A

PROJECT REPORT

ON

“A Study on Ratio Analysis”

CARRIED ON
AT

Skycon Technologies, Bathinda

Submitted in partial fulfillment of the requirements for the award
of the degree of
BACHELORS OF BUSINESS ADMINISTRATION

RAJINDER COLLEGE
(BATHINDA)

SUBMITTED BY

Amisha

BBA 6th SEM

University Roll no:-

 DECLARATION

I hereby declare that the project titled “A study on Ratio Analysis” is an original piece
of research work carried out under the guidance of supervisor the information has been
collected from genuine & authentic sources.

The work has been submitted in partial fulfillment of the requirement of BBA (Batch
2014-2017) of RAJINDER COLLEGE.

Amisha
 ACKNOWLEDGEMENT
Perseverance, inspiration and motivation have always played a key role in success of any
venture. In the present world of competition there is a race of existing in which those who
are having willed to come forward succeed. Project is like a bridge between theoretical
and practical working. With willing I join this particular project.
To design and compare a project report is very laborious work, which no student
complete without taking any help from any professional.
First of all, I would like to thank the supreme power of almighty God who is obviously
the one who has always guided us to work on right path of our life. 
I express my deep gratitude to my guide for his invaluable guidance during the project.
His unlimited guidance, innovative ideas and tireless efforts helped along the way in
completing the project. I am also thankful to the staff members for their encouragement
and cooperation in this successful completion of my project.
In the end I would like to thank my parents whom greatly indebted for having me brought
me love and encouragement of this stage

Amisha

EXECUTIVE SUMMARY
Financial analysis is the process of evaluating businesses, projects, budgets and other
finance-related entities to determine their performance and suitability. Typically,
financial analysis is used to analyze whether an entity is stable, solvent, liquid or
profitable enough to warrant a monetary investment. When looking at a specific
company, a financial analyst conducts analysis by focusing on the income statement,
balance sheet and cash flow statement.

This project is specially designed to understand the subject matter of Financial Statement
Analysis through various ratios in the company. This project gives us information and
report about company’s Financial Position. Throughout the project the focus has been on
presenting information and comments in easy and intelligible manner. The purpose of the
training was to have practical experience of working in an organization and to have
exposure to the various management practices in the field of Finance. This training has
also given me an on the job experience of Financial Management. This project is very
useful for those who want to know about company and financial position of the company.

Table of contents
Sr. no. Chapter name Page no.

1. CHAPTER-1
INTRODUCTION ABOUT TOPIC
2. CHAPTER-2
OBJECTIVE OF THE STUDY
3. CHAPTER-3
SCOPE OF THE STUDY
4. CHAPTER-4
RESEARCH METHODOLOGY
5. CHAPTER-5
LIMITATIONS
6. CHAPTER-6
DATA ANALYSIDS AND INTERPRETATION
7. CHAPTER-7
FINDINGS OF THE STUDY
8. CHAPTER-8
SUGGESTIONS OF THE STUDY
9. CHAPTER-9
CONCLUSION
10. BIBLIOGRAPHY
 Chapter-1
Introduction
INTRODUCTION OF COMPANY

Skycon Technologies is a leading solution provider for Internet based applications. Established in
2009, The Company has been promoted by some highly experienced Professionals dedicated to
provide total IT solutions under one roof. It possesses not only the latest technology gadgets but
also the most knowledgeable and experience hands to offer most user friendly customized
solutions.

Skycon Technologies provides high quality on site services for software development and
the end users on a broad range of hardware & software platforms and latest technologies.

Skycon believes in a hands-on approach on all projects. That is why a Director of the
firm will always be in control of the key functions on our projects. Skycon is equipped
with the latest technology and has the necessary staff and resources to ensure the best
professional service is provided at all times.

Vision, Mission and Goals

Vision

Our vision is to grow our multi-disciplinary team in order to offer a broad spectrum of
specialist Engineering, Information Technology and Management Consulting services to
become our Clients' preferred Professional Service Provider (PSP) choice through
excellence and efficiency in all aspects of the project life cycle.Skycon is a leading
practice that will exceed expectations and set new standards!

