I INTRODUCTION

(i) INTRODUCTION Finance is the life blood and nerve center of any business. It has become so much important for every business undertaking that all managerial activities are connected with it. In our present day economy, finance is defined as the provision of money at the time when it is required. Every enterprise whether it is big, medium, or small needs finance to carry on its operations and to achieve the targets. Almost all kind of business activities directly or indirectly involve in acquisition and use of funds. In fact, finance is so indispensable today that it is rightly said to be the life blood of the enterprise. Without adequate finance, no enterprise can possibly accomplish its objectives. Everybody associated with the business like employees, bankers, creditors, government, shareholders, management and society want to know what is the company’s liability, where they have invested, what is their sales, profit, cost of value added and thousands of question like this. Globalization had matured financial functions with the paradigm shift in the focus from the production centric to customer centric. Resources in a business organization are seen as value creators and not cost enablers. The contemporary economic growth is putting tremendous pressure on resources availability. To ensure sustainable growth it is very essential that we focus on improving productivity of our resources. Unsustainable and shortsighted corporate vision exacerbates the environmental impacts. Manufacturers are forced to seek a minimum amount of cost effective inputs to be able to provide customers with a maximum amount of functional value. The offering will be successful if it delivers value and satisfaction to the targeted buyers and enlightened them. The companies striving to compete in today’s economy shouldmanage waste not cost. By reducing waste in activities, companies can forestall the tradeoff cost, quality and flexibility managing

waste in activities involves developing measures that track the company’s success at eliminating generators of delay, excess and unevenness. Technology is an important resources and it ought to be managed effectively. Effective management of technology has enabled organizations to make niche for themselves in the market place. Technology is a major stimulus for change and has become synonymous with economic development. The strategic nature of technology, call for management of this resource as a part of overall business planning process to gain higher competitive advantage and customer retention. Ideas of innovations are delivered from market needs and its speedy execution is the most essential factor for satisfying customer needs and perception about product development. Financial Analysis is the process of identifying the financial strengths and weaknesses of the firm, by properly establishing the relationships between the items of the profit and loss account and balance sheet. These financial statements provide valuable insights into a firm’s performance. Financial analysis may be done for a variety of purposes, which may range from a simple analysis of the short –term liquidity position of the firm to comprehensive assessment of strengths and weaknesses of the firm in various areas. It is helpful in assessing corporate excellence, judging credit worthiness, forecasting bond ratings, predicting bankruptcy and assessing market risk. Financial Ratios calculated with the help of information extracted from the financial statements play an important role in analyzing the financial performance of a firm. In this study, the financial performance for the last 5 years is

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assessed through ‘Ratio analysis’ and the required data are obtained from the annual accounts of NAI, AUSTRALIA.

(ii) STATEMENT OF THE PROBLEM
The study is an identification and analysis of the financial strengths and weaknesses of NEW APPROACH INTERNATIONAL LIMITED, Australia.Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. To do this compare your ratios with the average of businesses similar to yours and compare your own ratios for several successive years, watching especially for any unfavorable trends that may be starting. Ratio analysis may provide the all-important early warning indications that allow you to solve your business problems before your business is destroyed by them.

(iii) OBJECTIVES OF THE STUDY
The study is intended to analyze the financial strength and weakness AUSTRALIA. of NEW APPROACH INTERNATIONAL LIMITED,

The major objectives of the study are: • • To analyze the financial strength and weakness of NEW APPROACH INTERNATIONAL LIMITED, AUSTRALIA. To suggest improvements in the existing systems to improve the financial performance

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Secondary data was collected from the published records like annual reports. Data’s was also collected from web sites and other journals and magazines. (iv) RESEARCH METHODOLOGY (a) Area of Study The work tries to analysis financial position and its impact on profitability with reference to NEW APPROACHINTERNATIONAL Limited. 2 . • Secondary Data Secondary data are existing information that is useful for the purpose of specific study. financial statements. Australia. profit and loss and Balance sheet of the past five years. (b) Data collection Method Information for this work has been collected from previous records viz. To study the inventory turnover of the firm To assess the capacity of the firm to pay off its interest liabilities.Sub-objectives: • • • To study the liquidity position of the firm. similar project reports and similar documents. The secondary data is used for the study.

2 . etc.(c) Data Analysis The researcher has used various financial techniques for the study. which suffers from their inherent limitations. absolute ratio. (vi) LIMITATIONS OF THE STUDY The study of Financial Analysis is having its own limitations as detailed below: • • The study is limited for a maximum period of 5 years. efficiency ratio. quick ratio. Common size balance sheet. working capital ratio. net profit ratio. (d)Financial tools Comparative statement analysis Ratio analysis (v) SIGNIFICANCE OF THE STUDY • • • • • It is useful in financial position analysis It is useful in assessing the operational efficiency of the concern It is useful in forecasting purposes It is useful in locating the weak spot of the business Useful in comparison of performance with another firm having the same business . Financial Analysis is based on the statement of the Company. The techniques include ratio analysis. profitability ratios. The ratio analysis mainlyincludes current ratio.

Almost all kind of business activities directly or indirectly involve in acquisition and use of funds. their relations etc. III REVIEW OF LITERATURE Every enterprise whether it is big. ratio analysis is used as a tool to analyze.• • • • • Only audited records are considered for analysis.Without adequate finance. are not considered. While evaluating the financial performance. Non-monetary factors like human behavior. costing and Cash Management etc. limitations of ratios holds good for the study. or small needs finance to carry on its operations and to achieve the targets. no enterprise can possibly accomplish its objectives. Time is the main limiting factor in the study and within the time allowed it is not possible to study all aspects in detail.Financial analysis may be done for a variety of purposes. which may range from a simple analysis of the short –term liquidity position of 1 . medium. The study does not take into account the other areas of Finance such as Capital Budgeting.

It expanded its activities to a dedicated facility in Ringwood where it manufactured and distributed a variety of air hygiene and cleaning products. A ratio is the relationship between two accounting items expressed mathematically. Ratio analysis helps the analyst to make quantitative judgment with regard to Concerns financial position and performance. According to Metcalf and Titard Financial statement analysis is a process of evaluating the relationship between component parts of a financial statements to obtaining a better understanding of a firm. Ratio analysis is one of the Powerful tools of the financial Analysis.the firm to comprehensive assessment of strengths and weaknesses of the firm in various areas. In 2005 the company relocated to more modern Warehouse and office facilities in 2 . and as “the Relationship between two or more things”. A ratio can be defined as “the indicated quotient of two mathematical expressions”. IV COMPANY PROFILE: NEW APPROACH INTERNATIONAL (NAI) is a private limited company .It has been in operation for over 25 years.

