Ratio Analysis at Amararaja Batteries Limited (Arbl)

A STUDY ON
RATIO ANALYSIS AT
AMARARAJA BATTERIES LIMITED (ARBL)
A PROJECT REPORT
Submitted in partial fulfillment of the requirement for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
Under the Guidance of

S.SUJATHA M.B.A., M.Phil ASSISTANT PROFESSOR OF MANAGEMENT STUDIES
SRM UNIVERSITY
By
SUNEEL.R
(Reg.No.35080623)
DEPARTMENT OF BUSINESS ADMINISTRATION

SRM UNIVERSITY
YEAR-2010
SCHOOL OF MANAGEMENT
SRM UNIVERSITY
Page 1
SRM Nagar, Kattankulathur-603203
Phone: 044-27452270, 27417777, Fax: 044-27453903
E-hod@mba.srmuniv.ac.in, website:www.srmuniv.ac.in
BONAFIDE CERTIFICATE
Certified that this project report titled “A STUDY ON RATIO ANALYSIS AT

AMARARAJA BATTERIES LIMITED” is the bonafide work of Mr.R.SUNEEL who carried
out the research under my supervision.
Certified further, that to the best of my knowledge the work reported here in does not form
part of any other Project report or dissertation on the basis of which a degree or award was
conferred on an earlier occasion on this or any other candidate.
Signature of the supervisor Signature of the HOD
DECLARATION
Page 2
I hereby declare that the Project Report entitled “A STUDY ON RATIO
ANALYSIS AT AMARARAJA BATTERIES LIMITED(ARBL)” is a record of independent
research work submitted by me to SRM University, Chennai, for developing the real time
experience as well as award the degree of Master of Business Administration and has been carried
out during the period of my study at SRM UNIVERSITY, Chennai, Under the guidance of
S.SUJATHA, Department of MBA.
PLACE: Chennai (R.SUNEEL)
ACKNOWLEDGEMENT
I would like to express deepest gratitude and thanks to the Dr. JAYASREE SURESH, Head of
the Department for her valuable support in doing this project. She has been a source of
encouragement and guidance in all our endeavors.

I would like to sincerely acknowledge thanks to Sri C.Ramachandra raju, Finance
Manager of Amararaja Batteries limited, Mr.C.Ravi Costing Manager of Amararaja Batteries
Limited for their moral support during the research work.
I express our profound thanks to S.SUJATHA project guide, for her consistent
encouragement and invaluable suggestion in completing this project, without his effort the
completion of this project would be practically impossible.
It gives me great pleasure to acknowledge my indebtedness to my family Members for
their substantial moral support and encouragement in my studies.
I would like to extend my sincere thanks to My Dearest Friends and also my classmates
for their unnerving support in the completion of the work.
(R. SUNEEL)
TABLE OF CONTENTS
Chapters Title and Topics Page No
1 INTRODUCTION
1‐2
 Introduction
2 OBJECTIVES & METHODOLOGY

 Need of study 4
 Scope of study 5
 Objectives of study 6
 Review of Literature 7‐19

20
 Research Methodology
21
 Limitations of study
3 COMPANY PROFILE
22‐29
4 DATA ANALYSIS AND INTERPRETATION 30‐60
5 FINDINGS & SUGGESTIONS

 Findings 62
63
 Suggestions
64
 Conclusion
6  Annexure 65‐71
 BIBLOGRAPHY 72
SI .NO PARTCULARS PAGE.NO
1 CURRENT RATIO 31
2 QUICK RATIO 33
3 CASH RATIO 35
4 NETWORKING CAPITAL RATIO 36
5 DEBT RATIO 37
6 DEBT EQUITY RATIO 39
7 INTEREST COVERAGE RATIO 41
8 TOTAL LIABILITIES RATIO 42
9 INVENTORY TURNOVER RATIO 43

10 DEBTORS TURNOVER RATIO 45
11 FIXED ASSET TURNOVER RATIO 46
12 CURRENT ASSET TURNOVER RATIO 48
13 TOTAL ASSET TURNOVER RATIO 49
14 WORKING CAPITAL TURNOVER RATIO 50
15 NET ASSET TURNOVER RATIO 51
16 CAPITAL TURNOVER RATIO 52
17 CREDITOR TURNOVER RATIO 53
18 GROSS PROFIT 54
19 NET PROFIT 56
20 OPERITING EXPENCES RATIO 57
21 RETURN ON INVESTMENT 59
22 RETURN ON EQUITY SHARE HOLDER FUND 60
LIST OF CHARTS
SI .NO PARTCULARS PAGE.NO
1 CURRENT RATIO 32
2 QUICK RATIO 34
3 CASH RATIO 35
4 NETWORKING CAPITAL RATIO 36
5 DEBT RATIO 38
6 DEBT EQUITY RATIO 40
7 INTEREST COVERAGE RATIO 41
8 TOTAL LIABILITIES RATIO 42
9 INVENTORY TURNOVER RATIO 44
10 DEBTORS TURNOVER RATIO 45
11 FIXED ASSET TURNOVER RATIO 47
12 CURRENT ASSET TURNOVER RATIO 48

13 TOTAL ASSET TURNOVER RATIO 49
14 WORKING CAPITAL TURNOVER RATIO 50
15 NET ASSET TURNOVER RATIO 51
16 CAPITAL TURNOVER RATIO 52
17 CREDITOR TURNOVER RATIO 53
18 GROSS PROFIT 55
19 NET PROFIT 56
20 OPERITING EXPENCES RATIO 58
21 RETURN ON INVESTMENT 59
22 RETURN ON EQUITY SHARE HOLDER FUND 60

 INTRODUCTION
INTRODUCTION
ABOUT RATIO ANALYSIS
The ratio analysis is the most powerful tool of financial analysis. Several ratios calculated
from the accounting data can be grouped into various classes according to financial activity or
function to be evaluated.
 DEFINITION:
“The indicate quotient of two mathematical expressions “and as “The relationship
between two or more things. “It evaluates the financial position and performance of the firm.
As started in the beginning many diverse groups of people are interested in analyzing
financial information to indicate the operating and financial efficiency and growth of firm. These
people use ratios to determine those financial characteristics of firm in which they interested with
the help of ratios one can determine.
 The ability of the firm to meet its current obligations.

 The extent to which the firm has used its long-term solvency by borrowing funds.
 The efficiency with which the firm is utilizing its assets in generating the sales revenue.
 The overall operating efficiency and performance of firm.
The information contained in these statements is used by management, creditors,

investors and others to form judgment about the operating performance and financial
position of firm. Uses of financial statement can get further insight about financial strength
and weakness of the firm if they properly analyze information reported in these statements.
Management should be particularly interested in knowing financial strength of the firm to
make their best use and to be able to spot out financial weaknesses of the firm to take
suitable corrective actions. The further plans firm should be laid down in new of the firm’s
financial strength and weaknesses. Thus financial analysis is the starting point for making
plans before using any sophisticated forecasting and planning procedures. Understanding the
past is a prerequisite for anticipating the future.
 Need of study
 Scope of study
 Objectives
NEED OF THE STUDY
The prevalent educational system providing the placement training at an industry being a
part of the curriculum has helped in comparison of theoretical knowledge with practical system. It
has led to note the convergences and divergence between theory and practice.
The study enables us to have access to various facts of the organization. It helps in
understanding the needs for the importance and advantage of materials in the organization, the
study also helps to exposure our minds to the integrated materials management the various
procedures, methods and technique adopted by the organization. The study provides knowledge
about how the theoretical aspects are put in the organization in terms of described below
 To pay wages and salaries.
 For the purchase of raw materials, spares and components parts.
 To incur day-to-day expenses.
 To meet selling costs such as packing, advertising.
 To provide credit facilities to customers.
 To maintain inventories and raw materials, work-in-progress and finished stock.
Page 10
Scope of the study
The scope of the study is limited to collecting financial data published in the annual
reports of the company every year. The analysis is done to suggest the possible solutions. The
study is carried out for 4 years (2006– 10).
Using the ratio analysis, firms past, present and future performance can be analyzed and
this study has been divided as short term analysis and long term analysis. The firm should
generate enough profits not only to meet the expectations of owner, but also to expansion
activities.
OBJECTIVE’S OF STUDY
1. To study and analyze the financial position of the Company through ratio analysis.
2. To suggest measures for improving the financial performance of organization.
To analyze the profitability position of the company.
To assess the return on investment.
To analyze the asset turnover ratio.
To determine the solvency position of company.
To suggest measures for effective and efficient usage of inventory.