Mission

Our Mission is to offer excellent service in each of our professional disciplines, in

accordance with statutory practices, codes of conduct and integrity, thereby developing
our team and providing a leading platform from which to service the built environment
and in particular, our valued Clients.
Goals

Skycon Technologies would strive hard to achieve the 3 goals mentioned below:

 To provide clients awesome websites without incurring exorbitant costs.

 Create best value for Customers, Shareholders and all Stake holders.
 To provide world class E – Commerce, Web Development Solutions to achieve
impeccable reputation and credentials through best business practices.
Products/Services Offered By Company

Web Development

Website is key component of Internet World. From websites to mobile phone apps &
portals, to attractive product packaging, the work of a graphic designer is seen
everywhere. But a good design also requires a strong backbone of programming &
development. This is the job of a developer. An increase number of jobs and high
demand for trained and skilled graphic designers, web designers, and developers. You
can be one of these in-demand professionals. Therefore it is very important to develop a
website with strong web presence and functionality. Among web professionals, "web
development" usually refers to the main non-design aspects of building web sites: writing
mark-up and coding. Most recently Web development has come to mean the creation of
content management systems or CMS. These CMS can be made from scratch, proprietary
or open source. In broad terms the CMS acts as middleware between the database and the
user through the browser. A major benefit of a CMS is that it allows non-technical people
to make changes to their web site without having technical knowledge. At Skycon we
provide a best solution of website Development. Our professional and skilled web
developers build creative websites using the latest technologies.
Bulk Messaging

Bulk Messaging is the dissemination of large numbers of SMS messages for delivery to
mobile phone terminals. It is used by media companies, enterprises, banks (for marketing
and fraud control) and consumer brands for a variety of purposes including
entertainment, enterprise and mobile marketing. Skycon is a leading SMS messaging
service provider offering two-way SMS communication services straight from your
internet enabled computer.

M.Tech Thesis

Skycon Technologies Provide Proper Guidance to Students for their Research Work
Based on IEEE Research Papers. We provide research in various area of Computer &
Electronics for M.Tech, M.Phill. And P.hD. Courses Following are the list of Topics on
which Our research students are doing work

Industrial Training

Industrial training plays an important role in college studying period. Because of

industrial training, students will get opportunity to experience doing real work while
studying and also industrial training helps to fill the gap between the academic
curriculum and the industry. It gives an opportunity to students to apply theoretical
knowledge practically. Industrial training also gives exposure to students about the work
environment in the companies. They also learn tools used in the industries as no college
teach them about tools used in the industry. So because of industrial training, students
become job-ready before they complete the college and increase their chances to get
employment. Industrial training also helps to improve the personal skills and also
provides the opportunity to get employed after the completion of the training.
 Introduction about Topic
What is Financial Analysis
Financial statement analysis (or financial analysis) is the process of reviewing and
analyzing a company's financial statements to make better economic decisions. These
statements include the income statement, balance sheet, statement of cash flows, and a
statement of changes in equity. Financial statement analysis is a method or process
involving specific techniques for evaluating risks, performance, financial health, and
future prospects of an organization.

It is used by a variety of stakeholders, such as credit and equity investors, the

government, the public, and decision-makers within the organization. These stakeholders
have different interests and apply a variety of different techniques to meet their needs.
For example, equity investors are interested in the long-term earnings power of the
organization and perhaps the sustainability and growth of dividend payments. Creditors
want to ensure the interest and principal is paid on the organizations debt securities (e.g.,
bonds) when due.

Common methods of financial statement analysis include fundamental analysis, DuPont

analysis, horizontal and vertical analysis and the use of financial ratios. Historical
information combined with a series of assumptions and adjustments to the financial
information may be used to project future performance. The Chartered Financial Analyst
designation is available for professional financial analysts.

Ratio Analysis

Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick
indication of a firm's financial performance in several key areas. The ratios are
categorized as Short-term Solvency Ratios, Debt Management Ratios, Asset Management
Ratios, Profitability Ratios, and Market Value Ratios.

Ratio Analysis as a tool possesses several important features. The data, which are
provided by financial statements, are readily available. The computation of ratios
facilitates the comparison of firms which differ in size. Ratios can be used to compare a
firm's financial performance with industry averages. In addition, ratios can be used in a
form of trend analysis to identify areas where performance has improved or deteriorated
over time.