Victoria. Now our Chinese SGS quality assured facility and sourcing service allows us deliver market focused product. The company is committed to envisage within itself best policies for the healthy development of its members strengthen its position both in domestic and international markets and strive for continuous improvement in all spheres of its activities to create values that can be sustained over a long term. At New Approach International their focus is on monitoring and analysing market trends. 2 . Their core philosophy of addressing environmental biocompatibility issues for each and every product that they are involved with is taken very seriously by their company – Family and Staff alike. direct to our wholesale customer’s distribution facilities anywhere in the world. Company's Export has been spread across 25 countries including USA and EU. In Australia they offer the flexibility of distributing via their national warehousing facilities located in Hallam. NAI has been very successful in building confidence of the buyer basically due to • • • The Quality of the Product Well experienced sales arms Very low lead-time for shipments. Their internal structure is highly flexible and they can quickly convert an identified market opportunity to a new product on shelf with each and every product that they are involved. NAI has recorded a steady market support from all these markets. In 2007 the company was purchased by the Waite Family and began trading as New Approach International in conjunction with a Joint Venture Chinese manufacturing partner.Hallam and discontinued manufacturing locally in favour of offshore production.

Quality control 2 .The company has its own marketing personnel positioned at Victoria. chemical laboratory mineral uses sophisticated bacterial electronic facilities and precise instrument to check purity and chemical freshness. contamination. Queensland. NAI maintains the most stringent quality control. dilution and other factors to ensure only the best products. NAI stability of fully-equipped raw material. Company has set up state of the art in house effluent treatment and reduction plant to recycle waste water after treatment thus reducing effluent load. with independent research and development. NAI is awarded for effective implementation and maintenance of Pollution Control measures during the year. The company maintains the standards acceptable by The State Pollution control department and these are being monitored continuously. From the first production step to the final delivery. New South wales to meet the needs of the customer. Research and Development NAI operates on one fundamental principle: uncompromised quality. NAI constantly seeks new ways to increase usage and efficiency while improving value for their customers. Eco-Friendliness Environmental considerations continue to receive the utmost priority and attention of our company. content. It is their first priority in all that they do.

uncompromised standards for NAI’s chemical PRODUCT PROFILE NAI is here to make the product to suit the customer's requirement. Main Products: • • • • • • Clensel Cleaner Eco Clens Leather Cleaner Toilet flush: Eco Werxs Breathe Easy Shower Cleaner Eco Clens Carpet Cleaner Eco Clens Dishwashing Liquid V DATA ANALYSIS AND INTERPRETATION The term analysis refers to the computation of certain measures along with searching for pattern of relationship that exist among the data groups Financial Analysis isthe process of identifying the strengths and weakness of the company with the help of accounting information provided by the profit and loss account and balance sheet. This rigorous testing process at every stage of production ensures consistent quality and product. Samples of finished products are then tested meticulously by experienced quality-control officers.NAI has a comprehensive physical laboratory that operates around the clock. Every stage of production is checked and counter-checked very carefully. day and night.It is the process of evaluation of relationship between component parts of financial statements to obtain a 2 .

better understanding of the firm’s position and performance.1 COMMON SIZE STATEMENT The common size statement. various liabilities are also taken as component percentage or 100 percent statements because every individual items is stated as a percentage of the total 100. In this chapter. • • Common size statement Ratio analysis 3. Similarly.  The total of assets or liabilities are taken as 100 2 . The common size statement may be prepared in the following ways. The figures are shown as percentage of total asset. balance sheet and income statement are shown in analytical percentage. analysis and interpretation of the data collected from the company are made.It is a technique of X-raying the financial position as well as progress of a firm. The total assets are taken as 100 and different assets are expressed as a percentage of the total. total liabilities and total sales. Accounting data for the period from 2004 to 2008 is subjected to the under mentioned tools and techniques of analysis. Financial analysis will give the management considerable insight into the levels and areas of strength or weakness.

1 . The individual assets are expressed as a percentage of total assets. ie 100 and different liabilities are calculated in relation to total liabilities The common size balance sheet highlights the composition or structure of the total current assets and liabilities. It is seem from the statement that sundry debtors constitute a predominant part of current assets. Such an examination can identify the weightage of each component of working capital and hence its relative importance.

81 439.87 6277.37 9.54 99.35 0.6 10.00 99.0 0 85.77 43.18 45.37 22.25 21.45 0.96 COMMON SIZE BALANCE SHEET OF NAI FOR THE YEAR 2003-2008 2 .82 2352.34 100 99.38 58.01 12.32 5622.55 883.32 0.22 9.57 35.8 99.36 32.26 23.66 39.02 2.89 2153.3 2.32 47.75 0.38 56.68 791.81 100 3168.13 5.0 0 26.82 6505.14 1.01 9.93 6378.42 1.38 152.18 37.PARTICULARS CURRENT ASSETS Inventories Sundry Debtors Cash and bank balance Loans and advances Other current Assets TOTAL CURRENT ASSETS FIXED ASSETS Net Block Miscellaneous expenditure Unit A/C (DEBIT) TOTAL FIXED ASSETS TOTAL ASSETS LIABILITIES AND CAPITAL capital Reserves and surplus Secured Loans Unsecured Loans TOTAL LOAN FUND CURRENT LIABILITIES Current Liabilities Provisions TOTAL CURRENT LIABILITIES TOTAL CAPITAL AND LIABILITIES COMMON SIZE BALANCE SHEET OF NAI FOR THE YEAR 2003-2008 31/6/2004 31/6/2005 31/6/2006 Amount % Amount % Amount % 95.69 0.51 100 6505.09 786.33 100 3168.14 100.06 100.06 6163.18 39.83 100 3168.27 100.23 100.2 975.87 356.0 0 26.02 367.0 0 112.13 100.00 137.45 878.00 72.89 2067.56 6277.54 3.34 1876.89 2087.22 5.59 2794.97 33.18 5.0 0 26.44 2.61 100 99.63 190.00 5837.37 9.98 58.37 9.71 17.26 44.04 15.8 0.6 100 980.13 6.00 59.18 38.90 5486.62 32.86 53.28 6010.96 0.65 0.56 5398.39 0.65 16.93 153.53 3.61 341.63 112.6 6378.38 57.43 1.66 175.26 2.

99 5.61 15. % of current Year 2003-04 2004-05 2005-06 2006-07 2007-08 assets 6.2 COMMON SIZE BALANCE SHEET OF THE COMPANY Percentage of current assets to total asset and current liabilities to total liabilities.77 4.99 3 .3 13.48 % of current liabilities 12.56 8.58 12.3.76 5.25 5.

If 4000 is divided by 10000.3. It is expressed where one figure is defined by another.When 4 . and as “the relationship between two or morethings”. the numerical or an arithmetical relationship between two figures.3 RATIO ANALYSIS Ratio Analysis is the one of the powerful tools of the financial analysis. Accounting ratios show interrelationships which exist among various accounting data. Ratio is thus. Absolute figures are valuable but they standing alone convey no meaning unless compared with another.4 or 2:5 or 40%.the ratio can be expressed as . because the absolute accounting data cannot provide meaningful understanding and interpretation. A ratio is the relationship between two accounting items expressed mathematically.A ratio can be used as a yard stick for evaluating the financial position and performance of a concern. A ratio can be defined as “the indicated quotient of two mathematical expressions”. Ratio analysis helps the analyst to make quantitative judgment with regards to concern’s financial position and performance.