REVIEW OF LITERATURE
FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial strengths and weakness of the firm.
It is done by establishing relationships between the items of financial statements viz., balance
sheet and profit and loss account. Financial analysis can be undertaken by management of the firm,
viz., owners, creditors, investors and others.
Objectives of the financial analysis
Analysis of financial statements may be made for a particular purpose in view.
1. To find out the financial stability and soundness of the business enterprise.
2. To assess and evaluate the earning capacity of the business
3. To estimate and evaluate the fixed assets, stock etc., of the concern.
4. To estimate and determine the possibilities of future growth of business.
5. To assess and evaluate the firm’s capacity and ability to repay short and long term loans
Parties interested in financial analysis
The users of financial analysis can be divided into two broad groups.
Internal users
1. Financial executives
2. Top management
External users
1. Investors
2. Creditor.
3. Workers
4. Customers
5. Government
6. Public
7. Researchers
Significance of financial analysis
Financial analysis serves the following purpose:
To know the operational efficiency of the business:
The financial analysis enables the management to find out the overall efficiency of the firm. This will
enable the management to locate the weak Spots of the business and take necessary remedial action.
Helpful in measuring the solvency of the firm:
The financial analysis helps the decision makers in taking appropriate decisions for strengthening the
short-term as well as long-term solvency of the firm.
Comparison of past and present results:
Financial statements of the previous years can be compared and the trend regarding various
expenses, purchases, sales, gross profit and net profit can be ascertained.
Helps in measuring the profitability:
Financial statements show the gross profit, & net profit.
Inter‐firm comparison:
The financial analysis makes it easy to make inter-firm comparison. This comparison can also be made for
various time periods.
Bankruptcy and Failure:
Financial statement analysis is significant tool in predicting the bankruptcy and the failure of the business
enterprise. Financial statement analysis accomplishes this through the evaluation of the solvency position.
Helps in forecasting:
The financial analysis will help in assessing future development by making forecasts and preparing
budgets.
METHODS OF ANALYSIS:
A financial analyst can adopt the following tools for analysis of the financial statements. These are
also termed as methods of financial analysis.
A. Comparative statement analysis
B. Common-size statement analysis
C. Trend analysis
D. Funds flow analysis
E. Ratio analysis
NATURE OF RATIO ANALYSIS
Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as "the indicated
quotient of mathematical expression" and as "the relationship between two or more things". A ratio is
used as benchmark for evaluating the financial position and performance of the firm. The relationship
between two accounting figures, expressed mathematically, is known as a financial ratio. Ratio helps to
summarizes large quantities of financial data and to make qualitative judgment about the firm's financial
performance.
The persons interested in the analysis of financial statements can be grouped under three head
owners (or) investors who are desired primarily a basis for estimating earning capacity. Creditors who
are concerned primarily with Liquidity and ability to pay interest and redeem loan within a specified
period. Management is interested in evolving analytical tools that will measure costs, efficiency, liquidity
and profitability with a view to make intelligent decisions.
STANDARDS OF COMPARISON
The ratio analysis involves comparison for an useful interpretation of the financial statements. A
single ratio in itself does not indicate favorable or unfavorable condition. It should be compared with
some standard. Standards of comparison are:
1. Past Ratios
2. Competitor's Ratios
3. Industry Ratios
4. Projected Ratios
Past Ratios: Ratios calculated from the past financial statements of the same firm.
Competitor's Ratios: Ratios of some selected firms, especially the most progressive and successful
competitor at the same point in time.
Industry Ratios: Ratios of the industry to which the firm belongs.
Projected Ratios: Ratios developed using the projected financial statements of the same firm.
TIME SERIES ANALYSIS

The easiest way to evaluate the performance of a firm is to compare its present ratios with past
ratios. When financial ratios over a period of time are compared, it is known as the time series analysis
or trend analysis. It gives an indication of the direction of change and reflects whether the firm's
financial performance has improved, deteriorated or remind constant over time.
CROSS SECTIONAL ANALYSIS

Another way to comparison is to compare ratios of one firm with some selected firms in the
industry at the same point in time. This kind of comparison is known as the cross-sectional analysis. It is
more useful to compare the firm's ratios with ratios of a few carefully selected competitors, who have
similar operations.
INDUSTRY ANALYSIS
To determine the financial conditions and performance of a firm. Its ratio may be compared with
average ratios of the industry of which the firm is a member. This type of analysis is known as industry
analysis and also it helps to ascertain the financial standing and capability of the firm & other firms in
the industry. Industry ratios are important standards in view of the fact that each industry has its
characteristics which influence the financial and operating relationships.
TYPES OF RATIOS
Management is interested in evaluating every aspect of firm's performance. In view of the requirement
of the various users of ratios, we may classify them into following four important categories:
1. Liquidity Ratio
2. Leverage Ratio
3. Activity Ratio
4. Profitability Ratio
Liquidity Ratio
It is essential for a firm to be able to meet its obligations as they become due. Liquidity Ratios
help in establishing a relationship between cast and other current assets to current obligations to provide
a quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity and
also that it does not have excess liquidity. A very high degree of liquidity is also bad, idle assets earn
nothing. The firm's funds will be unnecessarily tied up in current assets. Therefore it is necessary to
strike a proper balance between high liquidity. Liquidity ratios can be divided into three types:
Current Ratio
Quick Ratio
Cash Ratio
Current Ratio
Current ratio is an acceptable measure of firm’s short-term solvency Current assets includes
cash within a year, such as marketable securities, debtors and inventors. Prepaid expenses are also
included in current assets as they represent the payments that will not made by the firm in future. All
obligations maturing within a year are included in current liabilities. These include creditors, bills
payable, accrued expenses, short-term bank loan, income-tax liability in the current year.
The current ratio is a measure of the firm's short term solvency. It indicated the availability of
current assets in rupees for every one rupee of current liability. A current ratio of 2:1 is considered
satisfactory. The higher the current ratio, the greater the margin of safety; the larger the amount of
current assets in relation to current liabilities, the more the firm's ability to meet its obligations. It is a
cured -and
-quick measure of the firm's liquidity.
Current ratio is calculated by dividing current assets and current liabilities.
Current Assets
Current Ratio =
Current Liabilities
Quick Ratio
Quick Ratio establishes a relationship between quick or liquid assets and current liabilities. An
asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value.
Cash is the most liquid asset, other assets that are considered to be relatively liquid asset and included in
quick assets are debtors and bills receivables and marketable securities (temporary quoted investments).
Inventories are converted to be liquid. Inventories normally require some time for realizing into
cash; their value also has a tendency to fluctuate. The quick ratio is found out by dividing quick assets
by current liabilities.
Current assets - Inventories

Quick Ratio =
Current Liabilities
Generally, a quick ratio of 1:1 is considered to represent a satisfactory current financial condition.
Quick ratio is a more penetrating test of liquidity than the current ratio, yet it should be used
cautiously. A company with a high value of quick ratio can suffer from the shortage of funds if it has
slow- paying, doubtful and long duration outstanding debtors. A low quick ratio may really be
prospering and paying its current obligation in time.
Cash Ratio
Cash is the most liquid asset; a financial analyst may examine Cash Ratio and its equivalent
current liabilities. Cash and Bank balances and short-term marketable securities are the most liquid
assets of a firm, financial analyst stays look at cash ratio. Trade investment is marketable securities of
equivalent of cash. If the company carries a small amount of cash, there is nothing to be worried about
the lack of cash if the company has reserves borrowing power. Cash Ratio is perhaps the most stringent
Measure of liquidity. Indeed, one can argue that it is overly stringent. Lack of immediate cash may not
matter if the firm stretch its payments or borrow money at short notice.
Cash and bank balances + Current Investment

Cash Ratio= --------------------------------------------------------------------
Current Liabilities
LEVERAGE RATIOS
Financial leverage refers to the use of debt finance while debt capital is a cheaper source of
finance: it is also a riskier source of finance. It helps in assessing the risk arising from the use of debt
capital. Two types of ratios are commonly used to analyze financial leverage.
1. Structural Ratios &
2. Coverage ratios.
Structural Ratios are based on the proportions of debt and equity in the financial structure of firm.
Coverage Ratios shows the relationship between Debt Servicing, Commitments and the sources
for meeting these burdens.
The short-term creditors like bankers and suppliers of raw material are more concerned with the
firm's current debt-paying ability. On the other hand, long-term creditors like debenture holders,
financial institutions are more concerned with the firm's long-term financial strength. To judge the long-
term financial position of firm, financial leverage ratios are calculated. These ratios indicated mix of
funds provided by owners and lenders.
There should be an appropriate mix of Debt and owner's equity in financing the firm's assets.
The process of magnifying the shareholder's return through the use of Debt is called "financial
leverage" or "financial gearing" or "trading on equity". Leverage Ratios are calculated to measure the
financial risk and the firm's ability of using Debt to share holder's advantage.
Leverage Ratios can be divided into five types.
Debt equity ratio.
Debt ratio.
Interest coverage ratio
Proprietary ratio.
Capital gearing ratio
Debt equity ratio

It indicates the relationship describing the lenders contribution for each rupee of the owner's
contribution is called debt-equity ratio. Debt equity ratio is directly computed by dividing total debt by
net worth. Lower the debt-equity ratio, higher the degree of protection. A debt-equity ratio of 2:1 is
considered ideal. The debt consists of all short term as well as long-term and equity consists of net
worth plus preference capital plus Deferred Tax Liability.
Long term Debts

Debt Equity Ratio = ----------------------
Share holder funds (Equities)
Debt ratio
Several debt ratios may used to analyze the long-term solvency of a firm. The firm may be
interested in knowing the proportion of the interest-bearing debt in the capital structure. It may,
therefore, compute debt ratio by dividing total total debt by capital employed on net assets. Total debt
will include short and long-term borrowings from financial institutions, debentures/bonds, deferred
payment arrangements for buying equipments, bank borrowings, public deposits and any other interest-
bearing loan. Capital employed will include total debt net worth.
Debt
Debt Ratio = ----------
Equity
Interest Coverage Ratio