Because Ratio Analysis is based upon Accounting information, its effectiveness is limited
by the distortions which arise in financial statements due to such things as Historical Cost
Accounting and inflation. Therefore, Ratio Analysis should only be used as a first step in
financial analysis, to obtain a quick indication of a firm's performance and to identify
areas which need to be investigated further.

Types Of ratios

RATIO ANALYSIS
It refers to the systematic use of ratios to interpret the financial statements in terms of the
operating performance and financial position of a firm. It involves comparison for a
meaningful interpretation of the financial statements.
In view of the needs of various uses of ratios the ratios, which can be calculated from the
accounting data are classified into the following broad categories

A. Liquidity Ratio
B. Turnover Ratio
C. Solvency or Leverage ratios
D. Profitability ratios

A. LIQUIDITY RATIO

It measures the ability of the firm to meet its short-term obligations, that is capacity of the
firm to pay its current liabilities as and when they fall due. Thus these ratios reflect the
short-term financial solvency of a firm. A firm should ensure that it does not suffer from
lack of liquidity. The failure to meet obligations on due time may result in bad credit
image, loss of creditors confidence, and even in legal proceedings against the firm on the
other hand very high degree of liquidity is also not desirable since it would imply that
funds are idle and earn nothing. So therefore it is necessary to strike a proper balance
between liquidity and lack of liquidity.

The various ratios that explains about the liquidity of the firm are

1. Current Ratio
2. Acid Test Ratio / quick ratio
3. Absolute liquid ration / cash ratio

1. CURRENT RATIO
The current ratio measures the short-term solvency of the firm. It establishes the
relationship between current assets and current liabilities. It is calculated by dividing
current assets by current liabilities.

Current Ratio = Current Asset /Current Liabilities

Current assets include cash and bank balances, marketable securities, inventory, and
debtors, excluding provisions for bad debts and doubtful debtors, bills receivables and
prepaid expenses. Current liabilities includes sundry creditors, bills payable, short- term
loans, income-tax liability, accrued expenses and dividends payable.

2. ACID TEST RATIO / QUICK RATIO

It has been an important indicator of the firm’s liquidity position and is used as a
complementary ratio to the current ratio. It establishes the relationship between quick
assets and current liabilities. It is calculated by dividing quick assets by the current
liabilities.

Acid Test Ratio = Quick Assets/ Current liabilities

Quick assets are those current assets, which can be converted into cash immediately or
within reasonable short time without a loss of value. These include cash and bank
balances, sundry debtors, bill’s receivables and short-term marketable securities.

3. ABSOLUTE LIQUID RATION / CASH RATIO

It shows the relationship between absolute liquid or super quick current assets and
liabilities. Absolute liquid assets include cash, bank balances, and marketable securities.

Absolute liquid ratio = Absolute liquid assets / Current liabilities

B. TURNOVER RATIO
Turnover ratios are also known as activity ratios or efficiency ratios with which a firm
manages its current assets. The following turnover ratios can be calculated to judge the
effectiveness of asset use.

1. Inventory Turnover Ratio

2. Debtor Turnover Ratio
3. Creditor Turnover Ratio
4. Assets Turnover Ratio

1.INVENTORY TURNOVER RATIO

This ratio indicates the number of times the inventory has been converted into sales
during the period. Thus it evaluates the efficiency of the firm in managing its inventory.
It is calculated by dividing the cost of goods sold by average inventory.
Inventory Turnover Ratio = Cost of goods sold/Average Inventory

The average inventory is simple average of the opening and closing balances of
inventory. (Opening + Closing balances / 2). In certain circumstances opening balance
of the inventory may not be known then closing balance of inventory may be considered
as average inventory

2. DEBTOR TURNOVER RATIO

This indicates the number of times average debtors have been converted into cash during
a year. It is determined by dividing the net credit sales by average debtors.