They highlight the interrelationships which exist between various segments of the business as expressed by accounting statements. summarize and systematize the accounting figures in order to make them more understandable and in lucid form. IMPORTANCE OF RATIO ANALYSIS Ratio analysis stands for the process of determining and presenting the relationship of items and groups of items in the financial statements. 5 . insurance companies and other financial institutions in lending and making investment decisions. 2)Useful in simplifying accounting figures-accounting ratios simplify. 1)Use full in financial position analysis-Accounting ratios reveal the financial position of the concern. This helps the banks. It is a way which financial stability and health of a concern can be judged. The following are the main points of importance of ratio analysis. Of Ten the figures alone cannot help them convey any meaning and ratios help to relate with other figures. It is an important technique of financial analysis.relationships among various accounting data supplied by financial statements are worked out.

6) Useful in comparison of performance-Through accounting ratios comparison can be made between one department of a firm with another of the same firm in order to evaluate the performance of various departments in the firm. LIMITAIONS OF ACCOUNTING RATIOS 2 . then a trend is established.3) Useful in assessing the operational efficiency-Accounting ratios help to have an idea of the working of a concern. They diagnose the financial This health the by evaluating to liquidity. Ratios also help him make any change in the organization structure. assess solvency. For example expenses as a percentage of sales can be easily forecasted on the basis of sales and expenses of the past years 5) Useful in locating the weaks spots of the business-Accounting ratios are of great assistance in locating the weak spots in the business even though the overall performance may be efficient. financial profitabilityetc. helps management requirements and the capabilities of various business units. if a firm finds that increase in distribution expenses is more than proportionate to the situation. Forexample. 4) Useful in forecasting purposes-If accounting ratios are calculated for a number of years. This trend helps in setting up future plans and forecasting. Weakness in financial structure due to incorrect policies in the past or present are revealed through accounting ratios. The efficiency of the firm becomes evident when analysis is based on accounting ratios. Manager is naturally interested in such comparison in order to know the proper and smooth functioning of such departments.

These limitations should be kept in mind while making use of ratio analysis for interpreting the financial statements. an analysis by reference to the ratios would be misleading. 2 .Soundness of the business. 2)No idea of probable happenings in future-Ratios are an attempt to make an days keeping in view the complexities of the business..the information given in the financial statements is affected by window dressing. Sometimes .for example . Moreover utilization of inbuilt facilities. Comparison will become difficult if the two concerns follow the different method of providing depreciation or valuing stock. showing position better than what actually is .Accounting ratios can be correct only if the data are correct. if the two following two different standards and methods. I.if inventory values are inflated or depreciation is not charged on fixed assets.if any. But in spite of its advantages it has some limitations which restrict its use. Comparison of financial statements of such firms by means of ratios is bound to be misleading. not only will one have an optimistic view of profitability of look out for signs of window dressing . availability of facilities and scale of operation would affect financial statements of different firms. The following are the main limitations of the accounting ratios: 1)False results if based on incorrect accounting data-. Similarly.e. it is important to have an idea of the probable happenings in future. 3) Variation in accounting methods –The two firms results are comparable with the help of accounting ratios only if they follow the same accounting methods or bases.

For example a business with current ratio of more than 2:1 might not be in a position to pay current liabilities in time because of an unfavorable distribution of current assets in relation to liquidity. 7) Different meanings assigned to the same term. For example the ratio of sales to total assets in 1996 would be much higher than in 1976 due to rising prices.4)Price level changes-changes in price level make comparison for various years is difficult.another business with a current ratio of even less than 2:1 might not be experiencing any difficulty in making the payment of current liabilities in time because of its favorable distribution of current assets in relation to liquidity. 6)No common standards-it is very difficult to lay down a common standard for comparison because circumstances differ from concern to concern and the nature of each industry is different. Forexample. fixed assets being shown at cost and not at market price. profit for the purpose of before tax but after interest or profit after interest and tax. in order to calculate ratio may assign different meanings. The calculation derived from the ratio analysis under 2 . 5)Only one method of analysis-Ratio analysis is only a beginning and gives just a comprehensive analysis of financial statements. ratios should be used with other methods of analysis . This may affect the calculation of ratio in different firms and such ratio when used for comparison may lead to wrong conclusions. 8)Ignores qualification factors-Accounting ratios are tools of quantitative analysis only. But sometimes qualification factors may surmount the quantitative aspects.Different firms. On the other hand .

This classification is rather crude and unsuitable to determine the profitability and financial position of the business. such ratio may be misleading. Regarding his financial position .honesty. One should be clear as to what is cause and what is effect before calculating a ratio between two figures. those indicating financial position are computed on the basis of the balance sheet and those which show operating efficiency or productivity or effective use of resources are calculated on the basis of figures in the profit and loss account and the balance sheet.yet the grant of credit ultimately depends on debtor’s character. 1) Financial Ratios 2) Coverage ratios 3) Turnover ratios 4) Profitability Ratios 5) Leverage ratios I) FINANCIAL RATIOS 2 . CLASSIFICATION OF RATIOS Ratios may be classified in a number of ways keeping in view the particular purpose.past record and his managerial ability. 9)No use if ratios are worked out for insignificant and unrelated figuresAccounting ratios may be worked for any two in significant and unrelated figure as ratio of sales and investment in government securities.such circumstances may get distorted. ratios may be classified as . Ratios should be calculated on the basis of cause and effect relationship. To achieve this purpose effectively. Ratios indicating profitability are calculated on the basis of the profit and loss account.

It is the ratio of current assets to current liabilities. Liquidity Ratios-If it is decided to study the liquidity position of the concerns.These ratios are calculated to Judge the financial position of the concern from long terms as well as Short term solvency point of view. current assets should be twice of the current liabilities 2) Liquid (or Acid Test or Quick) Ratio This is the ratio of liquid assets to liquid liabilities. It shows a firms ability to cover its current liabilities with its current assets. 1:1 Ratio is considered ideal ratio for a concern because it is wise to keep the liquid assets at least equal to the liquid liabilities at all times.e. Liquid ratio = Liquid Assets /Liquid Liabilities 3) Absolute Liquid (super quick) Ratio to maintain sound liquidity and to pinpoint the difficulties if any in it. Stability Ratios a). then liquidity ratios are calculated. These Ratios can be divided into two categories: a) .. It shows a firms ability to meet current liabilities with its most liquid assets. The 1 .Liquidity Ratios b). It is expressed as follows: Current Ratio=Current Assets/Current Liabilities Generally 2:1 is considered ideal for a concern i. in order to highlight the relative strength of the concerns in meeting their current obligations important liquidity ratios are 1) Current Ratio or Working Capital Ratio This is the most widely used ratio.