The interest coverage ratio or the time interest earned is used to test the firms’ debt servicing
capacity. The interest coverage ratio is computed by dividing earnings before interest and taxes by
interest charges. The interest coverage ratio shows the number of times the interest charges are covered
by funds that are ordinarily available for their payment. We can calculate the interest average ratio as
earnings before depreciation, interest and taxes divided by interest.
EBIT
Interest Coverage ratio = ---------------
Interest
Proprietary ratio
The total shareholder's fund is compared with the total tangible assets of the company. This ratio
indicates the general financial strength of concern. It is a test of the soundness of financial structure of
the concern. The ratio is of great significance to creditors since it enables them to find out the proportion
of share holders funds in the total investment of business.
Net worth
Proprietary Ratio =--------------------------------------100
Total tangible assets
Capital gearing ratio:
This ratio makes an analysis of capital structure of firm. The ratio shows relationship between
equity share capital and the fixed cost bearing i.e., preference share capital and debentures.
Equity capital
Capital gearing ratio = -----------------------------------------------
P.S capital +Debentures +Loans
ACTIVITY RATIOS
Turnover ratios also referred to as activity ratios or asset management ratios, measure how
efficiently the assets are employed by a firm. These ratios are based on the relationship between the
level of activity, represented by sales or cost of goods sold and levels of various assets. The
improvement turnover ratios are inventory turnover, average collection period, receivable turn over,
fixed assets turnover and total assets turnover.
Activity ratios are employed to evaluate the efficiency with which the firm manages and utilize its
assets. These ratios are also called turnover ratios because they indicate the speed with which assets are
being converted or turned over into sales. Activity ratios thus involve a relationship between sales and
assets. A proper balance between sales and assets generally reflects that asset utilization.
Activity ratios are divided into four types:
Total capital turnover ratio
Working capital turnover ratio
Fixed assets turnover ratio
Stock turnover ratio
Total capital turnover ratio: This ratio expresses relationship between the amounts
invested in this assets and the resulting in terms of sales. This is calculated by dividing the net
sales by total sales. The higher ratio means better utilization and vice-versa.
Some analysts like to compute the total assets turnover in addition to or instead of net assets
turnover. This ratio shows the firm's ability in generating sales from all financial resources committed to
total assets.
Sales
Total assets turnover = ----------------------------
Capital employed.
Working capital turnover ratio: This ratio measures the relationship between working
capital and sales. The ratio shows the number of times the working capital results in sales.
Working capital as usual is the excess of current assets over current liabilities. The following
formula is used to measure the ratio:
Sales
Working capital turnover ratio = -------------------------------
Working capital
Fixed asset turnover ratio: The firm may which to know its efficiency of utilizing fixed
assets and current assets separately. The use of depreciated value of fixed assets in computing
the fixed assets turnover may render comparison of firm's performance over period or with
other firms.
The ratio is supposed to measure the efficiency with which fixed assets employed a high ratio
indicates a high degree of efficiency in asset utilization and a low ratio reflects inefficient use of assets.
However, in interpreting this ratio, one caution should be borne in mind, when the fixed assets of firm
are old and substantially depreciated, the fixed assets turnover ratio tends to be high because the
denominator of ratio is very low
Net sales
Fixed asset turnover ratio = -------------------------
Fixed assets
Stock turnover ratio
Stock turnover ratio indicates the efficiency of firm in producing and selling its product. It is
calculated by dividing the cost of goods sold by the average stock. It measures how fast the inventory is
moving through the firm and generating sales.
The stock turnover ratio reflects the efficiency of inventory management. The higher the ratio,
the more efficient the management of inventories and vice versa .However, this may not always be true.
A high inventory turnover may be caused by a low level of inventory which may result if frequent stock
outs and loss of sales and customer goodwill.
Cost of goods sold

Stock turnover ratio = ------------------------------
Average stock
Opening stock + Closing stock

Average stock = --------------------------------------------
2
PROFITABILITY RATIOS
A company should earn profits to survive and grow over a long period of time. Profits are
essential but it would be wrong to assume that every action initiated by management of a company
should be aimed at maximizing profits. Profit is the difference between revenues and expenses over a
period of time.
Profit is the ultimate 'output' of a company and it will have no future if it fails to make
sufficient profits. The financial manager should continuously evaluate the efficiency of company in
terms of profits. The profitability ratios are calculated to measure the operating efficiency of company.
Creditors want to get interest and repayment of principal regularly. Owners want to get a required rate of
return on their investment.
Generally, two major types of profitability ratios are calculated:
 Profitability in relation to sales
 Profitability in relation to investment
Profitability Ratios can be divided into six types:
Gross profit ratio

Operating profit ratio
Net profit ratio
Return on investment
Earns per share
Operating expenses ratio
Gross profit ratio
First profitability ratio in relation to sales is the gross profit margin the gross profit margin
reflects.
The efficiency with which management produces each unit of product. This ratio indicates the
average spread between the cost of goods sold and the sales revenue. A high gross profit margin is a
sign of good management. A gross margin ratio may increase due to any of following factors: higher
sales prices cost of goods sold remaining constant, lower cost of goods sold, sales prices remaining
constant. A low gross profit margin may reflect higher cost of goods sold due to firm's inability to
purchase raw materials at favorable terms, inefficient utilization of plant and machinery resulting in
higher cost of production or due to fall in prices in market.
This ratio shows the margin left after meeting manufacturing costs. It measures the efficiency of
production as well as pricing. To analyze the factors underlying the variation in gross profit margin, the
proportion of various elements of cost (Labor, materials and manufacturing overheads) to sale may
studied in detail.
Gross profit
Gross profit ratio =-------------------------100
Net sales
Operating profit ratio

This ratio expresses the relationship between operating profit and sales. It is worked out by
dividing operating profit by net sales. With the help of this ratio, one can judge the managerial
efficiency which may not be reflected in the net profit ratio.
Operating profit
Operating profit ratio =-----------------------------100
Net sales
Net profit ratio

Net profit is obtained when operating expenses, interest and taxes are subtracted from the gross
profit. Net profit margin ratio established a relationship between net profit and sales and indicates
management's efficiency in manufacturing, administering and selling products.
This ratio also indicates the firm's capacity to withstand adverse economic conditions. A firm
with a high net margin ratio would be in an advantageous position to survive in the face of falling
selling prices, rising costs of production or declining demand for product
This ratio shows the earning left for share holders as a percentage of net sales. It measures
overall efficiency of production, administration, selling, financing. Pricing and tax management. Jointly
considered, the gross and net profit margin ratios provide a valuable understanding of the cost and
profit structure of the firm and enable the analyst to identify the sources of business efficiency /
inefficiency.
Net Profit
Net Profit Ratio =-------------------------------100
Net sales
Return on investment: This is one of the most important profitability ratios. It indicates the
relation of net profit with capital employed in business. Net profit for calculating return of investment
will mean the net profit before interest, tax, and dividend. Capital employed means long term funds.
E.B.I.T
Return on investment =-------------------------------------100
Capital employed
Earnings per share
This ratio is computed by earning available to equity share holders by the total amount of equity
share outstanding. It reveals the amount of period earnings after taxes which occur to each equity share.
This ratio is an important index because it indicates whether the wealth of each share holder on a per
share basis as changed over the period.
Net profit
Earnings per share =---------------------------------100
Number of equity shares
It explains the changes in the profit margin ratio. A higher operating expenses ratio is
unfavorable since it will leave a small amount of operating income to meet interest, dividends.
Operating expenses ratio is a yardstick of operating efficiency, but it should be used cautiously. It is
affected by a number of factors such as external uncontrollable factors, internal factors. This ratio is
computed by dividing operating expenses by sales. Operating expenses equal cost of goods sold plus
selling expenses and general administrative expenses by sales.
Operating expenses
Operating expenses ratio =------------------------------100
Sales
Research Methodology
Research Design
In view of the objects of the study listed above an exploratory research design has been
adopted. Exploratory research is one which is largely interprets and already available information
and it lays particular emphasis on analysis and interpretation of the existing and available
information.
 To know the financial status of the company.
 To know the credit worthiness of the company.
 To offer suggestions based on research finding.
Data Collection Methods
Primary Data
Information collected from internal guide and finance manager. Primary data is first hand
information.
Secondary Data
Company balance sheet and profit and loss account. secondary data is second hand
information.
Data Collection Tools
To analyze the data acquire from the secondary sources “Ratio Analysis”The scope of the
study is defined below in terms of concepts adopted and period under focus.
First the study of Ratio Analysis is confined only to the Amarraja Batteries Limited.
Secondly the study is based on the annual reports of the company for a period of 4 years
from 2006-07 to 2009-10 the reason for restricting the study to this period is due time constraint.
LIMITATIONS
 The study was limited to only four years Financial Data.
 The study is purely based on secondary data which were taken primarily from
Published annual reports of Amararaja batteries Ltd.,
 There is no set industry standard for comparison and hence the inference is made
on general standards.
 The ratio is calculated from past financial statements and these are not indicators of
future.
 The study is based on only on the past records.
 Non availability of required data to analysis the performance.
 The short span of the time provided also one of limitations.