Debtor Turnover Ratio = Net Credit Sales/ Average Trade Debtors

Net credit sales consist of gross credit sales minus sales return. Trade debtor includes

sundry debtors and bill’s receivables. Average trade debtors (Opening + Closing

balances / 2)

When the information about credit sales, opening and closing balances of trade debtors is
not available then the ratio can be calculated by dividing total sales by closing balances
of trade debtor

Debtor Turnover Ratio = Total Sales/ Trade Debtors

3.CREDITOR TURNOVER RATIO

It indicates the number of times sundry creditors have been paid during a year. It is
calculated to judge the requirements of cash for paying sundry creditors. It is calculated
by dividing the net credit purchases by average creditors.

Creditor Turnover Ratio = Net Credit Purchases/Average Trade Creditor

Net credit purchases consist of gross credit purchases minus purchase return

When the information about credit purchases, opening and closing balances of trade
creditors is not available then the ratio is calculated by dividing total purchases by the
closing balance of trade creditors.

Creditor Turnover Ratio = Total purchases/Total Trade Creditors

4. ASSETS TURNOVER RATIO

The relationship between assets and sales is known as assets turnover ratio. Several
assets turnover ratios can be calculated depending upon the groups of assets, which are
related to sales.

a) Total asset turnover.

b) Net asset turnover
c) Fixed asset turnover
d) Current asset turnover
e) Net working capital turnover ratio

a. TOTAL ASSET TURNOVER

This ratio shows the firms ability to generate sales from all financial resources committed
to total assets. It is calculated by dividing sales by total assets.

Total asset turnover = Total Sales/Total Assets

b. NET ASSET TURNOVER

This is calculated by dividing sales by net assets.

Net asset turnover = Total Sales/Net Assets

Net assets represent total assets minus current liabilities. Intangible and fictitious assets
like goodwill, patents, accumulated losses, deferred expenditure may be excluded for
calculating the net asset turnover.

c. FIXED ASSET TURNOVER

This ratio is calculated by dividing sales by net fixed assets.

Fixed asset turnover = Total Sales/Net Fixed Assets

Net fixed assets represent the cost of fixed assets minus depreciation.

d. CURRENT ASSET TURNOVER

It is divided by calculating sales by current assets

Current asset turnover = Total Sales/Current Assets

e. NET WORKING CAPITAL TURNOVER RATIO

A higher ratio is an indicator of better utilization of current assets and working capital
and vice-versa (a lower ratio is an indicator of poor utilization of current assets and
working capital). It is calculated by dividing sales by working capital.

Net working capital turnover ratio = Total Sales/Working Capital

Working capital is represented by the difference between current assets and current
liabilities.

C. SOLVENCY OR LEVERAGE RATIOS

The solvency or leverage ratios throws light on the long term solvency of a firm
reflecting it’s ability to assure the long term creditors with regard to periodic payment of
interest during the period and loan repayment of principal on maturity or in
predetermined instalments at due dates. There are thus two aspects of the long-term
solvency of a firm.

a. Ability to repay the principal amount when due

b. Regular payment of the interest.

The ratio is based on the relationship between borrowed funds and owner’s capital it is
computed from the balance sheet, the second type are calculated from the profit and loss
a/c. The various solvency ratios are

1. Debt equity ratio

2. Debt to total capital ratio
3. Proprietary (Equity) ratio
4. Fixed assets to net worth ratio
5. Fixed assets to long term funds ratio
6. Debt service (Interest coverage) ratio

1. DEBT EQUITY RATIO

Debt equity ratio shows the relative claims of creditors (Outsiders) and owners (Interest)
against the assets of the firm. Thus this ratio indicates the relative proportions of debt
and equity in financing the firm’s assets. It can be calculated by dividing outsider funds
(Debt) by shareholder funds (Equity)

Debt equity ratio = Outsider Funds (Total Debts)/Shareholder Funds or Equity

The outsider fund includes long-term debts as well as current liabilities. The shareholder
funds include equity share capital, preference share capital, reserves and surplus
including accumulated profits. However fictitious assets like accumulated deferred
expenses etc should be deducted from the total of these items to shareholder funds. The
shareholder funds so calculated are known as net worth of the business.

2. DEBT TO TOTAL CAPITAL RATIO

Debt to total capital ratio = Total Debts/Total Assets

3. PROPRIETARY (EQUITY) RATIO

This ratio indicates the proportion of total assets financed by owners. It is calculated by
dividing proprietor (Shareholder) funds by total assets.