Absolute Liquidity Ratio is calculated as follows: Cash in hand and at bank+ Short term marketable securities/Current liabilities The desirable norm for this ratio is 1:2 4) Ratio of Inventory to Working capital In order to ascertain that there is no overstocking. appropriate debt equity mix to raise long term funds and earning to pay interest and installment of long term loans in time. It is calculated as follows: Inventory/Working capital b) Stability Ratios These ratios help in ascertaining the long term solvency of a firm which depends on firm’s adequate resources to meet its long term funds Requirements. the ratio of inventory to working capital should be calculated. 67. 2) Ratio of Current Assets to Fixed Assets This Ratio is worked out as: Current Assets/Fixed Assets 1 . The following ratios can be calculated for this purpose: 1) Fixed Assets Ratio This ratio explains whether the firm has raised adequate long term funds to meet its fixed assets requirements and is calculated as under: Fixed Assets/Capital employed If the ratio is less than one it is good for the concern. The ideal ratio is .Though Receivables are generally more liquid than inventories. there may be debts having doubt regarding their real stability in time.

This ratio will differ from industry to industry and. therefore.2:1. This ratio is calculated to measure the relative proportions of outsiders’ funds and shareholders funds invested in the company. This ratio is worked out as follows: Shareholders’ funds/Total tangible assets The ratio should be 1:3 5) Capital Gearing Ratio This ratio establishes the relationship between the fixed interest bearing securities and equity shares of a company. It is calculated as follows: Debt Equity Ratio= Long term debts/Shareholders’ Funds 4) Proprietary Ratio A variant of debt to equity is the proprietary ratio which shows the relation ship between shareholders’ funds and total tangible assets. no standard can be laid down. the ideal situation is that the current assets are almost double the current liabilities i. the current assets get converted into cash and provide funds needed to pay the current liabilities . 1 .e. 3) Debt Equity Ratio It measures the extent of equity covering the debt.. It is calculated as follows: Fixed interest-bearing securities/Equity shareholders’ fund Current Ratio or Working Capital Ratio Current Ratio measures the company’s ability to meet its short term obligations.

outstanding expenses etc….A relatively very high ratio indicates slackness of management practices. a low ratio indicates an inadequate margin of safety between current resources and short term obligation.60 0.56 0. Current liabilities include sundry creditors.37 2005-2006 341. Current Ratio= current assets ÷ current liabilities Current assets include cash.51 0.55 2003-2004 439.5 1 .. On the other hand. stock.62 883.25 2004-2005 367. debtors.34 980. bill of exchange and investments which are held by the business for immediate conversion into cash.21 838. bills payable. provision for taxation.56 CURRNT RATIO 0. Those are expected to mature with in a period of 12 months. it reflected in excessive holding of current assets.38 2006-2007 387. TABLE 1 CURRENT RATIO YEAR CURRENT ASSETS CURRENT LIABILITIES 791.

Here the ratios are less than 2. This ratio shows the extent of cushion of protection provided from the quick assets to the current 2 .2007-2008 354.9 CHART 1 CURRENT RATIO INFERENCE Generally 2:1 is considered as ideal for a concern.13 0. difficulty may be experienced in the payment of current liabilities and day to day operations may suffer. because it excludes very slow moving inventories and those assets which cannot convert into cash easily. It is a better test of financial strength than current ratio.20 357. LIQUID RATIO (ACID TEST OR QUICK RATIO) Quick ratio is a more refined tool to measure the liability of an organization.

A quick ratio of 1:1 is considered satisfactory though it is only a rule of thumb.(Inventories + Prepaid expenses) TABLE 2 LIQUID RATIO YEAR LIQUID ASSETS LIQUID LIABILITIES 791.65 CHART 2 LIQUID RATIO 357.60 883.13 0.30 2007-2008 289.3 0.3 2003-2004 2004-2005 2005-2006 2006-2007 343.62 281.56 LIQUID RATIO 0.liabilities.56 980.99 291.4 0.25 0.68 228.8 INFERENCE 2 . Liquid Ratio = Liquid Asset Current Liabilities Liquid Assets= Current Assets .51 838.

Generally 1:1 is considered as ideal ratio for a concern.But here the ratios are less than 1 so it can’t keep the liquid asset equal to the liquid liabilities.56 0.06 1 . Absolute liquid assets include cash in hand and at bank and marketable securities. in determining the short term solvency of the firm. This ratio is most rigorous and conservative. This ratio is calculated by using the formulas: Cash ratio= [cash + marketable securities] / current liabilities. The liquidity measure also takes into account the ‘reserve borrowing power’ as the firm’s real debt paying ability depends not only on cash resources available with it but also its capacity to borrow from the market at short notice. here the absolute liquid assets are cash and bank balances only. TABLE3 ABSOLUTE LIQUID RATIO YEAR CASH IN HAND AND AT BANK CURRENT LIABILITIES CASH RATIOS 2003-2004 99. ABSOLUTE LIQUID OR CASH RATIO This ratio is called cash ratio or super quick ratio.57 980.60 0. It plays an important role.1 2004-2005 59.26 791.

78 54.51 838.98 74.After the year 2003-2004 the ratio shows large decrease in the following years.15 ABSOLUTE LIQUID RATIO INFERENCE The absolute liquid asset ratio shows that the firm may have problems in meeting its short-term obligations.56 357.39 CHART 3 883. the firm has got more of convertible liquid assets and less of immediately liquid assets.09 0.06 0. as it carries a small amount of cash.13 0. Hence. This is because. the cash component of the current assets is at a very low level.2005-2006 2006-2007 2007-2008 53. RATIO OF CURRENT ASSETS TO FIXED ASSETS This ratio is worked out as: Current Assets / Fixed assets TABLE 4 RATIO OF CURRENT ASSETS TO FIXED ASSETS 2 .

21 2996.12 2007-2008 354.51 0.11 2004-2005 367.51 0.20 2742.34 3532.12 CHART 4 RATIO OF CURRENT ASSETS TO FIXED ASSETS INFERENCE Then the current assets to fixed assets of NAI Limited showing a difference in each year.98 883.An increase in the ratio may reveal that inventories and debtors have unduly increased or fixed 2 .10 2005-2006 53.53 0.A decrease in the ratio may mean that trading is slack or more mechanisation has been put through.YEAR CURRENT ASSETS FIXED ASSETS RATIOS 2003-2004 439.25 3798.83 0.99 0.06 2006-2007 387.

This ratio is calculated to measure the relative proportions of outsiders’ funds and shareholders’ funds invested in the company.26 RATIO 2003-2004 0. It is calculated as follows: TABLE 5 DEBT EQUITY RATIOS YEAR EXTERNAL EQUITY 2313.An increase in ratio.40 2005-2006 2449.21 INTERNAL EQUITY 5054. accompanied by increase in profit.32 0. DEBT EQUITY RATIO It measures the extent of equity covering the debt.indicates the business is expanding .41 2 .45 2004-2005 2225.assets have been intensively used.32 5530.57 5972.54 0.