Company profile
COMPANY PROFILE
Amara Raja Batteries (ARBL) incorporated under the companies Act, 1956 in 13 th
February 1985, and converted into public Limited Company on 6th September 1990.
The chairman and Managing Director of the company is “Sri Gala Ramachandra Naidu”,
ARBL is a first company in India, which manufactures Values regulated Lead Acid (VRLA)
Batteries. The main objectives of the company are a manufacturing of good quality of “Sealed
Maintenance Free” (SMF) acid batteries. The company is setting up to Rs.1, 920 lakhs plant is in
185 acres in Karakambadi village, Renigunta Mandal. The project site is notified under “B”
category.
The company has the clear-cut policy of direct selling without any intermediate. So they
have set up six branches and are operated by corporate operations office located in Chennai. The
company has virtual monopoly in higher A.H.(Amp Hour) rating Market its product VRLA . It is
also having the facility for industrial and automotive batteries.
Amara Raja is 5 ‘S ’Company and its aim are to improve the work place environment by
using 5‘S techniques which is A systematic and rational approach to workplace organization and
methodical house keeping with a sense of purpose, consisting of the following five elements
CULTURE AND ENVIRONMENT
 Amara Raja is putting a number of HRD initiatives to foster a spirit of togetherness and a
culture of meritocracy. Involving employees at all levels in building organizational
support plans and in evolving our vision for the organization.
 ARBL encourages initiative and growth of young talent allows the organization to develop
innovation solution and ideas.
 Benchmark pollution control measures, energy conversation measures, waste reduction

schemes, massive green belt development programs, employee health monitoring and
industrial safety programs have helped ARBL to take further environment management
program.
 Amara Raja has now targeted to secure the ISO 14001 certification.
QUALITY POLICY
ARBL’s main aim is to achieve customer satisfaction through the collective

commitment of employees in design; manufacture and marketing of reliable power systems,
batteries, allied products and services.
To accomplish above, ARBL focus on
 Establishing superior specifications for our products and processes.

 Employing state-of-the-art technologies and robust design principles.
 Striving for continuous improvements in process and product quality.
 Implementing methods and techniques to monitor quality levels.
 Providing prompt after sales service.
RESEARCH & DEVELOPMENT

Specific areas in which the company carries out R&D are;
 New product development.
 Process technology up gradation.
 Application engineering for new market place.
 Quality improvement.
Benefits derived as a result of above R&D,
 Developed 4v/200 AH batteries.
 Design optimization of higher AH batteries for DOT application.
 Design optimization of batteries 92v/1285 AH for TL/AC-Railway application.
 Formation cycle optimization results in reduced duration and rejection.
 Chemist curing cycle optimization.
 Manufacture of automobile battery for four-wheeler vehicles.
FUTURE PLAN OF ACTION
 Commercialization of motorcycle batteries.
 Development of new range high integrity VRLA cell design.
 Establishment of product for new application segment.
 Studies on paste additives to enhance the battery performance.
 In-depth evaluation of metal surface treatment chemical to reduce the process cycle time.
 Validating alternative grades of propylene to conserve energy and to improve productivity.

MILE STONES
YEAR Mile stone
1997 100 crores turnover
1997 ISO-9001 Accreditation
1999 S-9000 Accreditation
2002 SO-14001 Certification
AWARDS
 “The spirit of Excellence”- Awarded by academy of fine arts, Tirupati.
 “Best Entrepreneur of the year 1998”-awarded by Hyderabad Management

Association.
 “Industrial Economist Business Excellence Award – 1991”- Awarded by the industrial

Economist, Chennai.
 “Excellence Award”-by institution of economic studies (ES), New Delhi.
 “Udyog Rattan Award”- by institution of economic studies, New Delhi.
 “QI CERTIFICATE” –2002 - By FORD Company

AMARA RAJA GROUP OF COMPANIES
 AMARA RAJA POWER SYSTEMS PRIVATE Ltd. (ARPSL), Karakambadi,
Tirupati.
 MANGAL PRECISION PRODUCTS PRIVATE Ltd1. (MPPL1), Karakambadi,
Tirupati.
 MANGAL PRECISION PRODUCTS PRIVATE Ltd2. (MPPL2), Petamitta, Chittoor.
 AMARA RAJA ELECTRONICS PRIVATE LIMITED (AREPL), Dighavamgham,
Chittoor.
 GALLA FOODS PRIVATE LIMITED (GFPL), Puthalapattu Mandal, Chittoor.
This ratio is calculated by dividing sales in to current assets. This ratio expressed the
number of times current assets are being turn over in stated period. This ratio shows how well
the current assets are being used in business. The higher ratio is showing that better utilization
of the current assets another a low ratio indicated that current assets are not being efficiently
utilized.
INDUSTRIAL BATTERY DIVISION (IBD)
Amara Raja has become the benchmark in the manufacturer of industrial batteries. India is
one of the largest and fastest growth markets for industrial batteries in the world. Amara Raja is
leading in the front, with an 80% market share is stand by VRAL batteries point of view. It is also
having the facility for production plastic components.
ARBL id the first company in India to manufacture VRLA (SMF) Batteries. The initial
investment of the company has Rs.1920 lakhs; the total land is around 18 acres in Karambadi
village, Renigunta Mandal. The project site is notified under ‘B’ category.
Capacity
The capacity per the year 2005-2006 of IBD is 3, 70,000 cells per annum.
Products
Amara Raja being the first entrant in this industry and has the privilege of pioneering VRLA
technology in India.
Amara Raja has established itself as a reliable supplier of high quality products to major
segments like Telecom, Railways and power.
2. PLATE PREPARATION
Using lead oxide production in earlier stage positive and negative paste is prepared with
addition of sulphuric acid and water. These pastes are applied to respective grids using industrial
fasting machines.
3. CALL ASSEMBLY
Here positive and negative grids are separated by a sheet of fibreglass mat bush bars are
welded and as assembled into a jar or container to form battery cells. Then these cells are
assembled according to the customer’s specification into battery sets or systems.
4. FORMATION
In this process cells are filled with the electrolyte (surphuric acid) and then the set is
charged and discharged repeatedly, after final charging the battery comes out ready to be used.
Competitors
The Major competitors for Amara Raja Batteries are “Exude industries Ltd, and GNB”.
AUTOMOTIVE BATTERY DIVISION (ABD)
ARBL has inaugurated its new automotive plant at Karakambadi in Tirupati on September
24th, 2001. This plan is a part of the most completely integrated battery manufacturing facility in
India with all critical components, including plastics sourced in-house from existing facilities on
site. In this project, Amara Raja’s strategic alliance partners Johnson Control Inc., of USA have
closely worked technology and plant engineering. It is also having the facility for producing
plastic components required for automotive batteries.
Capacity
With an existing production capacity of 5 lakhs units of automotive batteries, the new
Greenfield plant will now be able to produce 1 million batteries per annum. This is the first phase
in the enhancement of Amara Raja’s production capacity, for this the company has invested Rs.45
crores and the next phase, at an additional cost of Rs.25 crores, for this the production capacity
will be increase to 2 million units and the company has estimated to complete around 3 years,
after that ARBL will become the single largest battery of manufacturer in Asia. The fiscal year
2005-2006’s capacity Of ABD is 2.2 million numbers of batteries per year.
Products
The products of ABD are
 Amaron Hi-way
 Amaron Harvest
 Amaron shield
 Amaron Highlife
The plastic products of ABD are”jars” and “jar covers”.
Customers
ARBL has prestigious OEM (Original Equipment Manufacture) clients like FORD,
GENERAL MOTORS, DAEWOO MOTORS, MERCEDES BENZ, DAIMLER CHRYSLER,
MARUTI UDYOG LTD., premier Auto Ltd., and recent acquired a preference supplier alliance
with ASHOK LEYLAND, HINDUSTAN MOTORS, TELCO, MAHINDRA & MAHINDRA and
SWARAJ MAZDA.
COMPETITORS
 EXIDE
 PRESTOLITE
 AMCO.
MAJOR USERS
1. RAILWAYS
Train lighting air conditioning, diesel engine starting, signaling systems, control
systems, emergency breaking systems, and telecommunications.
2. TELECOMMUNICATION
Central office power plants, microwave repeaters station, RAX in public building,
emergency lighting system at airports, fire alarm system etc.,
3. POWER SYSTEMS
Switch gear control systems, powerhouse control systems, rural street lighting etc.
4. UPS SYSTEM
Back up power to computers in progress control systems in industry etc.
5. TRACTION
Forklift trucks, earth moving machinery, mining locomotives and road vehicles etc.
6. PETROCHEMICALS
Off—share and no—shore oil exploration lighting systems, security systems etc.
7. DEFENCE
Defence communication, aircraft and helicopter ground starting, stationary and mobile
diesel engine starting etc.
PRODUCTION PROCESS
The process for the production of lead acid batteries consists essentially of five operations
described below
1. GRID CASTING
In the process grids to hold the active materials are made. Battery grids are produced using
microprocessor-casting machines with patented alloys. Different sizes of moulds are used to get
the required size of grids.
2. PLATE PREPARATION
Using lead oxide production in earlier stage positive and negative paste is prepared with
addition of sulphuric acid and water. These pastes are applied to respective grids using industrial
fasting machines.
3. CALL ASSEMBLY
Here positive and negative grids are separated by a sheet of fibreglass mat bush bars are
welded and as assembled into a jar or container to form battery cells. Then these cells are
assembled according to the customer’s specification into battery sets or systems.
4. FORMATION
In this process cells are filled with the electrolyte (surphuric acid) and then the set is
charged and discharged repeatedly, after final charging the battery comes out ready to be used.
5. TESTING & INSPECTION
Testing the battery is discharged to the customer it is tested for quality specifications.
Data analysis & Interpretation
DATA ANALYSIS AND INTERPRETATIONS
LIQUIDITY RATIO’S
CURRENT RATIO
The ratio between all current assets and all current liabilities; another way of expressing
liquidity. It is a measure of the firm’s short-term solvency. It indicates the availability of current
assets in rupees for every one rupee of current liability. A ratio of greater than one means that the
firm has more current assets than current claims against them.
Current Assets
Current ratio = -----------------------------------------
Current Liabilities
Table 4.1.1 Current ratio
S.No Year
CURRENT
CURRENT ASSETS CURRENT RATIO
LIABILITIES
2006‐07 1,612,642,497 638,958,266 2.52
1.
2007‐08 2,280,704,176 1,181,003,846 1.93

