 15179 13026 100% 168%
Advertisement Expenses 489 935 405 1177 2116 100% 191%
Research and Development 196 464 130 315 258 100% 237%
Interest on Fixed Assets 61650 60659 1899 21602 23037 100% 98%
Interest on other loans 31470 5654 18896 36289 32629 100% 18%
Excise Duty 54277 99601 37338 82069 61850 100% 184%
Prior Period Adjustment 428 47 -1748 1447 3534 100% 11%
Bad And DD Written off 0 33015 56 2466 0 100% 100%
Provision for Doubtful Debts 2375 16052 0 0 10123 100% 676%
Provision for Taxation 0 1246 2956 5630 22732 100% 100%
Depreciation 41764 65721 22500 46607 46599 100% 157%
Extra Ordinary Expenses 0 0 0 0 9964 100% 0%
Other Expenditure 21518 21201 6548 14446 15702 100% 99%
79339
TOTAL EXPENDITURE 628975 962890 330482 698770 6 100% 153%
PROFIT AND LOSS ACCOUNT -40754 21853 52709 42768 25836 100% -54%
 TREND ANALYSIS INCOME STATEMENT 2012-17
Table No: 14

2016- 2012-13 2013-14

PARTICULARS 2012-13 2013-14 2014-15 2015-16
14 (%) (%)
INCOME              
Sales 499305 858160 328091 719255 816052 100% 172%
Extra Ordinary Income 0   25500 0 0 100% 0%
Other Income 91193 1519886 9134 1282 7702 100% 16%
Deferred Tax Liability 1837 0 0 0 0 100% 0%
Increase/Decrease in Stock -4114 -25403 20466 21001 -4522 100% 617%
TOTAL INCOME 588221 984743 383191 741538 741538 100% 167%
EXPENDITURE              
Purchase of Finished Goods 752 1297 310 797 1037 100% 173%
Material consumed 14135 229678 95400 205950 246220 100% 163%
Power And Fuel 128447 153703 54302 109582 123158 100% 120%
Salaries, Wages and Bonus 78030 143519 47949 83183 96317 100% 184%
Repairs and Maintenance 21169 27879 9558 20013 22732 100% 132%
Insurance 2579 6108 2169 4510 3112 100% 237%
Travelling Expenses 3635 5938 1257 4253 3586 100% 163%
Miscellaneous Expenses 4933 11049 1665 3513 4482 100% 224%
Packing and Forwarding 25812 65560 23321 39742 51182 100% 254%
Commission and Discount 8095 13564 5571 15179 13026 100% 168%
Advertisement Expenses 489 935 405 1177 2116 100% 191%
Research and Development 196 464 130 315 258 100% 237%
Interest on Fixed Assets 61650 60659 1899 21602 23037 100% 98%
Interest on other loans 31470 5654 18896 36289 32629 100% 18%
Excise Duty 54277 99601 37338 82069 61850 100% 184%
Prior Period Adjustment 428 47 -1748 1447 3534 100% 11%
Bad And DD Written off 0 33015 56 2466 0 100% 100%
Provision for Doubtful Debts 2375 16052 0 0 10123 100% 676%
Provision for Taxation 0 1246 2956 5630 22732 100% 100%
Depreciation 41764 65721 22500 46607 46599 100% 157%
Extra Ordinary Expenses 0 0 0 0 9964 100% 0%
Other Expenditure 21518 21201 6548 14446 15702 100% 99%
TOTAL EXPENDITURE 628975 962890 330482 698770 793396 100% 153%
PROFIT AND LOSS ACCOUNT -40754 21853 52709 42768 25836 100% -54%

RATIO ANALYSIS
LIQUIDITY RATIO

CURRENT RATIO

CURRENT RATIO = Current Assets

Current Liability

TABLE NO: 15
CURRENT RATIO

(Rs in thousands)
YEAR CURRENT CURRENT CURRENT RATIO
 ASSETS LIABILITY
2012-2013 525569 209727 2.5
2013-2014 496283 303104 1.6
2014-2015 526498 257407 2.0
2015-2016 593627 246131 2.4
2016-2017 625739 196421 3.2