A low ratio is generally viewed as favourable from long term creditors point of view.2006-2007 2700.36 7957.65 0. the better it is.because a large margin of protection provides safety for the creditors.50 CHART 5 DEBT EQUITY RATIOS INFERENCE The Debt Equity Ratio of NAI Limited shows a decrese in trend.41 2007-2008 4024. Under this category the following ratios are calculated: 1) Fixed interest cover Fixed interest cover =Net profit before interest and tax/Interest charges 2 .. II) COVERAGE RATIOS The ratios indicate the extent to which the interest of the persons entitled to get a fixed return Or a scheduled repayment as per agreed terms are safe.63 0.01 6433.The higher the cover.The same low ratio may be taken as quite unsatisfactory by the shareholders because they find neglected opportunity for using low cost outsider’s funds to acquire fixed assets that could earn a high return.

6 COVERAGE RATIO= EBIT / INTEREST 2003-2004 1427. It is determined by dividing the operating profit or earnings before interest and taxes (EBIT) by the fixed interest charges on loans.2) Fixed dividend cover Fixed dividend cover=Net profit after interest and tax/Preference dividend 3) Debt service coverage ratio Debt service coverage ratio= Net profit before interest and tax/interest+ Principal payment installment/1-tax rate INTEREST COVERAGE RATIO Interest coverage ratio is also known as ‘time-interest earned ratio’. It indicates whether the business would earn sufficient profits to pay periodically the interest charges. TABLE 6 INTEREST COVERAGE RATIO YEAR EBIT INTEREST CHARGES 386. INTEREST CHARGES. This ratio measures the debt-servicing capacity of the company insofar as fixed interest on long term loan in concerned.61 5.42 136.44 INTEREST COVERAGE RATIO 3. It shows the relationship between debt-servicing commitments and sources of meeting these burdens.43 2 .3 2004-2005 742.

92 2006-2007 796. the more secured the lenders will be in respect of their periodical interest income. 2 .65 CHART 6 INTEREST COVERAGE RATIOS INFERENCE The Interest coverage Ratio of NAI limited showing a high Trend.2005-2006 592.35 2.68 3.37 2007-2008 2111.The higher the ratio.68 335.55 577.86 3.64 150.

Such ratios should be calculated separately for each type of asset. these will indicate position of assets usage. These ratios are usually calculated on the basis of sales or cost of sales and are expressed in number of times rather than as a percentage. In short. 1) Sales to capital employed Ratio This ratio shows the efficiency of capital employed in the business by computing period how many times capital employed is turned-over in a stated period. The concern must always plan for efficient use of the assets to increase the overall efficiency. The ratio is ascertained as follows: Sales/Capital employed (Shareholders fund+ Long term liabilities) The higher the ratio. The greater the ratio more will be efficiency of asset usage. It is calculated as under: Sales/Net fixed assts(Fixed assets less depreciation) The higher the ratio the better is the performance 3) Sales to working capital Ratio 2 . The lower ratio will reflect the under utilization of the resources available at the command of the concern. The following are the important turnover ratios usually calculated by a concern. the greater are the profits 2) Sales to fixed asset Ratio This ratio expresses the number of times fixed assets are being Turnedover in a stated period.III) TURNOVER RATIOS These ratios are very important for a concern to judge how facilities at the disposal of the concern are being used or to measure the effectiveness with which a concern uses its resources at its disposal.

A high ratio is an indicator of over-trading of total assets while a low ratio reveals idle capacity.This Ratio shows the number of times working capital is turnedover in a stated period: It is calculated as follows: Sales/Net working capital (current asset-current liabilities) 4) Total assets turnover ratio This Ratio is calculated by dividing the net sales by the value of the total assets (i. Net sales/Total assets). The higher the value of the ratio. It is calculated as follows: Receivable turnover ratio=Net credit sales/Average Debtors 7) Creditors turnover ratio This ratio gives the average credit period enjoyed from the creditors and is calculated as under: Credit purchases/Average accounts payable A high ratio indicates that creditors are not paid in time while a low ratio gives an idea that the business is not taking full advantage of period allowed by the creditors. thereby contributing for the profits of the concern.e.The traditional standard for the Ratio is two times 5) Stock turnover Ratio It denotes the speed at which the inventory will be converted into sales. credit 1 . This ratio is calculated as follows: Stock Turnover Ratio=Cost of goods sold/Average stock held during the period 6) Receivable Turnover ratio It indicates the numbers of times on the average the receivable are turn over in each year.. the more is the efficient management of debtors.

19 104.83 2003-2004 1978. The higher the stock turn over rate or lower the stock turnover period the better through it is subject to variation between companies. Inventory turnover ratio= sales .80 2006-2007 3165.14 28.08 INVENTORY TURN OVER RATIO 13. Average Inventory Average inventory=Opening stock+ Closing stock 2 TABLE 7 INVENTORY TURNOVER RATIO YEAR SALES AVERAGE INVENTORY 143.64 25.41 2004-2005 2342.64 99.07 90.84 2005-2006 2855.35 2 .INVENTORY TURNOVER RATIO Inventory turnover ratio is also known as Stock Velocity indicates the number of times the stock has been turned over during the period and evaluate the efficiency with which a firm is able to manage its inventories be kept as low as possible consistent with the need of fulfill customer’s order on time.27 30.

A higher ratio means prompt payment by debtors where as a lower one indicates very liberal.A low stock turnover ratio is not desirable because it reveals the accumulation of obsolete stock.23 CHART 7 30. DEBTORS TURNOVER RATIO A concern may sell goods on cash as well as credit. Credit is one of the important elements of sales promotion. It indicates the number of times the average debtors are turned over during a year. infective and inefficient credit and collection policy.72 INVENTORY TURNOVER RATIOS INFERENCE The inventory Turnover ratio is shown in increasing trend. 2 . The volume of sales can be increased by following a liberal credit policy. It is indicative of efficiency of trade credit management. This ratio shows the extent of trade credit granted and the efficiency in the collection of debts.55 80.Greater the turnover of inventory more will be efficiency of management.2007-2008 2464.Higher the ratio.the better it is because it shows that finished stock is rapidly turned over.or the carrying of too much stock.

55 CHART 8 DEBTORS TURNOVER RATIOS INFERENCE The Debtors Turnover Ratio is shown in increasing nature.99 143.94 19.72 8. Similarly.93 125.16 17. the higher the value of Debtors turnover the more efficient is the management of sales/debtors or more liquid are the debtors.41 2342.48 261.19 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 1978. Debtors turnover of the unit is not 2 .8 143. low debtors turnover ratio implies inefficient management of sales/debtors and less liquid debtors.07 2855.33 DEBTORS TURNOVER RATIO 6.Debtors turnover ratio= Sales Average Trade Debtors Average Trade Debtors=Opening Debtors + Closing Debtors 2 TABLE 8 DEBTORS TURNOVER RATIOS YEAR SALES AVERAGE TRADE DEBTORS 294.84 25.19 2464. Generally.64 3165.

The ratio can be calculated as follows.at all favorable over the period. Average Collection Period= 365 / TABLE 9 AVERAGE COLLECTION PERIOD YEAR DEBTORS TURNOVER RATIO 6.72 AVERAGE COLLECTION PERIOD 54 Debtor’s turnover ratio 2003-2004 2004-2005 8.84 19 2 . Its impact is clearly highlighted in the debt collection period.94 41 2005-2006 19. AVERAGE COLLECTION PERIOD The average collection period represent the average number of days for which a firm has to wait before its receivables are converted into cash.