2.
2008‐09 3,500,193,294 1,312,272,610 2.67

3.
2009‐10 5,975,961,025 2,020,744,952 2.96

4.
Graph 4.1.1 Current ratio
2.96
3
2.67
2.52
2.5
1.93
2
1.5
0.5
0
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
The standard norm for current ratio is 2:1. During the year 2006 the ratio is 2.52 and it has
decreased to 1.93 during the year 2007 and increased to 2.67 in 2008 and it is increased to 2.67 in
the year 2009 and it has increased to 2.96 in the year 2010. The ratio above was standard except
in the year 2008. So the ratio was satisfactory.
Quick ratio
Quick ratio establishes a relationship between quick, or liquid, assets and current liabilities. An
asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value.
Current Assets – Inventories Quick Ratio =

Current liabilities
Table 4.1.2 Quick Ratio
S.NO Year
QUICK ASSETS CURRENT LIABILITIES QUICK RATIO
1 2006‐07 1,171,683,584 638,958,266 1.83
2 2007‐08 1,708,741,955 1,181,003,846 1.45
2008‐09 2,578,479,879 1,312,272,610 1.96

3.
4,032,625,321 2,020,744,952 1.99

4. 2009‐10
Gr ph 4.1.2 Quick Ratio
a
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
The standard norm for the quick ratio is 1:1. Quick ratio is decreased in the year 2007 to
1.83 from 2.45. Then, it decreased to 1.45 in the year 2008. And it has increased to 1.96 in t he
year 2 0 e 9 h
09 and th n it increased to 1.9 in the year 2010. However the ratio was above t e
standard norm so the ratio was satisfactory.
Page 40
Cash ratio: The ratio between cash plus marketable securities and current liabilities.
Cash & Bank balances

Cash Ratio = _ _
Current liabilities
Table 4.1.3 Cash Ratio

Year
S.NO CASH&BANK CURRENT
CASH RATIO
BALANCES LIABILITIES
1 2006‐07 169,121,827 638,958,266 0.26
2 2007‐08 205,212,363 1,181,003,846 0.17
2008‐09 256,000,280 1,312,272,610 0.20

3.
511,453,739 2,020,744,952 0.25

4. 2009‐10
Gr aph 4.1.3 Cash Ratio
0.3
0.25
0.2
0.15
0.1
0.05
0
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
In all the above years the absolute quick ratio is very low. The standard norm for absolute
quick ratio is 1:2
the company is failed in keeping sufficient Cash & Bank Balances and
Marketable Securities.
4.1.4 NET WORKING CAPITAL RATIO: The difference between current assets and current
liabilities excluding short-term bank borrowing is called net working capital or net current assets.
Net worki g capital

Net working capital ratio =
Net assets
Table 4.1.4 Net workingac pital ratio

S.NO Year NET WORKING NET WORKING
CAPI AL CAPITAL RATIO
1 2006‐07 973,684,231 1,935,207,714 0.50
2 2007‐08 1,099,700,330 2,191,397,006 0.50
3 2008‐09 2,187,920,684 3,817,892,862 0.57
4 2009‐10 3,955,216,073 6,501,134,460 0.61
Graph 4.1.4 Net workin g capital ratio
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
Net Working Capital ratio is 0.45 in 2006 but increased to 0.50 in the next year i.e.,
2007. From that year the ratio increased to 0.50 in 2008 and followed in 2009 also and increased
to 0.61in 2010 but condition of business working capital is not shortage.
LEVERAGE RATIO’S
4.2.1 Debt Ratio

If the firm may be Interested in knowing the proportion of the interest bearing debt
in the capital structure.
Total Debt
Debt ratio = -----------------------------------------
Total Debt + Net Worth
Table 4.2.1 Debt ratio
S.No Year TOTAL

TOTAL DEBT DEBT + NET DEBT RATIO
WORTH
2006‐07 233,058,880 2,039,907,551 0.11
1.
2007‐08 378,672,427 2,391,525,347 0.16

2.
2008‐09 1,407,083,880 3,843,741,557 0.37

3.
2009‐10 3,162,620,560 3,493,635,030 1.10

4.
Graph 4.2.1 Debt ratio
1.2 1.1
0.8
0.6
0.4 0.37
0.2 0.16
0.11
0
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
This ratio gives results relating to the capital structure of a firm. Debt ratio is 0.08 in the
year 2006 it increased to 0.11 & 0.16
in the corresponding years 2007 & 2008. Again it is
increased to 0.37 & 1.10 in the year 2009& 2010. From the above in fluctuating trend we can
conclude that the
company’s dependence on debt is increasing. It is not better position in
collection of debt.
4.2.2 Debt equity ratio
Debt equity ratio indicates the relationship describing the lenders contribution for each
rupee of the owner’s contribution is called debt- equity ratio. Debt equity ratio is computed by
dividing Long term Liabilities divided by Equity. Lower debt – equity ratio higher the degree of
protection. A debt-equity ratio of 2:1 is considered ideal.
LONG TERM LIABILITIES Debt equity ratio = -----------------------------------------

EQUITY
Table 4.2.2 Debt equity ratio
S.No Year
TOTAL DEBT
NET WORTH D.E.RATIO
2006‐07 233,058,880 1,806,848,671 0.13
1.
2007‐08 378,672,427 2,012,852,920 0.19

2.
2008‐09 1,407,083,880 2,436,657,677 0.58

3.
2009‐10 3,162,620,560 3,331,014,470 0.95

4.
Graph 4.2.2 Debt equity ratio
1 0.95
0.9
0.8
0.7
0.6 0.58
0.5
0.4
0.3
0.2 0.19
0.13
0.1
0
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
The ratio gives results relating to the capital structure of a firm. Debt equity ratio is 0.09 in
the year 2006 and it increased to 0.13 & 0.19 in the year 2007 and 2008. In the year 2009 & 2010
the ratio has increased to 0.58 & 0.95. We can conclude that the company depends on the debt
fund is increasing.
I NTEREST COVERAGE RATIO: The ratio shows the number of times the interest charges are
covere e
d by funds that are ordinarily available for th ir payment.
ratio
Interest coverage
E T
B
= _
I
Interest
Table 4.2.3 Interest coverage ar tio

S.NO Year
EBIT INTEREST I.C.RATIO

137,259,583 1,448,427 94.76
1 2006‐07
386,899,738 1 ,435,515 28.80

2 20 7‐08
742,908,741 3 ,924,293 24.02

3 20 8‐09
0
1,588,690,299 129,308,874 12.29
4 20 9‐10
0
0 Grap 4.2.3 Inter st Coverag ratio

100
80
h e e
60
40
20
0
2006‐07 2007‐08 2008‐09 009‐10
Interp tation: Interest coverage ratio is 07.56 in the year 2006. It is increased automatically t o
r
e the year 2007. But, it is decreased to 28.80 in the year 2008 and decreased to 24.02 in t e
94.76 in
2
year 2009 and it again decreased to 12.29 in the ear 2010. n this position outsid investors is h
interested to invest the money in this co pany. y I e
TOTAL LIABILITIES RATIO

Formula: Total Liabilities
Total Assets
Total liabilities: Current liabilities + Secured & Unsecured

Loans.
Total : Fixed assets + Investments + Current assets

Assets
Table 4.2.4: Total Liabilities ratio
S.NO Year TOTAL

TOTAL ASSETS
LIABILITIES T.L. RATIO
1 2006‐07 872,017,146 2,809,793,132 0.3
2 1,559,676,273 3,692,541,508 0.4

2007‐08
3 2008‐09 2,719,356,490 5,292,107,128 0.5
2009‐10 5,183,,365,512 8,683,886,037 0.6

4
Graph 4.2.4: Total abilities ratio

Li
0.6
0.5
0.4
0.3
0.2
0.1
2006‐07 2007‐08 2008‐09 2009‐10
Interp etation: In the years, 2006 & 2007 the total liabilities is 0.2&0.3 but in the year 2008 the
r
total liabilities increased to 0.4 and the ratio increas
ed to 0.5 & 0.6 in the corresponding years of
2009 &2010.
ACTIVITY RATIO’S
Inventory turnover ratio

It indicates the firm efficiency of the firm in producing and selling its product. It is calculated
by dividing the cost of goods sold by the average inventory.
Cost of goods sold Inventory turnover ratio=

Average inventory
ost of goods sold = Raw materials consumed +payments &benefits to employees +mfr, selling &admin expenses +duties & t
Table 4.3.1: Inventory turnover ratio
S.NO Year
COST OF GOODS
AVG INVENTORY I.T.RATIO
SOLD
1 2006‐07 2,228,549,828 374,102,223 5.96
2 2007‐08 3,499,805,230 506,460,567 6.91
O
2008‐09 5,324,665,192 746,837,818 7.13
3
4
2009‐10 9,782,463,974 1,432,524,559 6.83
Graph 4.3.1: Inventory turnover ratio
0
2006‐07 2007‐08 2008‐09 2009‐10
Interp etation:
r
Inventory turnover ratio is 5.57 times in the year 2006. But, it is increased to 5.96 in the
year 2007. Then, it is increased to 6.91 in the year 2008 and again increased to 7.13 in the year
2009. But, it is decreased to 6.83 in the year 2010. Inventory turn over ratio increased for year by
year that is company production is also increased. Subsequently sales are also increased.
Debtors turnover r tio: It is found out b dividing the credit sales by aver ge debtors.
a y a
Debtor s turnover indicates the number of times debtor’s turno er each year.
’ v
Sales
Debtors ratio =
turnover
Average Debtors
Sales = Gross Sales