Sources Company Records

CHART NO: 15
CURRENT RATIO

Current Ratio
3.5
3
2.5
PERCENTAGE

2
3.2
1.5 2.5 2.4
2
1 1.6
0.5
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE:
In the year 2013-2014 companies’ current liability is comparatively high compared to last year as
there is an increase in its liability. After 2013-2014 company started to recover and the current
liabilities came down considerably. Current ratio has shown an increasing trend in the past three
years which means the company is able to maintain sufficient margin of working capital after
paying off the liabilities.
LIQUID RATIO OR QUICK RATIO

LIQUID RATIO = Liquid Assets

Liquid Liabilities

TABLE NO: 16
LIQUID RATIO OR QUICK RATIO
(RS IN THOUSANDS)
YEAR QUICK ASSETS QUICK LIABILITY QUICK RATIO
2012-2013 146946 209727 07
2013-2014 129959 303104 0.43
2014-2015 143404 257407 0.56
2015-2016 169482 246131 0.7
2016-2017 207869 196421 1.05
Sources Company Records
TABLE NO: 16
LIQUID RATIO OR QUICK RATIO

Quick Ratio
7
6
5
PERCENTAGE

4 7
3
2
1 0.43 0.56 0.7 1.05
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE:
In the year 2013-2014 the quick ratio has come down to 0.43 as the current liability is high
during the year. After 2013-2014 company started to recover as there is an increasing trend in
quick ratio. The company has become successful in achieving this ratio which means its quick
assets are sufficient to pay off the short term obligations. The current quick ratio of the firm is
greater than 1:1 hence it can be said that the financial position of the firm is good.
CASH RATIO

CASH RATIO = Cash and Bank + Cash in Hand

Current Liabilities
TABLE NO: 17

CASH RATIO

(Rs in thousands)
YEAR CASH CURRENT LIABILITIES CASH RATIO
2012-2013 11041 209727 0.052
2013-2014 11930 303104 0.039
2014-2015 13424 257407 0.052
2015-2016 29272 246131 0.119
2016-2017 47558 196421 0.242
Sources Company Records

CHART NO: 3
CASH RATIO
 Cash Ratio
0.25
PERCENTAGE 0.2

0.15
0.24
0.1
0.12
0.05 0.05 0.05
0.04
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE:
As the company was maintaining a small amount of cash the cash ratio is too low during the
year2012-2013 to 2013-2014. From the year 2015-2016 company started to maintain high cash
by which the cash ratio has increased to 0.199 in the year 2015-2016 and to 0.242 in the year
2016-2017 .The acceptable norm for the ratio is 0.5:1. Cash position of the company is not
satisfactory.

LEVERAGE RATIO OR SOLVENCY RATIO

DEBT EQUITY RATIO

Debt Equity Ratio = Long Term debt

Share Holders Fund
TABLE NO: 18
DEBT EQUITY RATIO

(Rs in thousands)
 YEAR OUTSIDER’S SHARE HOLDERS DEBT EQUITY RATIO
FUND FUND
2012-2013 713444 172169 4.14
2013-2014 644292 172169 3.74
2014-2015 498467 264920 1.9
2015-2016 487860 307688 1.6
2016-2017 431125 344990 1.24
Sources Company Record

TABLE NO: 18
DEBT EQUITY RATIO

Debt Equity Ratio

4.5
4
3.5
PERCENTAGE

3
2.5 4.14
2 3.74
1.5
1.9 1.6
1 1.24
0.5
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCES
The debt equity ratio during 2012-2013 is high as the company depended mostly on outsiders
fund during the year and it has decreased over the years as there is a decreasing trend in ratio.
The ratio indicates extend the firm depends upon outsiders for its existence. The decreasing trend
in the ratio shows that their dependence has decreased when it comes from 2012-2013 to 2016-
2017