Proprietary (equity) ratio = Shareholder funds/Total assets

4. FIXED ASSETS TO NET WORTH RATIO

This ratio establishes the relationship between fixed assets and shareholder funds. It is
calculated by dividing fixed assets by shareholder funds.

Fixed assets to net worth ratio = (Fixed Assets/ Net Worth) * 100

The shareholder funds include equity share capital, preference share capital, reserves and
surplus including accumulated profits. However fictitious assets like accumulated
deferred expenses etc should be deducted from the total of these items to shareholder
funds. The shareholder funds so calculated are known as net worth of the business.

5. FIXED ASSETS TO LONG TERM FUNDS RATIO

Fixed assets to long term funds ratio establishes the relationship between fixed assets and
long-term funds and is calculated by dividing fixed assets by long term funds.
Fixed assets to long term funds ratio = (Fixed Assets/ Long-term Funds) X 100

6. DEBT SERVICE (INTEREST COVERAGE) RATIO

This shows the number of times the earnings of the firms are able to cover the fixed
interest liability of the firm. This ratio therefore is also known as Interest coverage or
time interest earned ratio. It is calculated by dividing the earnings before interest and tax
(EBIT) by interest charges on loans.

Debt Service Ratio = Earnings before interest and tax (EBIT)/Interest Charges
PROFITABILITY RATIOS
The profitability ratio of the firm can be measured by calculating various profitability
ratios. General two groups of profitability ratios are calculated.

a. Profitability in relation to sales.

b. Profitability in relation to investments.

Profitability in relation to sales

1. Gross profit margin or ratio
2. Net profit margin or ratio
3. Operating profit margin or ratio
4. Operating Ratio
5. Expenses Ratio

1. GROSS PROFIT MARGIN OR RATIO

It measures the relationship between gross profit and sales. It is calculated by dividing
gross profit by sales.

Gross profit margin or ratio = Gross profit X 100/Net sales

Gross profit is the difference between sales and cost of goods sold.
2. NET PROFIT MARGIN OR RATIO
It measures the relationship between net profit and sales of a firm. It indicates
management’s efficiency in manufacturing, administrating, and selling the products. It is
calculated by dividing net profit after tax by sales.

Net profit margin or ratio = Earning after tax/ Net Sales X 100

3. OPERATING PROFIT MARGIN OR RATIO

It establishes the relationship between total operating expenses and net sales. It is
calculated by dividing operating expenses by the net sales.

Operating profit margin or ratio = Operating expenses / Net salesX 100

Operating expenses includes cost of goods produced/sold, general and administrative

expenses, selling and distributive expenses.

4. EXPENSES RATIO

While some of the expenses may be increasing and other may be declining to know the
behavior of specific items of expenses the ratio of each individual operating expenses to
net sales should be calculated. The various variants of expenses are

Cost of goods sold = Cost of goods sold / Net SalesX 100

5. OPERATING PROFIT MARGIN OR RATIO

Operating profit margin or ratio establishes the relationship between operating profit and
net sales. It is calculated by dividing operating profit by sales.

Operating profit margin or ratio = Operating Profit/ Net sales X 100

Operating profit is the difference between net sales and total operating expenses.
(Operating profit = Net sales – cost of goods sold – administrative expenses – selling and
distribution expenses.)
PROFITABILITY IN RELATION TO INVESTMENTS
1. Return on gross investment or gross capital employed
2. Return on net investment or net capital employed
3. Return on shareholder’s investment or shareholder’s capital employed.
4. Return on equity shareholder investment or equity shareholder capital employed.

1. RETURN ON GROSS CAPITAL EMPLOYED

This ratio establishes the relationship between net profit and the gross capital employed.
The term gross capital employed refers to the total investment made in business. The
conventional approach is to divide Earnings After Tax (EAT) by gross capital employed.

Return on gross capital employed = Earnings After Tax (EAT)/ Gross capital employed
X 100

2. RETURN ON NET CAPITAL EMPLOYED

It is calculated by dividing Earnings Before Interest & Tax (EBIT) by the net capital
employed. The term net capital employed in the gross capital in the business minus
current liabilities. Thus it represents the long-term funds supplied by creditors and
owners of the firm.