Table 4.3.2: Debtors ut rnover ratio Page 50
S.NO Year AVERAGE
SALES D.T.RATIO
DEBTORS
1 2006‐07 2,685,436,096 560,689,881 4.79
2 2007‐08 4,458,295,779 753,113,338 5.92
3 2008‐09 7,451,032,998 1,158,032,767 6.43
13,499,867,499 1,862,113,498 7.25

4 2009‐10
Graph 4.3.2: Debtors t urnover ratio
8
7
6
5
4
3
2
1
0
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation: Debtor’s tur nover ratio is 4.31 tim s in the year 2006 and it is increased to 4.79
e
times in the year 2007 and increased to 2
5.92 times in the year 008 and it increased to 6.43 times
&7.25 times in the years 2009 &2010.
Page 51
Fixed asset turnover ratio
The ratio is supposed to measure the efficiency with which fixed assets are employed a high
ratio indicates a high degree of efficiency in asset utilization and a low ratio reflects inefficient use of
assets. However, in interpreting this ratio, one caution should be borne in mind. When the fixed assets
of the firm are old and substantially depreciated, the fixed assets turnover ratio tends to be high because
the denominator of the ratio is very low.
Net Sales
Fixed Asset Turnover Ratio =
Net Fixed Asset
Sales = Gross Sales
Net fixed assets: Net block
Table 4.3.3: Fixed asset turnover ratio
S.NO Year
NET FIXED
SALES F.A.T.RATIO
ASSETS
2,685,436,096 948,631,374 2.83

1 2006‐07
4,458,295,779 1,043,547,559 4.27

2
2007‐08
3 7,451,032,998 1,568,304,581 4.75

2008‐09
13,499,867,499 1,888,508,475 7.15

4 2009‐10
Graph 4.3.3: Fixed asset turnover ratio
2006‐2007 2007‐08 2008‐09 2009‐10
Interpretation:
Fixed assetsCurrent
turn overasset
ratioturnover
is 2.01 inratio
the year
= 2006 and it is increased to 2.83 in the year 2007. In
the year 2008 the ratio is 4.27 and it continued up to 4.75 and to 7.15 in the years 2009&2010.
urrent asset turnover ratio

Table 4.3.
_
u s
4: Current asset turnover ratio
Sales
_
C rrent asset
S.NO Year CURRENT
SALES C.A.T. RATIO
ASSETS
1 2006‐07 2,685,436,096 1,612,642,497 1.67
2 2007‐08 4,458,295,779 2,280,704,176 1.95
3 2008‐09 7,451,032,998 3,500,193,294 2.12
13,499,867,499 5,975,961,025 2.26

4 2009‐10
Graph 4.3.4 Current assets turnover ratio
2.5
1.5
0.5
0
2006‐07 2007‐08 2008‐09 20 09‐10
Interpretation:
Current assets turnover ratio is 1.68 in the year 2006 and it is decreased t o 1.67 in t eh
year 2007. But, in the year 20 c
08 the ratio is increased to 1.95 and it continuously in reased up to
2.26 in
the year 2010. From above we can c nclude that current assets turnover ratio is
o a
increasing.
Total assets turnover ratio
This ratio ensures whether the capital employed has bee n effectively used or not. This is als o
test of managerial efficiency and business performance. Higher total capital turnover ratio is always
requiredin the interest of the company.
Sales
Total asset over ratio =
turn
Capital employed
Total assets: Fixed assets + Current assets + Investments
Table 4.3.5: Total asset turnover ratio

S. NO Year SALES TOTAL ASSETS T.A.T. RATIO
1 2006‐07 2,685,436,096 2,809,793,132 0.96
2 2007‐08 4,458,295,779 3,692,541,508 1.21
3 2008‐09 7,451,032,998 5,292,107,128 1.41
4 2009‐10 13,499,867,49 8,683,886,037 1.55

9
Graph 4.3.5: Total assets turn

o ver ratio
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
Total assets ratio is 0.83 in the year 2006 and it gradually increased year by year and reached
to 1.55 in the year 2010.It means Total Assets is increased in every year.
orking capital
W turnover ratio
A firm may also like to relate net current assets or net working capital to sales. Working
capital turnover indicates for one rupee of sales the company ne eds how many net current assets.
This ratio indicates whether or not working capital has been effectively utilized market sales.
Sales
Working capital turnover =
ratio Working capital
T ble
a 4.3.6: Working capital turnover ratio
S.NO Year NET CURRENT
SALES W.C.T. RATIO
ASSETS
1 2006‐07 2,685,436,096 973,684,231 2.76
2 2007‐08 4,458,295,779 1,099,700,330 4.05
3 2008‐09 7,451,032,998 2,187,920,684 3.41
13,499,867,499 3,955,216,073 3.41

4 2009‐10
Graph 4.3.6: Working capital turnover ratio

5
0
2006‐07 2007‐08 2008‐09 2009‐10
Interp etation:
r
Working capital turnover ratio is 2.41 in the year 2006 and it is increased to 2.76 in the year
2007. In the year 2008 increased to 4.05 . Again it decreased to 3.41 in the year 2009&2010. The
higher the working capital turnover the more favorable for the company.
et asset turnover
N ratio
Sales
Net Asset Turnover Ratio = N t Asset
Net Assets: Net Fixed Assets + Net Current Assets
Table 4.3.7: Net asset turnover ratio

S.NO Year
SALES NET ASSETS N.A.T. RATIO
1 2006‐07 2,685,436,096 1,935,207,714 1.39
2 2007‐08 4,458,295,779 2,191,397,006 2.03
3 2008‐09 7,451,032,998 3,817,892,862 1.95
4 2009‐10 13,499,867,499 6,501,134,460 2.08
Graph 4.3.7: Net asset turnover ratio
2.5
1.5
0.5
2006‐2007 2007‐08 2008‐09 2009‐10

Interp etation:
r
Net Assets turnover ratio is 1.11 in the year 2006 and it is increased to 1.39 in the year
2007 and it is increased to 2.03 in the year 2008. And, it decreased to 1.95 in the year 2009 and it
slightlyC incr apital ratio
eas turnover
ed
2.08 in the year 2010.
The ratio obtains by dividing sales with the capital employed.
Sales
Capital turnover ratio = _
Capital Employed
Table 4.3.8: capital turnover rat io
S.NO Year
SALES CAPITAL EMPLOYED C.T. RATIO
1 2006‐07 2,685,436,096 2,170,834,866 1.24
2 2007‐08 4,458,295,779 2,511,537,662 1.78
3 2008‐09 7,451,032,998 3,979,834,518 1.87
13,499,867,499 6,663,141,085 2.03

4 2009‐10
Graph 4.3.8: capital turnover ratio
2.5
1.5
0.5
0
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
Capital turnover ratio is 0.98 in the year 2006 and it is increased 1.24 in the year
2007 and it is increased to 1.78 in the year 2008 and again it is increased to 1.87 in the year 2009
. Then, it increased to 2.03 in the year 2010.
4.3.9 Creditor’s turnover ratio

The ratio obtained by dividing the annual credit purchases with average accounts payable.
Purchases
Creditor’s turnover ratio =
Avge.Creditors
Table 4.3.9: Creditors turnover ratio

S.NO Year AVERAGE
PURCHASES C.T. RATIO
CREDITORS
1 2006‐07 1,422,358,585 192,242,196 7.4
2 2007‐08 2,244,170,172 441,904,975 5.1
3 2008‐09 4,086,818,721 591,059,052 6.9
8,125,662,265 7,081,427,12 11.47

4 2009‐10
Graph 4.3.9: Creditors turnover ratio
12
10
0
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
Creditors’ turnover ratio is 6.1 in the year 2006. It is increased to 7.4 in the year 2007
and it is suddenly decreased to 5.1 in the year 2008 and it suddenly increased to 6.9 in the year
2009 but increased in the next year 2010 to 11.47.
4.4 PROFITABILITY RATIOS

Gross profit ratio
This ratio shows that the margin left after meeting manufacturing costs. It measures the
efficiency of production as well as pricing.
Gross profit
Gross profit margin Ratio = X100
Net sales
Gross profit= Net sales-Cost of goods sold

Cost of goods sold= Opening stock+ material consumed+ mfg .exp- closing stock
Table 4.4.1: Gross profit ratio
S.NO Year
GROSS PROFIT SALES G.P. RATIO (%)
1 2006‐07 456,886,268 2,685,436,096 17
2 2007‐08 958,490,549 4,458,295,779 21.5
3 2008‐09 2,126,367,806 7,451,032,998 28.5
3,717,403,516 13,499,867,499 27.5

4 2009‐10
Page 60
Graph 4.4.1: Gross profit ratio
30
25
Rati
20
15
10
0
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
From the above we can say that gross profit ratio is 16.2% in the year 2006 but it increased
to 17 % &21.5% in 2007& 2008 and again it increased to 28.5% in the year 2009 and it is
decreased to 27.5% in the year 2010. The company is maintaining proper control on trade
activities.
Net profit ratio: This ratio also indicates the firm's acity to with stand adverse economic
ca p
conditions. A firm with a high net margin ratio would be in an advantageous position to survive hin t e
m de and for the product.
face falling selling prices, rising costs of production or declining
Net profit
Net profit ratio= X I00
Net sales
Table 4.4.2: Net profit ratio
S.NO Year PROFIT AFTER NET PROFIT
SALES
TAX MARGIN (%)
1 2006‐07 86,900,563 2,685,436,096 3.2
2 2007‐08 238,465,730 4,458,295,779 5.3
3 2008‐09 470,434,575 7,451,032,998 6.3
4 2009‐10 9,436,315,11 13,499,867,499 6.99
Graph 4.4.2: Net profit ratio

8
6
4
2
0
‐2
‐4
‐6
‐8
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
During the year 2006 the net profit margin is 0.7 it suddenly increased to 3.2% in the year 2007
because of decreased in administration and selling expenses. In the next year, it again increased to
5.3 in the year 2008 and it again increased to 6.3 in 2009 and to 6.99 in the year 2010.