PROPRIETARY RATIO

Proprietary Ratio = Shareholder’s Fund

Total Assets

TABLE NO: 19
PROPRIETARY RATIO

(Rs in thousands)
YEAR SHARE HOLDERS FUND TOTAL ASSETS PROPRIETARY
RATIO
2012-2013 172169 1055606 0.16
2013-2014 172169 1017822 0.17
2014-2015 264920 1021045 0.26
2015-2016 307688 1047837 0.29
2016-2017 344990 1040820 0.33
Sources Company Records
CHART NO: 5
PROPRIETARY RATIO

Proprietary Ratio
0.35
0.3
0.25
PERCENTAGE

0.2
0.15
0.1
0.05
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFRENCE:
The increasing trend of proprietary ratio indicates the firm’s dependence on creditors for its
working capital has been decreasing. The firm has not reached the ideal proprietary ratio of 0.5:1
which is alarming for the creditors but the creditors increasing trend in the ratio is also
satisfactory for them.
CAPITAL GEARING RATIO

Capital Gearing Ratio = Fixed Income bearing funds

Equity shareholder’s fund

TABLE NO: 20
CAPITAL GEARING RATIO

(Rs in thousands)
YEAR FIXED INCOME EQUITY CAPITAL
BEARING FUNDS SHAREHOLDER’S GEARING
FUND RATIO
2012-2013 46000 84873 0.54
2013-2014 46000 84873 0.54
2014-2015 138727 84873 1.63
2015-2016 138727 84873 1.63
2016-2017 138727 84873 1.63

Sources Company Records

CHART NO: 6
CAPITAL GEARING RATIO

Capital Gearing Ratio

1.8
1.6
1.4
PERCENTAGE

1.2
1 1.63 1.63 1.63
0.8
0.6
0.4 0.54 0.54
0.2
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERNCE:
From the above table and chart it can be seen that the capital gearing ratio has increased from
0.54:1 to 1.61:1 and is being constant for about the past three accounting years. Company
invested in more fixed income bearing funds in the year 2014-2015and the equity shareholder’s
fund has remained constant for the past five years which indicates risk to the equity shareholders.
SOLVENCY RATIO
Solvency Ratio = Total assets
Total Liabilities

TABLE NO: 21
SOLVENCY RATIO

(Rs in thousands)
YEAR TOTAL ASSETS TOTAL LIABILITY SOLVENCY
RATIO
2012-2013 1055606 713444 1.48
2013-2014 1017822 644292 1.58
2014-2015 1021045 498467 2.05
2015-2016 1047837 487860 2.15
2016-2017 1040820 431125 2.41
Sources Company Records
CHART NO: 7
SOLVENCY RATIO

Solvency Ratio
2.5

2
PERCENTAGE

1.5
2.41
2.05 2.15
1 1.48 1.58

0.5

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE:
Solvency ratio is low in the year 2012-2013 as the total liability was high during the year. After
2013-2014 total assets has increased and the total liability has come down and this has caused to
an increase in the solvency ratio. Solvency ratio measures the ability of a firm to pay the outside
liabilities out if total assets. Higher the ratio stronger is the financial position of the firm.
Increasing trend of the ratio had proven favourable for the company.
INTEREST COVERAGE RATIO
Interest Charges Ratio = Profit before depreciation and tax
Interest charges
TABLE NO: 22
INTEREST COVERAGE RATIO

(Rs in thousands)
YEAR PROFIT BEFORE INTEREST INTEREST COVERAGE
INTEREST AND TAX CHARGES RATIO
2012-2013 1010 93120 0.11
2013-2014 88820 66313 1.34
2014-2015 78165 20795 3.76
2015-2016 95005 57891 1.64
2016-2017 95167 55666 1.71
Sources Company Records

CHART NO: 8
INTEREST COVERAGE RATIO
 Interest Coverage Ratio
4
3.5
3
PERCENTAGE

2.5
2 3.76
1.5
1 1.64 1.71
1.34
0.5
0.11
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE:

During the year 2012-2013 company’s profit was too low and the company recovered in the year
2013-2014 and the interest coverage ratio has increased. In the year 2014-2015 it shows the
highest ratio as the company as the interest charges were too low during the year. The firm’s
interest coverage ratio is far below the standard ratio which is 6 to 7 times. Low ratio indicates
excessive use of debt and the inability to offer assured payment of interest to creditors.