Return on net capital employed = Earnings Before Interest & Tax (EBIT) / Net capital
employedX 100

3. RETURN ON SHARE CAPITAL EMPLOYED

This ratio establishes the relationship between earnings after taxes and the shareholder
investment in the business. This ratio reveals how profitability the owners’ funds have
been utilized by the firm. It is calculated by dividing Earnings after tax (EAT) by
shareholder capital employed.

Return on share capital employed = Earnings after tax (EAT) / Shareholder capital
employedX 100
4. RETURN ON EQUITY SHARE CAPITAL EMPLOYED

Equity shareholders are entitled to all the profits remaining after the all outside claims
including dividends on preference share capital are paid in full. The earnings may be
distributed to them or retained in the business. Return on equity share capital
investments or capital employed establishes the relationship between earnings after tax
and preference dividend and equity shareholder investment or capital employed or net
worth. It is calculated by dividing earnings after tax and preference dividend by equity
shareholder’s capital employed.

EARNINGS PER SHARE

IT measure the profit available to the equity shareholders on a per share basis. It is
computed by dividing earnings available to the equity shareholders by the total number of
equity share outstanding

Earnings per share = Earnings after tax – Preferred dividends (if any)/ Equity shares
outstanding

DIVIDEND PER SHARE

The dividends paid to the shareholders on a per share basis in dividend per share. Thus
dividend per share is the earnings distributed to the ordinary shareholders divided by the
number of ordinary shares outstanding.

Dividend per share = Earnings paid to the ordinary shareholders/Number of ordinary

shares outstanding

DIVIDENDS PAY OUT RATIO (PAY OUT RATIO)

It measures the relationship between the earnings belonging to the equity shareholders
and the dividends paid to them. It shows what percentage shares of the earnings are
available for the ordinary shareholders are paid out as dividend to the ordinary
shareholders. It can be calculated by dividing the total dividend paid to the equity
shareholders by the total earnings available to them or alternatively by dividing dividend
per share by earnings per share.
Dividend pay our ratio (Pay our ratio) = Total dividend paid to equity share holders/Total
earnings available to equity share holders

Or

Dividend per share

Earnings per share

DIVIDEND AND EARNINGS YIELD

While the earnings per share and dividend per share are based on the book value per
share, the yield is expressed in terms of market value per share. The dividend yield may
be defined as the relation of dividend per share to the market value per ordinary share and
the earning ratio as the ratio of earnings per share to the market value of ordinary share.

Dividend Yield = Dividend Per share/Market value of ordinary share

Earnings yield = Earnings per share/Market value of ordinary share

PRICE EARNING RATIO

The reciprocal of the earnings yield is called price earnings ratio. It is calculated by
dividing the market price of the share by the earnings per share.

Price earnings (P/E) ratio = Market price of share/Earnings per share

 Chapter-2
Objectives of the
study
Objectives of the Project
 To evaluate the performance of the company by using ratios as a yardstick
tomeasure the efficiency of the company.
 To understand the liquidity, profitability and efficiency positions of the
companyduring the study period.
 To evaluate and analyze various facts of the financial performance of
thecompany.
 To make comparisons between the ratios during different periods.
Chapter-3
Scope of the Study

30
Scope of the study

Scope of the study is limited to Skycon technologies, Bathinda.

31
 Chapter-4
Research
Methodology

32
Research Methodology

Research Methodology is a way to systematically solve the research problem. It deals with the
objective of a research study, the method of defining the research problem, the type of
hypothesis formulated, the type of data collected, method used for data collection and analyzing
the data etc. the methodology includes collection of primary and secondary data

RESEARCH DESIGN:

A research design is an arrangement of conditions for collection and analysis of data in a

manner that aims to combine relevance to the research. A research design is a basis of
framework which provides guidelines for the rest of research process. It is the map of blueprint
according to which the research will be conducted. The research design used for this study is
“DESCRIPTIVE DESIGN”. This design includes surveys and facts finding enquiries of different
kinds.

Sources of Data:

 Primary data: Primary Data is collected through questionnaire.

 Secondary data : Secondary data is collected through books, magazines and internet.

Sampling Design:

 Sampling Area:

The area is limited to Skycon Technoogies, Bathinda.