19 21 CHART 9 AVERAGE COLLECTION PERIOD INFERENCE Average collection period is shorter in nature.2006-2007 25. CREDITORS TURNOVER RATIO CREDITORS TURNOVER RATIO is a ratio between net credit purchase & average amount of creditors. A shorter collection period indicates prompt payment of debtors. 2 .Average collection period is satisfied to the management.16 15 2007-2008 17. It is computed by using the following formula. Last 5 years average collection period shows a shorter period for credit collection. while a longer period indicates the inefficiency of the credit collection. It implies the credit period enjoyed by the firm in paying creditors.

18 CREDITORS TURNOVER RATIO 1.18 2.95 2003-2004 1534.57 2006-2007 2400.57 711.64 878.22 1.59 833.33 2.84 2004-2005 1739.78 2005-2006 2253.CREDITORS TURNOVER RATIO =Net credit purchases /Sundry creditors TABLE 10 CREDITORS TURNOVER RATIO YEAR PURCHASES AVERAGE CREDITORS 786.A high ratio indicates that creditors are not paid in time while a low ratio gives an idea that the 1 .88 2007-2008 1782.52 975.50 CHART 10 CREDITORS TURNOVER RATIOS INFERENCE The Creditors turn over Ratios is increase in trend.13 2.

57 187 205 142 2 .95 1.business is not taking full advantage of credit period allowed by the creditors. It is calculated by using the formula: CREDITORS PAYMENT PERIOD = 365 / CREDITORS TURNOVER OR = [CREDITORS / CREDIT PURCHASES] * 365 TABLE 11 CREDITORS PAYMENT PERIOD YEAR 2003-2004 2004-2005 2005-2006 CREDITORS CREDITORS TURNOVER RATIO PAYMENT PERIOD 1.78 2. CREDITORS PAYMENT PERIOD Creditors payment period measures the time taken by the firm to make payments for it’s purchases. This ratio measures the average credit period enjoyed from the creditors.

A shorter period indicates that creditors are being paid promptly.50 127 146 CHART 11 CREDITORS PAYMENT PERIOD INFERENCE The Creditors payment period shows a decrease in Trend. It is calculated as follows: WORKING CAPITAL TURNOVER RATIO = NET SALES NET WORKING CAPITAL TABLE 12 WORKING CAPITAL TURNOVER RATIOS . WORKING CAPITAL TURNOVER RATIO This ratio is computed to test the efficiency with which the net working capital is utilized.88 2. this ratio indicates whether working capital is effectively used in making sales. while a longer period reflects liberal credit terms granted by suppliers. 2 . In other words.2006-2007 2007-2008 2.

When compared to the general norms it is good.6 2003-2004 1978.13 6. A low Working capital turnover 2 .55 357.89 5.But during the year 04-05 the ratio shows a very low working capital.41 2004-2005 2342.64 541.07 613.19 451. A high Working capital turnover ratio may reflect an adequacy of working capital and higher turnover of inventories.35 7.26 3.81 2005-2006 2855.27 2006-2007 3165.01 2007-2008 2464.9 CHART 12 WORKING CAPITAL TURNOVER RATIO INFERENCE The Working capital turnover ratio of NAI Limited is showing a decreasing and increasing trend.31 WORKING CAPITAL TURN OVER RATIOS 5.During the year 06-07 the ratio shows a very good working capital turnover.YEAR NET SALES NET WORKING CAPITAL 352.

65 2004-2005 2342.47 2 . TOTAL ASSETS TURNOVER TOTAL ASSETS TURNOVER = NET SALES / TOTAL ASSETS TABLE 13 TOTAL ASSETS TURNOVER RATIOS YEAR NET SALES TOTAL ASSETS TOTAL ASSETS TURN OVER RATIOS 0.41 6277.44 2006-2007 3165. for this management action is initiated ASSET TURNOVER Assets are utilized for generating sales and to earn profits.36 2005-2006 2855. The relationship between sales and assets is called asset turnover.19 6711.96 0.ratio may reflect an inadequacy of working capital and lower turnover of inventories.45 0.07 6378.64 6505. therefore. a firm should manage its assets efficiently and effectively to maximize sales.32 2003-2004 1978. The ratio shows the firm’s ability in generating sales from all financial resources committed towards assets.8 0.

FIXED ASSETS TURNOVER RATIO Fixed assets turnover ratio shows the relationship between sales and fixed assets. The Total Assets Turnover Ratio of NAI Limited is showing a decrease in trend. Fixed assets The term fixed assets for this ratio is the depreciated value of fixed assets i.2007-2008 2464. It is computed as follows: Fixed assets turnover ratio = sales .A high ratio is an indicator of over-trading of total assets while a low ratio reveals idle capacity. It shows whether fixed assets are fully utilized. TABLE 14 2 . this ratio measures the efficiency with which a firm is utilising its fixed assets in generating sales.e.07 0. To be more clearly.31 CHART 13 TOTAL ASSETS TURNOVER RATIOS INFERENCE . the amount of depreciation is deducted from the value of fixed assets.55 7904.

FIXED ASSETS TURNOVER RATIOS YEAR SALES FIXED ASSETS FIXED ASSETS TURN OVER RATIOS 0.99 2742.83 3297. a lower ratio indicates ideal capacity and excessive investment in fixed assets.87 1. a standard or ideal ratio is 5 times.51 0.51 CHART 14 FIXED ASSETS TURNOVER RATIO INFERENCE The Fixed Asset turnover ratio of NAILimited was decreasing and increasing trend.41 2342.53 3558.89 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 1978.65 0.64 3165. This ratio measures the efficiency in the utilisation of fixed assets.07 2855.04 0. So we can say that firm achieved the standard ratio.17 3022. On the other hand. 1 .55 3824. A high ratio reflects overtrading. Generally.19 2464.

IV) PROFITABILITY RATIOS Profitability is the overall measure of the companies with regard to efficient and effective utilization of resources at their command. It indicates in a nutshell the effectiveness of the decision taken by the management from time to time. Profitability ratios are of utmost importance for a concern .These ratios are calculated to enlighten the end results of business activities which is the sole criterion of the overall efficiency of a business concern. The following are the important profitability ratios: 1) Gross profit ratio-This ratio tells gross margin on trading and is calculated as under: Gross Profit Ratio=Gross Profit / Net Sales*100 For example, if gross profit is Rs.42,000 and net sales are Rs.3,00,000, the gross profit ratio will be 14%(i.e.,42,000/ 3,00,000*100). Higher the ratio, the better it is. A low ratio indicates unfavorable trends in the form of reduction in selling prices not accompanied by proportionate decrease in cost of goods or increase in cost of production. 2) Operating Ratio-This ratio indicates the proportion that the cost of sales bears to sales. Cost of sales includes direct cost of goods sold as well as other operating expenses, (i.e., administration, selling and distribution expenses) which have matching relationship with sales. It excludes income and expenses which have no bearing on production and sales i.e., non- operating income and expenses as interest and dividend received on investment, interest paid on long-term loans and debentures, profit or loss on sale of fixed assets or long-term investments. It is calculated as follows:

3

Cost of goods sold +operating expenses / net sales*100 For example ,if cost of goods sold Rs.3.10,000 are given, then operating expenses Rs.2,00,000 and net sales Rs.6,80,000 are given ,then operating ratio will be 75% (i.e., Rs.3,10,000+Rs.2,00,000/Rs.6,80,000*100) Lower the ratio, the better it is. Higher the ratio, the less favorable it is because it would have a smaller margin of operating profit for the payments of dividends and the creation of reserves. This ratio should be analyses further to throw light on the levels of efficiency prevailing in different elements of total cost. 3)Expense Ratios-These are calculated to ascertain the relationship that exist between operating expenses and volume of sales.The following ratios will help in analyzing operating ratio. a)Material consumed ratio=material consumed/net sales*100 b)Conversation cost ratios=labour expenses+ manufacturing expenses/net sales*100 c) Administrative expenses ratio =Administrative expenses ratio/net sales*100 d)Selling and distribution expenses Ratio =Selling and distribution expenses/net sales*100 The total of these four ratios will be equal to operating ratio

1

4) Operating profit ratio-This ratio establishes the relationship between operating profit and sales and is calculated as follows: Operating profit ratio=Operating profit/net sales*100 This indicates the portion remaining out of every rupee worth of sales after all operating costs and expenses have been met. Higher the ratio the better it is. 5) Net profit ratio-This ratio explains per rupee profit generating capacity of sales. If the cost of sales is lower, then the net profit will be higher and then we divide it with the net sales, the result is the sales efficiency. If lower is the net profit per rupee of sales, lower will be the sales efficiency. The concerns must try for achieving greater sales efficiency for maximizing the RIO.This ratio is very useful to the proprietors and prospective investors calculated as follows: Net profit Ratio=Net profit after tax/Net sales*100 This ratio differs from the operating profit ratio in as much as it is calculated after deducting non-operating expenses, such as loss on sale of fixed assets etc., from operating profit and adding non-operating income like interest or dividends on investments, profit on sale of investment or fixed assets, etc., to such profit. Higher the ratio, the better it is, because it gives idea of improved efficiency of the concern. 6) The return on capital employed-This ratio is an indicator of the earning capacity of the capital employed in the business. The ratio is calculated as follows because it reveals the overall profitability of the concern. This is the ratio of net profit after taxes to net sales and is

2

000.5..25.2.000. Higher the ratio.e. the better it is.000*100). Interest and preference dividend/Equity shareholders fund Suppose profit after interest.000 and equity shareholders is Rs.00.the return on capital employed will be 15%(i.000/1.2.00. a project yielding high return is favored.00.000)*100] and 20% 1 .taxes and preference dividend is Rs.The return on equity shareholders funds will be 20%[i. The ratio is expressed as follows: Return on Equity share holders fund= Net profit after tax.25. 7)Return on shareholder’s fund-When it is desired to work out the profitability of the company from the shareholder’s point of view. This ratio is a helpful tool for making capital budgeting decisions.00.Return on capital employed=operating profit/capital employed*100 This ratio is considered to be the most important ratio because it reflects the overall efficiency with which capital is used.00. if the capital employed is Rs.(Rs.1.000 and operating profit before interest and tax is Rs.000*100) The ratio of net profit to share holders funds shows the extent to which profitability objective is being achieved.000 Shareholders fund Rs..00. Return on share holder’s fund= Net profit after interest and tax/Shareholders fund*100 For example.. For example.00.00. 15. 8)Return on equity shareholders fund-This ratio is a measure of the percentage of net profit to equity shareholders fund.15.e.000/10. then the ratio will be (Rs.5. if net profit after interest and tax is Rs.000/RS.00.then it is calculated by the following formula.000. 00.10.

9)Return on Total Asset-This ratio is calculated to measure the profit after tax against the amount invested in total assets to ascertain whether assets are being utilized properly or not.It is calculated as under: Return on total assets=Net profit after tax/Total assets*100 10)Earning per share-This helps in Determining the market price of equity shares of the company and in estimating the company’s capacity to pay dividend to its equity shareholders. It is calculated as follows: Earnings per share= Net profit after tax and preference dividend/Number of equity shares 2 .

39 2004-2005 2342.41 3065.07 3009.9 2006-2007 3165.4 2005-2006 2855.19 3687. Here. The gross profit margin reflects the efficiency with which management produces each unit of the product.GROSS PROFIT MARGIN Gross profit is defined as a difference between net sales and cost of goods sold.51 28.55 4075. Gross profit is the result of relationship between prices.4 2007-2008 2464. NET SALES = SALES – SALES RETURN GROSS PROFIT MARGIN = (NET SALES – COST OF GOODS SOLD)*100 NET SALES TABLE 15 GROSS PROFIT MARGIN YEAR NET SALES CGS GROSS PROFIT MARGIN 54. sales volumes and cost.39 17.02 CHART 15 65.3 GROSS PROFIT MARGIN 1 .12 16.64 3368.9 2003-2004 1978.

NET PROFIT RATIO Net profit ratio is the ratio of net profit to net sales. The decrease in gross profit was due to drastic reduction in selling price.Again it was reduced in the year 06-07 to 16.9%. dividend received etc. but it was decreased in the year 04-05 to 28. provision for contingent liability etc.9%. It is calculated as follows: N/P Profit = Net Profit *100 Net Sales Here. It is usually expressed as percentage.3%. interest on investment. It is known as profit margin.4%.But it was increased in the year 07-08 to 65.4%. sales volume and stiff competition in the market.INFERENCE The Gross profit margin of NAI Limited is showing a decreasing and also increasing trend. Where as in the year 05-06 it was reduced to 17. net profit is the balance of profit and loss account after adjusting interest and taxes and all non-operating expenses like loss on sale of fixed assets. and all nonoperating incomes like profit on sale of assets. TABLE 16 NET PROFIT RATIO YEAR NET PROFIT NET SALES NET PROFIT MARGIN 3 .The profit margin for 03-04 was 54.