PROFITABILY RATIO
NET PROFIT RATIO

Net Profit Ratio = Net Profit * 100

Net Sales
TABLE NO: 23
NET PROFIT RATIO

(Rs in thousands)
 YEAR NET PROFIT NET SALES NET PROFIT
RATIO
2012-2013 -40754 445028 NA
2013-2014 21853 758559 2.88
2014-2015 52709 290753 18.13
2015-2016 42768 630840 6.78
2016-2017 25836 750864 34.4

Sources Company Records

CHART NO: 09
NET PROFIT RATIO

Net Profit Ratio NA

35
30
25
PERCENTAGE

20 34.4
15
18.13
10
5 6.78
2.88
0
2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE:
From the above table and chart it is clear that the net profit ratio of the company is constantly
fluctuating. In the year 2012-2013 the company has incurred a loss. Net profit ratio measures the
overall profitability of the firm. The ideal net profit is 5% to 10%.
RETURN ON SHAREHOLDER’S FUND

Return on Shareholder’s fund = Net Profit after Interest and tax * 100
Shareholder’s Fund
TABLE NO: 24
RETURN ON SHAREHOLDER’S FUND

(Rs in thousands)
Year Net Profit after Interest Shareholder’s Return on Shareholder’s
and Tax fund Fund
2012-2013 -40754 172169 NA
2013-2014 21853 174924 12.5
2014-2015 52709 264920 19.8
2015-2016 42768 307688 13.9
2016-2017 25836 344990 7.5
Sources Company Records
CHART NO: 10
RETURN ON SHAREHOLDER’S FUND

Return on Shareholder’s Fund NA

20
18
16
PERCENTAGE

14
12 19.8
10
8 12.5 13.9
6 7.5
4
2
0
2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCES
From the above table and chart it can be inferred that return on shareholder’s fund is
constantly fluctuating. The net profit kept fluctuating during the years and the share holders fund
kept on increasing. Higher ratio indicates better utilization of owner’s funds and higher
productivity. Although return on equity shareholder’s fund is satisfactory for the company but it
has shown a decrease in the last two accounting year

PRICE EARNINGS RATIO

Price Earnings Ratio = Market Price per Share

Earnings per Share

TABLE NO: 25
PRICE EARNINGS RATIO
(Rs in thousands)
YEAR MARKET PRICE PER EARNINGS PER PRICE EARNINGS
SHARE SHARE RATIO
2012-2013 100 -54 NA
2013-2014 100 12 8.33
2014-2015 100 -7 NA
2015-2016 100 2.5 4
2016-2017 100 3.7 2.7
Sources Company Records
CHART NO: 11
PRICE EARNINGS RATIO

Price Earnings Ratio

9
8
7
PERCENTAGE

6
5 8.33
4
3 4
2 0 0 2.7
1
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE:
From the above table and chart it is clear that in the year 2012-2013 earnings per share is
negative and again in the year 2014-2015 it again went to negative. The ratio indicates the
number of times the earnings per share is covered by its market price. This ratio is mainly used
to value company’s performance as expected by equity shareholders
ACTIVITY RATIOS
STOCK TURNOVER RATIO

Stock Turnover Ratio = Net Sales

Average inventory at selling price

TABLE NO: 26
STOCK TURNOVER RATIO

(Rs in thousands)
YEAR COST OF GOODS AVERAGE STOCK TURNOVER
SOLD STOCK RATIO
2012-2013 445028 304464 1.64
2013-2014 758559 309641 2.8
2014-2015 290753 307172 1.07
2015-2016 630840 327906 2.2
2016-2017 750864 336145 2.43
Sources Company Records
CHART NO: 12
STOCK TURNOVER RATIO

Stock Turnover Ratio

3
2.5
PERCENTAGE

2
1.5 2.8
2.2 2.43
1 1.64
1.07
0.5
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE:
From the above table and chart it can be seen that the cost of goods sold kept fluctuating due to
the changes in sales. Whereas the Average Stock was able to maintain balance as the production
was steady. The ratio measures how quickly inventory is sold. The firm’s stock turnover is not
very high which indicates the inventories are not sold so fast.
FIXED ASSETS TURNOVER RATIO