 Sample size:

The sample size of my project is limited to 50 only.

 Sample Techniques:
33
Data is collected through random sampling.

Instrumentation Technique:

 Tools and Techniques of data collection

The questionnaire serves as a useful guide for the communication process and may be used with
survey research in any form whether the questions are in written or verbal form. Without a
questionnaire the interview has no structure.

 Research tool:

Sample statistical tool is this analyzed and expresses in terms of percentage. The information
gathered from the primary source would be analyzed by tabulating all information received.
Conclusion and interpretation of this study would then be made using various tools like graphs,
charts and tables.

34
Chapter-5
Limitations

35
Limitation of research:

1. The research is confined to a company and does not necessarily shows a pattern

applicable to all of Country.

2. Some respondents were reluctant to divulge personal information which can affect the

validity of all responses.

3. In a rapidly changing industry, analysis on one day or in one segment can change very

quickly. The environmental changes are vital to be considered in order to assimilate the

findings.

36
 Chapter-6
Data Analysis &
Interpretation

37
 Analysis of Financial Statements with Ratios

Skycon Technologies
Balance Sheet
For the Period Ended on 31st March 2017

Assets
Current Assets
Cash 50000
Short-term Investments 4000
Accounts Receivables 15500
Inventories 10000
Prepaid Insurance 0
Others 5000 84500

Long Term Investments

Stock Investments 25000
Cash Value of Insurance 0 25000

Fixed Assets

Electronic Equipment 16000

Less Accumulated Depreciation (1000) 15000 15000

Intangible Assets
Good Will 20000

Other Assets
Receivables from Employees 5500

Total Assets 150000

38
Liabilities
Current Liabilities
Accounts Payable 0
Salaries Payable 60000
Accrued Interest 10000
Taxes Payable 5000
Current Portion of Notes 0 75000

Long Term Liabilities

Note Payable 50000
Mortgage Liability 25000 750000

Total Liabilities 150000

1. CURRENT RATIO

Year Current Assets Current liabilities Current ratio

39
 2015-16 150000 100000 1.5:1
2016-17 160000 75000 2.13:1

Current ratio
2.5

2.13
2

1.5 1.5
Current ratio

0.5

0
2015-16 2016-17

The current ratio of the firm measures the short term solvency. It indicatesthe rupees of current asset
available for each rupee of current liabilities.The above chart shows that assending trend from the F.Y.
2015 to F.Y. 2016.

There was continuousdecline in the current ratio which is a good sign for the company.

2. QUICK RATIO

40
 Year Liquid Assets Current liabilities Current ratio
2015-16 135000 100000 1.35:1
2016-17 120000 75000 1.6:1

Quick ratio
1.65

1.6

1.55

1.5

1.45 Quick ratio

1.4

1.35

1.3

1.25

1.2
2015-16 2016-17

The above chart indicates the decline trend from the F.Y. 2015 to F.Y. 2016the quick ratio of the
company was above the standard thatmeans large part of current asset of the firm is tie up in fast moving
and sellableinvestment of Finish goods and also fast moving of debts, but, the overall trend shows
increasing which is a positive sign for Skycon.

3. Operating Profit Ratio

41
Year EBIT Sales Operating Ratio
2015-16 20000 100000 20%
2016-17 16500 75000 22%

Operating ratio
22.5

22 22

21.5

21
Operating ratio

20.5

20 20

19.5

19
2015-16 2016-17

This ratio indicates how well the firm has used the resources of owner.The earning
of a satisfactory result is the most desirable objective of the business. Thisratio is
important to present as well as prospective shareholders and also of great
concernto management.

4. Average Collection Period

Year Recievables Average sales per day Ratio

2015-16 1700 10000 62 days

42
 2016-17 1650 10500 57.35 days

Average collection Period

63

62

61

60
Average collection Period
59

58

57

56

55
2015-16 2016-17

The above chart shows that the collection period was high in FY 2015-16 i.e. 62 days.This means, a very
long collection period would imply either for credit selection or an inadequate collection. The average
collection period short in FY 2016-17 which means that better is a credit management and prompt
payment on the part of debtors.