The Operating expenses ratio explains the changes in the profit margin ratio. A higher operating
expense is unfavorable since it will leave a small amount of operating income to meet interest, dividends.
Operating expenses X 100

Operating expenses ratio=
Sales
Operating expenses =Admin expenses+ Selling expenses
Table 4.4.3: Operating expenses ratio
S.NO Year
OPERATING
SALES O.E. RATIO
EXPENSES
I
2006‐07 376,620,609 2,685,436,096 14.02
1
2 2007‐08 550,626,756 4,458,295,779 12.35
3 2008‐09 767,790,197 7,451,032,998 10.30
4 1,388,735,777 13,499,867,499 10.30

2009‐10
Graph 4.4.3: Operating expenses ratio
Page 63
16
Return on Investment
The conventional approach of calculated ROI is to divide PAT by investment.
EBIT
Return on investment(ROI)= Page 64
Capital Employed
Table 4.4.4: Return on investment
S.NO Year EBIT CAPITAL R.O.I. RATIO
EMPLOYED
1 2006‐07 137,259,583 2,170,834,866 0.06
2 2007‐08 386,899,738 2,511,537,662 0.15
3 2008‐09 742,908,741 3,979,834,518 0.19
4 2009‐10 1,588,690,299 6,663,141,085 0.24
Graph 4.4.4: Return on Investment
0.25
0.2
0.15
0.1
0.05
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
Return on Investment is very low in all years. But, in the year 2006, it reached to
6.51 due to less earnings.
Return on equity share holders’ fund

The return on equity share holders fund explains about the return of share holders with
they get on their investment.
Page 65
Net profit
Return on equity share holders fund=
Equity share holder’s fund
Table 4.4.6: Return on equity share holder's fund

S.NO Year PROFIT AFTER
NET WORTH R.O.E.RATIO (%)
TAX
1 2006‐07 86,900,563 1,806,848,671 4.8
2 2007‐08 238,465,730 2,012,852,920 11.8
3 2008‐09 470,434,575 2,436,657,677 19.3
4 2009‐10 943,631,511 3,331,014,470 28.33
Graph 4.4.7: Return on equity share holder's fund
30
25
20
15
10
0
2006‐07 2007‐08 2008‐09 2009‐10
Interpretation:
Return on equity in the year 2006 is 0.8 and it increased suddenly to 4.8 in the year 2007
and again it increased to 11.8 in the year 2008. Return on Equity of the company is at
satisfactory level and then it increased to 19.3 in 2009 and again increased to 28.33 in 2010 .
CHAPTER-5
 Finding’s
 Suggestions
 Conclusion
FINDINGS
 Except in the year 2008, the company is maintaining current ratio as 2 and more, standard
which indicates the ability of the firm to meet its current obligations is more. It shows
that the company is strong in working funds management.
 The company is maintaining of quick assets more than quick ratio. As the company
having high value of quick ratio. Quick assets would meet all its quick liabilities with out
any difficulty.
 The company is failed in keeping sufficient cash & bank balances and marketable
securities.
 In above all current assets and liabilities ratios are better that also it is double the
normal position. Observe the absolute & super quick ratio the company cash
performance is down position.
 In the year 2006 debt equity ratio is 0.08 (8%) but it is increased to 0.11 (11%) &
0.16(16%) in 2007 and 2008 increased every year. It shows that the company is losing
its condition.
 Net working capital ratio is 0.45 in 2006 but also 0.50 in 2007. It is increased very high
but condition of business working capital is not shortage .
 Debt Equity ratio is increasing every year. It indicates the company depends on the debt
fund increasing.
 Total liabilities ratio is also increasing year by year.
 In the year 2006, the interest coverage ratio 7.56 which increased to 94.76 in the year
2007 and high fluctuations in the followed years. In this position, outside investors are
interested to invest their money in this company.
 The company is declining of its coverage ratio to serve long term debts.
 Inventory turnover also increased for year by year that is company production is also
increased. Subsequently sales are also increased.
 The net profit ratio of the company increasing over the study period. Hence the
organization having the good control over the operating expenses.
Page 68
SUGGESTIONS
 The company has to increase the profit maximization and has to decrease the operating
expenses.
 By considering the profit maximization in the company the earning per share, investment
and working capital also increases. Hence, the outsiders are also interested to invest.
 The company should maintain sufficient cash and bank balances; they should invest the
idle cash in marketable securities or short term investments in shares, debentures, bonds
and other securities.
 The company must reduce its debtors collection period from 83 & 84 days to 40 days be
adopting credit policy by providing discounts to the debtors.
 Return on investment is fluctuates every year. The company has to make efforts in
increasing return on investments by reducing its administration, selling and other
expenses.
 The company should increase its interest coverage ratio to serve long term debts.
 The net profit of the company is increasing over the study period. Hence the organization
maintaining good control on all trees of expenses.
 The dividend per share has observed as raising trend over the study period, hence it may
be suggested Amara Raja Batteries Limited should take key interest to maximize the
share holder wealth by increasing dividend pay out.
Conclusion
 Liquidity ratios, both current ratio and quick ratio are showing effectiveness in
liquidity as in all the years current ratio is greater than the standard 2:1 and quick ratio is
greater than the standard 1:1 ratio.
 The firm is maintaining a low cash balance and marketable securities which means they
done cash payments.
 Debt equity ratio, solvency ratio and interest coverage ratio are showing an average
increase in the long term solvency of the firm.
 The proprietary ratio is showing an average increase which means, the shareholders have
contribute more funds to the total assets.
 Average payment period of the firm is showing the credit worthiness of the firm to its
suppliers.
 Fixed assets turnover ratio is showing that the firm needs lesser investment in fixed assets
to generate sales.
 The increasing trend of current assets turnover ratio indicates that the firm needs more
investment in current assets for generating sales.
 The gross profit ratio, net profit ratio is showing the increasing trends. The profitability
of the firm the increasing
 Operating ratio of the company has observed decreasing trend, hence it may be good
control over the operating expenses.
 The interest that has to be paid is very less when compared to the sales. The firm is not
utilizing the debt conservatively.
 The firm is retaining much of the earnings (based on dividend payout ratio) .
 The company financial performance is very good and also they will increase their
business year by year by expanding their branches.
CHAPTER-6
Annexure
Bibliography
Schedule
Particulars No. As at 31.03.2007 As at 31.03.2006
Rupees Rupees Rupees Rupees
SOURCES OF FUNDS
Shareholders Funds
Share Capital 1 113,875,000 113,875,000
Reserves & Surplus 2 1,692,973,671 1,632,042,302
1,806,848,671 1,745,917,302
Loan Funds
Secured Loans 3 73,665,914 44,945,252
Unsecured Loans 4 159,392,966 103,853,138
233,058,880 148,798,390
Deferred Tax liability 5 130,927,315 145,000,360
Total 2,170,834,866 2,039,716,052
APPLICATION OF FUNDS
Fixed Assets 6
Gross Block 1,672,298,054 1,583,508,897
Less: Depreciation 723,666,680 591,622,548
Net Block 948,631,374 991,886,349
Capital Work-in-Progress 12,892,109 9,514,644
961,523,483 1,001,400,993
Investments 7 235,627,152 208,778,082
Current Assets, Loans &
Advances
Inventories 8 440,958,913 307,245,534
Sundry Debtors 9 649,706,121 471,673,642
Cash & Bank Balances 10 169,121,827 152,292,556
Loans, Advances & Deposits 11 342,929,588 251,402,682
Other Current Assets 12 9,926,048 7,622,683
1,612,642,497 1,190,237,097
Less: Current Liabilities &
Provisions 13
Liabilities 345,042,817 162,283,498
Provisions 293,915,449 198,416,622
638,958,266 360,700,120
Net Current Assets 973,684,231 829,536,977
Misc. Expenditure 14 -- --
Total 2,170,834,866 2,039,716,052

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2007
Schedule Year Ended on 31.03.07 Year Ended on 31.03.06