Fixed Assets Turnover Ratio = Net Sales

Net fixed assets

TABLE NO: 27
FIXED ASSETS TURNOVER RATIO

(Rs in thousands)
YEAR NET SALES FIXED FIXED ASSETS TURNOVER
ASSETS RATIO
2012-2013 445028 530037 0.94
2013-2014 758559 518152 1.65
2014-2015 290753 494547 0.66
2015-2016 630840 454210 1.6
2016-2017 750864 415081 2.00
Sources Company Records
CHART NO: 13
FIXED ASSETS TURNOVER RATIO

Fixed Assets Turnover Ratio

2
1.8
1.6
PERCENATAGE

1.4
1.2 2
1 1.65 1.6
0.8
0.6 0.94
0.4 0.66
0.2
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE:
From the above table and chart it can be seen that there is a fluctuation in the sales. And the
company has been selling out its fixed assets as the amount came down gradually Higher the
ratio better is for the firm. Higher ratio indicates better utilization of fixed assets. Fixed asset
turnover ratio of the firm is in the increasing trend for the past three accounting years which is
favourable for the company.
WORKING CAPITAL TURNOVER RATIO

Working Capital Turnover Ratio = Net sales

Net Working capital

TABLE NO: 28
WORKING CAPITAL TURNOVER RATIO

(RS IN THOUSANDS)
YEAR NET NET WORKING WORKING CAPITAL
SALES CAPITAL TURNOVER RATIO
2012-2013 445028 315842 1.6
2013-2014 758559 193179 4.44
2014-2015 290753 269091 1.22
2015-2016 630840 347496 2.00
2016-2017 750864 429318 1.90
Sources Company Records
CHART NO: 14
WORKING CAPITAL TURNOVER RATIO

Working Capital Turnover Ratio

4.44
4.5
4
3.5
3
Axis Title

2.5 2 1.9
1.6
2 1.22
1.5
1
0.5
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Axis Title

INFERENCE:
From the above table and chart it is clear. Compared to 2012-2013 the net sales increased in
2013-2014 The working capitals started to increase after 2013- 2014 and it showed a increasing
trend. The ideal working capital turnover ratio is 7 or 8 times. The company’s working capital
turnover ratio is far below the standard ratio which indicates working capital is not effectively
utilised in making sales.

DEBTORS TURNOVER RATIO

Debtors Turnover Ratio = Net Credit Sales

Average debtors including bills receivable

Average Collection Period = No of days in an accounting year

 Debtors Turnover ratio
TABLE NO: 29
DEBTORS TURNOVER RATIO
(Rs in thousands)
YEAR NET CREDIT DEBTORS DEBTORS TURNOVER
SALES RATIO
2012-2013 445028 71838 6.19
2013-2014 758559 80975 9.37
2014-2015 290753 83306 3.49
2015-2016 630840 97695 6.46
2016-2017 750864 112722 6.66
Sources Company Records

CHART NO: 15
DEBTORS TURNOVER RATIO

Debtors Turnover Ratio

10
9
8
7
PERCENTAGE

6
5 9.37
4 6.19 6.46 6.66
3
2 3.49
1
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR
TABLE NO: 30
DEBTORS TURNOVER RATIO
(Rs in thousands)
YEAR NO OF DAYS DEBTORS AVERAGE COLLECTION
TURNOVER PERIOD
RATIO
2012-2013 365 6.19 58.96
2013-2014 546 9.37 58.27
2014-2015 182 3.49 52.15
2015-2016 365 6.46 56.50
2016-2017 365 6.66 54.80
Sources Company Records

CHART NO: 16
DEBTORS TURNOVER RATIO
 Average Collection Period
60

58

56
PERCENTAGE

54
58.96 58.27
52 56.5
54.8
50 52.15

48
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE:
From the above table and chart it can be inferred that. Debtor’s turnover ratio measures the
efficiency in management of debtors. The ideal turnover ratio is 7 and the firm’s turnover ratio is
also coming in this range which is a very satisfactory figure. Average collection period of the
firm is coming around 56 days which means debtors remain outstanding for about 56 day.