5. Fixed Asset Turnover Ratio

43
 Year Net Sales Fixed Assets Ratio
2015-16 100000 35000 2.8 times
2016-17 75000 15000 3 times

It indicates efficiency in the utilization of fixed assets like plant andmachinery by

management.From the above chart the fixed asset turnover ratio of Skycon slowly increases over
period of time. From this we can say that a company has been successfulto manage and utilized
its assets. Also a company has been more effective in using theinvestment in fixed assts to
generate revenue.

Fixed Assets ratio

3.05

2.95

2.9
Fixed Assets ratio
2.85

2.8

2.75

2.7

2.65
2015-16 2016-17

6. Proprietary ratio

44
 Year Proprietary Fund Total Assets Ratio
2015-16 120000 140000 85%
2016-17 130000 150000 86.6%

Proprietary Ratio
87

86.5

86
Proprietary Ratio
85.5

85

84.5

84
2015-16 2016-17

FY 2016-17 i.e. 87%. It indicates the company is quite solvent.

7. Debt Asset Ratio:

Year Debt Total Assets Ratio

2015-16 15000 140000 10.7%
45
 2016-17 15500 150000 10.33%

Debt-Assets ratio
10.8

10.7

10.6

10.5 Debt-Assets ratio

10.4

10.3

10.2

10.1
2015-16 2016-17

From the above chart the debt asset ratio was consistently decreased in both years.. That means
at beginning creditors of Skycon bear the high risk than the other years.

46
 Chapter-7
Findings
of the Study

Findings of the Study

47
I started my survey with some sincere efforts was quite successful to obtain information from

respondent regarding different aspect of product. The conclusions of this report are as follows:.

 The ideal current ratio is 2:1 which the firm obtains only in the FY 2015-16 it
showsthe positive impact.
 The ideal liquid ratio is 1:1 which is also obtained by the firm in FY 2015-16 and
FY2016-17 it indicates that SKYCON, without selling its inventory, has enough
short-termassets to cover its immediate liabilities.
 The net profit ratio shows fluctuating trend, it shows that more or less the
company issuccessful to maintained efficiency in sales value and operating
expenses.
 The operating profit ratio of the SKYCON is in fluctuating manner.
 The company is maintaining the proper record of inventory. Management is
successfulto manage the cost involved in inventory, because of increasing ratio of
inventory.
 The fixed asset turnover ratio of the firm is in increasing trend from the F.Y. 2015
to 2016, means that the company is efficiently utilizing the fixed assets.
 The proprietary ratio of the firm shows increasing trend, means that the long
termsolvency of the firm is increased.
 The sales, profit before tax, profit after tax shows the increasing trend during
theperiod under review. It depicts that the company is working with more
efficiency.

Chapter-8
48
 Suggestions Of the
study

Suggestion of the Study

49
 The CURRENT RATIO of SKYCON was less than the standard in both years. A low
current ratio indicates that co will not be able tomeet its short term debts
 SKYCON should look into its credit policies in order to ensure the timely collection of
imparted credit that is not earning interest for the firm.
 The SKYCON should formulate the strategy to use the fixed assets more effectively
togenerate more revenues.
 Operating expenses should be especially considered to be reduced.
 There should be efficient utilization of share holder fund to increase return oninvestment
and return on equity to maintain its goodwill in investors mind

50
 Chapter-9
Conclusion

Conclusion of the Study

After this report I conclude that Finance is the life blood of every business. Without effective

financialmanagement a company cannot in this competitive world. A Prudent financial Manager

51
has to measure the working capital policy followed by the company The company’s overall

position is at a good position. It is better for the firm to diversify thefunds to different sectors in

the present market scenario.On a whole Skycon Technologies has once again demonstratedits

potential to ride through the difficult times. Despite the slowdown in its growth, it hasdetermined

to grab numerous opportunities.

BIBLIOGRAPHY

Books:

52
  Khan & Jain, Financial Management 14th edition.

 I.M. Pandey, Financial Management.

 Research Methodology “ C.R.Kothari”[NEW AGE

INTERNATIONAL(P)LIMITED,HYDERABAD] 2ND EDITION.

Websites:
 www.skycontechnologies.com
 www.google.com
 www.forbes.com
 www.wikipedia.in

53