Particulars No. Rupees Rupees
INCOME
Sales 2,368,057,275 1,759,017,304
Other Income 15 63,043,449 41,581,593
Increase / (Decrease) in stocks 16 71,015,819 11,120,770
Total 2,502,116,543 1,811,719,667
Expenditure
Raw Material Consumed 17 1,382,962,610 831,843,012
Payments & Benefits to Employees 18 170,091,901 157,730,759
Mfg., Selling Admn., & Other
19 494,265,237 561,985,559
Expenses
Taxes & Licenses 20 181,230,080 123,834,416
Interest 21 1,448,427 1,754,335
Depreciation 136,307,132 123,052,249
Total 2,366,305,387 1,800,200,330
Profit Before Taxation 135,811,156 11,519,337
Add: Excess provision of Income Tax -- 4,954,943
Less: Tax Provision for earlier years 14,073,045 30,473,038
Provision for Income Tax 59,500,000 33,000,000
Provision for Wealth Tax 3,440,615 --
Add: Excess provision for Dividend
43,023 49,721
Tax Written Back
Profit After Taxation 86,900,563 13,897,597
Profit brought forward 512,460,202
518,882,390
Year from Previous
Profit available for appropriation 599,360,765 532,779,987
Less: Transfer to General Reserve 6,517,542 1,050,000
Proposed Dividend 22,775,000 17,081,250
Dividend Tax 3,194,194 2,188,535
Balance carried to Balance Sheet 566,874,029 512,460,202
Basic Earnings per equity share 7.63 1.22
BALANCE SHEET AS AT 31 MARCH 2009
Schedule
SOURCES OF FUNDS
Shareholders Funds
Share Capital 1 113,875,000 113,875,000
2,436,657,677 2,012,852,921
Loan Funds
Secured Loans 3 1,074,874,049 189,001,189
Unsecured Loans 4 332,209,831 216,407,580
1,407,083,880 405,408,769
Deferred Tax liability 5 136,092,961 120,012,315
Total 3,979,834,518 2,538,274,005
Fixed Assets 6
Gross Block 2,577,786,073 1,907,116,068
Less: Depreciation 1,009,481,492 863.568,510
Net Block 1,568,304,581 1,043,547,558
1,629,972,178 1,091,696,676
Investments 7 161,941,656 320,140,656
Advances
Inventories 8 921,713,415 571,962,221
Sundry Debtors 9 1,459,544,977 856,520,556
Loans, Advances & Deposits 11 859,824,054 634,750,549
3,500,193,294 2,280,481,128
Provisions 13
Liabilities 735,304,583 673,895,907
Provisions 576,968,027 480,148,548

1,312,272,610 1,154,044,455
Net Current Assets 2,187,920,684 1,126,436,673
Total 3,979,834,518 2,538,274,005

INCOME
Sales 5,958,016,404 3,636,709,293
Other Income 15 97,738,804 72,509,746
Total 6,237,600,397 3,750,856,488
Expenditure
Purchase Of Finished Goods 1,190,212 4,353,496
Raw Material Consumed 17 3,937,812,454 2,229,601,146
19 1,093,657,443 760,841,717
Expenses
Taxes & Licenses 20 26,007,989 14,881,894
Interest 21 30,924,293 13,435,515
Depreciation 170,026,464 147,009,114
Total 5,525,615,949 3,377,392,265
Profit Before Taxation 711,984,448 373,464,223
Add: Excess provision of Income Tax -- 10,915,000
Less :Tax Provision for -Current Tax
Including Deferred tax, Earlier
Tax, Wealth tax, Fringe 241,549,873 145,913,493
benefits tax

Profit brought forward
749,031,694 566,874,029
Year from Previous
Profit available for appropriation 1,219,466,269 805,339,759
Dividend Tax 6,773,570 3,992,742
Balance carried to Balance Sheet 1,125,792,991 749,031,694

BALANCE SHEET AS AT 31 MARCH 2010
Schedule
SOURCES OF FUNDS
Shareholders Funds
Share Capital 1 113,875,000 113,875,000
2,436,657,677 3,331,014,470
Loan Funds
Secured Loans 3 1,074,874,049 2,266,545,502

Unsecured Loans 4 332,209,831 896,075,058
1,407,083,880 3,162,620,560
Deferred Tax liability 5 136,092,961 169,506055
Total 3,979,834,518 6,663,141,085
Fixed Assets 6
Gross Block 2,577,786,073 3,105,843,108
Less: Depreciation 1,009,481,492 1,217,334,633

Net Block 1,568,304,581 1,888,508,475

1,629,972,178 2,545,918,387
Investments 7 161,941,656 162,006,625
Advances
Inventories 8 921,713,415 1,943,335,704
Sundry Debtors 9 1,459,544,977 2,264,682,019

Loans, Advances & Deposits 11 859,824,054
1,248,478,477
3,500,193,294 5,975,961,025
Provisions 13
Liabilities 735,304,583 1,027,373,819
Provisions 576,968,027 99,371,133
1,312,272,610 2,020,744,952
Net Current Assets 2,187,920,684 3,955,216,073
Total 3,979,834,518 6,663,141,085

INCOME
Sales 5,958,016,404 10,833,256,904
Other Income 15 97,738,804 256,100,643
Total 6,237,600,397 11,671,423,529
Expenditure
Purchase Of Finished Goods 1,190,212 6,378,425
Raw Material Consumed 17 3,937,812,454 7,794,794,675
19 1,093,657,443 1,579,591,221
Expenses
Taxes & Licenses 20 26,007,989 49,538,561
Interest 21 30,924,293 129,308,874
Depreciation 170,026,464 244,452,070
Total 5,525,615,949 10,212,042,104
Profit Before Taxation 711,984,448 1,459,381,425
Add: Excess provision of Income Tax --
Less :Tax Provision for -Current Tax
Including Deferred tax, Earlier
Tax, Wealth tax, Fringe 241,549,873 523,262,294
benefits tax

Profit brought forward
749,031,694 1,125,792,991
Year from Previous
Profit available for appropriation 1,219,466,269 2,069,424,502

Dividend Tax 6,773,570 6,773,570
Balance carried to Balance Sheet 1,125,792,991 1,928,431,531
www.google.com
www.amaron.co.in
BIBLOGRAPHY
Financial Management
1. I.M.Pandey : Financial Management
2. M.Y.Khan & P.K.Jai : Cost & Management accounting
3. S.P. Jain & K.L. Narang : Accounting & Finance
4. K.Rajeswara rao & G. Prasad : Financial Management
5. P.Kulakarni :
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A STUDY ON

MASTER OF BUSINESS ADMINISTRATION

Under the Guidance of

DEPARTMENT OF BUSINESS ADMINISTRATION

Certified that this project report titled “A STUDY ON RATIO ANALYSIS AT

Signature of the supervisor Signature of the HOD

ANALYSIS AT AMARARAJA BATTERIES LIMITED(ARBL)” is a record of independent

S.SUJATHA, Department of MBA.

PLACE: Chennai (R.SUNEEL)

encouragement and guidance in all our endeavors.

Manager of Amararaja Batteries limited, Mr.C.Ravi Costing Manager of Amararaja Batteries

Limited for their moral support during the research work.

completion of this project would be practically impossible.

It gives me great pleasure to acknowledge my indebtedness to my family Members for

their substantial moral support and encouragement in my studies.

for their unnerving support in the completion of the work.

Chapters Title and Topics Page No

2 OBJECTIVES & METHODOLOGY

 Review of Literature 7‐19

4 DATA ANALYSIS AND INTERPRETATION 30‐60

5 FINDINGS & SUGGESTIONS

4 NETWORKING CAPITAL RATIO 36

6 DEBT EQUITY RATIO 39

7 INTEREST COVERAGE RATIO 41

8 TOTAL LIABILITIES RATIO 42

9 INVENTORY TURNOVER RATIO 43

11 FIXED ASSET TURNOVER RATIO 46

12 CURRENT ASSET TURNOVER RATIO 48

13 TOTAL ASSET TURNOVER RATIO 49

14 WORKING CAPITAL TURNOVER RATIO 50

15 NET ASSET TURNOVER RATIO 51

16 CAPITAL TURNOVER RATIO 52

17 CREDITOR TURNOVER RATIO 53

20 OPERITING EXPENCES RATIO 57

22 RETURN ON EQUITY SHARE HOLDER FUND 60

SI .NO PARTCULARS PAGE.NO

4 NETWORKING CAPITAL RATIO 36

6 DEBT EQUITY RATIO 40

7 INTEREST COVERAGE RATIO 41

8 TOTAL LIABILITIES RATIO 42

9 INVENTORY TURNOVER RATIO 44

10 DEBTORS TURNOVER RATIO 45

11 FIXED ASSET TURNOVER RATIO 47

12 CURRENT ASSET TURNOVER RATIO 48

14 WORKING CAPITAL TURNOVER RATIO 50

15 NET ASSET TURNOVER RATIO 51

16 CAPITAL TURNOVER RATIO 52

17 CREDITOR TURNOVER RATIO 53

20 OPERITING EXPENCES RATIO 58

22 RETURN ON EQUITY SHARE HOLDER FUND 60

 The ability of the firm to meet its current obligations.

 The overall operating efficiency and performance of firm.

The information contained in these statements is used by management, creditors,

 To pay wages and salaries.

 For the purchase of raw materials, spares and components parts.

 To incur day-to-day expenses.

 To meet selling costs such as packing, advertising.

 To provide credit facilities to customers.

 To maintain inventories and raw materials, work-in-progress and finished stock.

2. To suggest measures for improving the financial performance of organization.

To analyze the profitability position of the company.

To assess the return on investment.

To analyze the asset turnover ratio.