CREDITORS TURNOVER RATIO

Creditors Turnover Ratio = Net Credit Purchase

Average Creditors including bills payable
Average Payment Period = No of days in an accounting year
Creditor’s turnover ratio
TABLE NO: 31
CREDITORS TURNOVER RATIO

(Rs in thousands)
YEAR NET CREDIT AVERAGE CREDITORS
PURCHASE CREDITORS TURNOVER RATIO
2012-2013 138641 128263 1.08
2013-2014 239837 180654 1.33
2014-2015 92892 169939 0.55
2015-2016 227611 164057 1.39
2016-2017 254163 81438 3.12

Sources Company Records

CHART NO: 17
CREDITORS TURNOVER RATIO
 Creditors Turnover Ratio
3.5
3
2.5
PERCENTAGE

2
3.12
1.5
1 1.33 1.39
1.08
0.5 0.55
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE:
From this above table and chart it is clear that creditors turnover ratio of the company is 1.08:1 in
the year 2012-2013, 1.33:1 in the year 2013-2014 and 0.55:1 in the year2014-2015 . The ratio
reached1.39:1 in the year 2015-2016 and 3.12:1 in the year 2016-2017 . Creditor’s turnover ratio
of the company is low which means payment to creditors is delayed. The creditors by the
company is more than one year in the first three accounting years but payment period has been
decreased in the past two accounting years.

TABLE NO: 32
AVERAGE PAYMENT PERIOD
(Rs in thousands)
YEAR NO OF DAYS CREDITORS AVERAGE PAYMENT
TURNOVER RATIO PERIOD
2012-2013 365 1.08 338
2013-2014 546 1.33 411
2014-2015 182 0.55 331
2015-2016 365 1.39 263
2016-2017 365 3.12 117
Sources Company Records

CHART NO: 18
AVERAGE PAYMENT PERIOD
 Average Payment Period
411
450
400 338 331
350
263
PERCENTAGE

300
250
200 117
150
100
50
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE:
From this above table and chart it is clear that average payment ratio of the company is 338 in
the year 2012-2013 , 411 in the year 2013-2014 and 331 in the year 2014-2015 . The ratio
reached 263 in the year 2015-2016 and 117 in the year 2016-2017 . Creditor’s turnover ratio of
the company is low which means payment to creditors is delayed. The creditors by the company
is more than one year in the first three accounting years but payment period has been decreased
in the past two accounting years.

TOTAL ASSET TRUNOVER RATIO

 Total Assets Turnover Ratio = Net Sales
Total Assets
TABLE NO: 33
TOTAL ASSET TRUNOVER RATIO

(Rs in thousands)
YEAR NET SALES TOTAL TOTAL ASSET
ASSETS TURNOVER RATIO
2012-2013 445028 1055606 0.42
2013-2014 758559 1017822 0.75
2014-2015 290753 1021045 0.28
2015-2016 630840 1047837 0.60
2016-2017 750864 1040820 0.72

Sources Company Records

CHART NO: 19
TOTAL ASSET TRUNOVER RATIO
 Total Asset Turnover Ratio
0.8
0.7
0.6
PERCENTAGE

0.5
0.4 0.75 0.72
0.6
0.3
0.42
0.2 0.28
0.1
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

INFERENCE
From the above table and chart it can be seen that total asset turnover ratio has been constantly
fluctuating. In the year 2012-2013 the ratio is 0.42:1 which increased to 0.75:1 in2013-2014. The
ratio then decreased to 0.28:1 in the year 2014-2015. The ratio again showed an increase in the
year 2015-2016 and reached 0.61:1. In the year 2016-2017 the ratio became 0.71:1.

CHAPTER V

FINDING, SUGESSTION AND CONCLUSION

FINDINGS

 Company’s average current ratio is coming around the ideal current ratio 2:1 which
indicates the firm’s capacity to meet the short term liabilities. Current ratio has shown an
increasing trend in the past three years which means the company is able to maintain
sufficient margin of working capital after paying off the current liabilities.
 The company has become successful in achieving the ideal quick ratio of 1:1 which
means the its quick assets are sufficient to pay off the short term obligations. Since the
current quick ratio of the firm is greater than 1:1, it can be said that the financial position
of the firm is good.
 Cash position of the company is not satisfactory.
 Debt-equity ratio indicates the extent the firm depends upon the outsiders for its
existence. The decreasing trend in the ratio shows that their dependence on the outsiders
has decreased when it comes from 2012-2017.
 Proprietary ratio shows the financial health of the firm. It tells the proportion of
shareholder’s fund in the total assets of the business. The increasing trend of proprietary
ratio indicates the firm’s dependence on creditors for its working capital has been
decreasing. The firm has not reached the ideal proprietary ratio of 0.5:1 which is alarming
for the creditors but the increasing trend in the ratio is also satisfactory for them.
 Fixed income bearing funds has increased but equity shareholder’s fund has remained
constant for the past five years which indicates risk to the equity shareholders.
 Solvency ratio measures the ability of a firm to pay the outside liabilities out of total
assets. Higher the ratio stronger is the financial position of the firm. Solvency ratio of the
company is showing an increasing trend and hence it can be said that company’s financial
position in improving.
 The firm’s interest coverage ratio is far below the standard ratio of 6 to 7 times. Low ratio
indicates excessive use of debt and inability to offer assured payment of interest to
creditors.
 Net profit ratio of the company is constant fluctuating. But presently the profitability of
the company is satisfactory.
 Return on equity shareholders fund is satisfactory for the company but it has shown a
decrease in the last two accounting years.
 Price earnings ratio indicates the number of times the earnings per share is covered by its
market price. The company’s price earnings ratio is not satisfactory.
 Stock turnover ratio measures how quickly inventory is sold. The firm’s stock turnover
ratio is not very high which indicates the inventories are not sold fast.
 Fixed asset turnover ratio of the firm is in the increasing trend for the past three
accounting years which means company is effectively utilising its fixed assets.
 The ideal working capital turnover ratio is 7 or 8 times. The company’s working capital
turnover is far below the standard ratio which indicates working capital is not effectively
utilised in making sales.
  Debtor’s turnover ratio means the efficiency in management of debtors. The ideal
turnover ratio is 7.and the firms turnover ratio is coming in this range which is a very
satisfactory figure. Average collection period of the firm is coming around 56 days which
means debtors remain outstanding for about 56 days.
 Creditor’s turnover ratio of the company is low which means payment to creditors is
delayed. The credit enjoyed by the company is more than one year in the first three
accounting years but payment period has been decreased in the two accounting years.

SUGGESTIONS

 Cash position of the company is not satisfactory. It is not coming in the ideal range.
Company should see to it that they maintain a constant cash ratio.
 The company is not depending much on outsider’s fund which may affect its functioning.
Company should try to effectively utilise outsider’s fund.
 Firm’s dependence on creditors for its working capital has been decreasing which is
alarming for creditors.
 The firm’s interest coverage ratio is far below the standard ratio which is 6 to 7 times. It
shows inability to offer assured payment of interest to creditors. Company should try to
take necessary action regarding the payment of creditors.
 Firm should take necessary action to decrease the stock velocity. Management should
take necessary steps to improve inventory management.
 The company should effectively utilise its working capital in generating sales.
 Creditor’s management has to be properly done by the company. Steps should be taken
so that the creditors are paid in time.

CONCLUSION
The KINEMATIC TRADING & CO PRIVATE LIMITEDhas been serving the state for more
than 60 years. It has contributed much to the industrial development of the state and is providing
employment to hundreds of people. Over the last few years the company has made an indelible
mark in the wood industry.

The study conducted to measure the financial performance of the company has observed that the
financial position of the company is satisfactory, further improvement has to be made.

To an extend the debt and equity of the company is affecting the financial performance of the
company.

BIBLIOGRAPHY

 PRASANNA CHANDRA: "FINANCIAL MANAGEMENT THEORY AND PRACTICE",

Fourth Edition, Tata McGraw Hill Companies.
 Last five years Annual Report (2004 to 2008) of Western India Plywoods Limited,
Kannur.
 R.K SHARMA AND GUPTHA: "MANAGEMENT ACCOUNTING" 2nd edition,
Kalyani publishers, New Delhi.
 I M PANDEY : Financial Management, 8th Edition, Vikas Publishing House

WEBSITES

 www.scribed.com
 www.wikipedia.com
 www.google.com
 PROFIT AND LOSS OF THE KINEMATIC TRADING & CO PRIVATE LIMITED

2012 2013 2014 2015 2016 2017

INCOME
71925 8160
Sales 491595 499305 858160 328091 5 52
Other Income 4966 91193 1519886 25500 0 7702
Deferred Tax Liability 11763 1837 0 9134 1282 -4522
7415
Increase/Decrease in Stock 49315 -4114 -25403 20466 21001 38
74153
TOTAL INCOME 557639 588221 984743 383191 8 1037
EXPENDITURE
2462
Purchase of Finished Goods 1231 752 1297 310 797 20
20595 1231
Material consumed 126652 14135 229678 95400 0 58
10958 9631
Power And Fuel 112466 128447 153703 54302 2 7
2273
Salaries, Wages and Bonus 85381 78030 143519 47949 83183 2
Repairs and Maintenance 15955 21169 27879 9558 20013 3112
Insurance 2425 2579 6108 2169 4510 3586
Travelling Expenses 3476 3635 5938 1257 4253 4482
5118
Miscellaneous Expenses 8743 4933 11049 1665 3513 2
Packing and Forwarding 25494 25812 65560 23321 39742 1302
 6
Commission and Discount 11533 8095 13564 5571 15179 2116
Advertisement Expenses 496 489 935 405 1177 258
2303
Research and Development 219 196 464 130 315 7
3262
Interest on Fixed Assets 48005 61650 60659 1899 21602 9
6185
Interest on other loans 38001 31470 5654 18896 36289 0
Excise Duty 55464 54277 99601 37338 82069 3534
Prior Period Adjustment 630 428 47 -1748 1447 0
1012
Bad And DD Written off 397 0 33015 56 2466 3
2273
Provision for Doubtful Debts 2237 2375 16052 0 0 2
4659
Provision for Taxation 0 0 1246 2956 5630 9
Depreciation 0 41764 65721 22500 46607 9964
1570
Other Expenditure 18102 21518 21201 6548 14446 2
69877 7933
TOTAL EXPENDITURE 556907 628975 962890 330482 0 96
PROFIT AND LOSS 2583
ACCOUNT 732 -40754 21853 52709 42768 6

PARTICULARS 2012 2013 2014 2015 2016 2017

ASSETS
Fixed Assets:
Net Block 553851 527947 477999 494547 450754 415081
Capital Work in
Progress 2870 2090 40153 0 3456 0
Current Assets:
Inventories 387717 378623 366324 383094 424145 417870
Sundry Debtors 72097 71838 80975 83306 97695 112722
Cash and Bank
Balances 10794 11041 11930 13424 29272 47558
Loans and Advances 53826 64067 37054 46674 42515 47589
Investments 2739 2588 3611 5631 5632 5632
Miscellaneous
Expenses 298 149 0
Profit and Loss
Account 33384 74138 52285 0
TOTAL ASSETS 1117576 1132481 1E+06 1026676 1053469 1046452
LIABILITIES
Share Capital:
Equity 84873 84873 84873 84873 84873 84873
Preference 46000 46000 46000 138327 138327 138327
Reserves and Surplus 41296 41296 41296 41720 84488 121790
Secured Loan:
Term Loans 449763 503717 341188 241060 241729 234704
Others 253798 240060 243361 23985 238286 235082
Unsecured Loan 6784 6808 10509 23904 19635 18256
Current Liabilities 199897 174234 249398 196773 186623 145105
Provisions 33328 35493 53706 60634 59508 51316
Deferred Tax
Liability 1837 0 16999
TOTAL
LIABILITIES 1117576 1132481 1070331 1026676 1053469 1046452

BALANCE SHEET OF THE KINEMATIC TRADING & CO PRIVATE LIMITED