39 3165.07 100.but it was increased in the year 04-05 to 100.82.82 2004-2005 2352.43.28 2342.06 2855.IFINDINGS OF THIS STUDY • The Current Ratio of NAI international Limited showing a decreasing and increasing trend.84 2006-2007 3255.94 A high N/P ratio would indicate higher overall efficiency of the business.2003-2004 1876.64 97.55 101.84.01 1978.26 2464.43 2005-2006 2794.02 2007-2008 CHART 16 4789.This indicates that there is no 2 .Where as in the year 05-06 it was decreased in to 97.02 then it was slight increase 101. A low N/P ratio would mean low efficiency and inadequate return to owners IV.The net profit margin for 03-04 was 94.But it was increased in the year 06-07 to 101.19 101. better utilisation of limited resources and reasonable return to owners.94 NET PROFIT RATIO INFERENCE The net profit ratio of NAI limited is showing a unstable trend.41 94.

because a large margin of protection provides safety for the creditors.The greater the turnover of inventory more will be efficiency of its management.A decrease in the ratio mean that the trading is slack or more mechanisation has been put through. A low ratio indicates that firm’s liquidity position is not good. • The Debt Equity Ratio is shown in less in trend.better margin of safety for the creditors. A high ratio indicates that funds are not economically used in the firm. • The Absolute Liquid Ratio shows a very low in this case. A high ratio indicates that firm is liquid and has the ability to meet its current or liquid liabilities.The same low ratio may be taken as quite unsatisfactory by the shareholders because they find neglected opportunity for using low cost outsiders funds to acquire fixed assets that could earn a high return.it will be higher when sales are maximum the average inventory is minimum. • The Inventory turnover ratio is shown higher in Trend. • The Liquid Ratio of this company shows a low in trend. • The company has got a fixed interest coverage Ratio at high level.A low ratio is generally viewed as favaourable from long term creditors point of view.Itindicates whether the business would earn sufficient profits to pay periodically the interest charges. Further.It really measures the ability of the concerns to service the debt. • The Ratio of current Assets To fixed Assets shows a decrease in trend. 2 . A low ratio indicate that firm may have some difficulty in paying off its debts. This is because the company carries a less cash balance and absolutely no marketable securities.

The Gross Profit Ratio is Decrease in Trend. The decrease in gross profit was due to drastic reduction in selling price.The low ratio reveals that the idle capacity.The debtors Turnover ratio is very high in this case.It causes . 1 .IISUGGESTIONS From the data analysis and interpretation. The Creditors Turnover Ratios shown a decrease and also increase in trend. • • The Average Collection period shows the quality of debtors since it ventilates the speed at which the debtors are collected. sales volume and stiff competition in the market.• Debtors turnover ratio of the unit is not at all satisfactory for the last 5 years.Higher the ratio.more the chances of bad debts.The low working Capital Turnover Ratio is indicates that working capital is not properly used. the following suggestion are put forward to the company and their implementation will definitely be beneficial to the company. • The Net profit Ratio is shown a higher in trend.A high ratio indicates that creditors are not paid in time while a low ratio gives that the business is not taking full advantages of credit period allowed by the creditors. • The Working Capital Turnover Ratios is lower in trend. • • • The Total Asset Turnover Ratio is lower in trend.the better it is because it gives idea of improved efficiency of the concern. IV. The Fixed Assets Turnover Ratios are decrease in trend because it reveals that the fixed Assets are not being efficiently used.

• The current assets and quick assets are showing a continuous down ward trend. The company should make prompt payment to the suppliers’ leads to getting raw materials in timely and also enhancing the goodwill of the company. The management of inventory should ensure that no inventories are lying in stock for long time. • • • • The debtors occupy a significant proportion of current assets hence management of debtors deserve special attention. • The management should pay attention towards increasing working capital turnover by minimizing the investment in inventories and receivables. 1 . • There should not be excessive inventories or large idle cash balance. There should be always a good inventory management. Good relation with the bank should be maintained. The management should give more attention to maintain& keep minimum cash and bank balance as much as possible.• Take proper attention to be taken for either increasing current assets or decreasing current liabilities for the purpose of improving the short term liquidity position of the company. it is an alarming signal to the management for initiating necessary preventive action. Fixed assets must be utilized fully. • • • • The company should ensure that funds are using economically.

Finance is rightly described as the lifeblood of any industrial or commercial undertaking.• Managing innovation effectively has become the key to the growth in the context of increasing competition owing to the globalization and emergence of disruptive technologies across the world. IV. The main object of every business enterprise is to maximize shareholders wealth.IIICONCLUSION Finance is the king-pin of any business enterprise. requires finance. etc. Every part of an enterprise production. Without profit any firm can exist. distribution. management. All business organization has to be profit oriented as profits are essential for the very survival of the organization and are also needed for 1 .

if a suppliers’ organization has to achieve the profit objectives. It also highlights the liquidity and efficiency of the NAI International Limited. This study reveals the impact of financial analysis in the profitability of the NAI International Limited. Therefore. energy and human resources. The study gives a clear idea of the financial position of the company over the last five years. From the study the researcher was able to find out the financial efficiency of the firm through a detailed analyzes of the different ratios’ for the last five years. 2 . In the present highly competitive buyer dominated situation.The study undertakes various efforts to analyze all of them in great details. it has now to earn profit by controlling cost price. the market forces are determining the selling price. The major component which makes cost price is cost of materials.its growth. From the study thus it becomes clear that the overall financial position of the company have to be improved.

JAIN K.com.P.au Introduction to COST ACCOUNTING (Calicut University)-S.Studyfinance.com www.com www.newapproach.investopedia.NARANG NEW APPROACH INTERNATIONAL LIMITED BALANCE SHEET FOR THE PERIOD FROM 2003-2004 TO 2007-2008 PARTICULARS 31/6/2004 31/6/2005 31/6/2006 31/6/2007 31/6/2008 1 .L.BIBILIOGRAPHY www.

26 711.37 3684.78 2.53 112.39 1.89 2342.01 439.89 3168.00 0.11 75.37 9.37 9.00 0.18 5.16 2653.83 26.53 95.28 5398.70 2996.61 58.34 3168.98 3.22 5.50 339.38 541.26 7192.63 112.63 190.26 9.33 3255.13 5.20 5374.35 45.93 153.74 5396.89 2087.81 44.66 175.02 35.38 152.20 878.54 99.38 451.32 5622.06 5622.09 367.54 341.89 2067.86 53.91 138.26 99.00 0.45 RUBFILA INTERNATIONAL LIMITED PROFIT AND LOSS ACCOUNT FOR THE PERIOD FROM 2003-2004 TO 2007-2008 PARTICULARS 31/3/2004 31/3/2005 31/3/2006 31/3/2007 31/3/2008 1 .59 2794.69 2389.31 137.87 356.21 5872.55 147.74 74.53 85.92 54.45 5387.74 975.82 2352.56 5398.Loans and Advances a)Inventories b)Sundry Debtors c)Cash and bank balances d)Other current Assets e)Loans and Advances Total Less:Current Liabilities and Provisions a)Current Liabilities b)Provisions Net Current Assets 4)Miscellaneous Expenditure (to the extent not written off or adjusted) Profit and Loss Account Total Significant Accounting policies and notes on accounts 3168.37 9.00 0.68 3532.03 3271.51 1841.99 26.19 2116.42 352.00 59.99 1567.34 1876.89 2153.18 5.00 86.86 7192.65 2742.90 5486.38 352.46 3798.34 354.38 613.09 3168.51 64.33 357.25 786.89 72.00 5486.89 5386.53 95.37 9.53 26.17 26.SOURCES OF FUNDS: 1)Share Holder’s Funds a)Share Capital b)Reserves and Surplus 2)Loan Funds a)Secured Loans b)Unsecured Loans Total APPLICATION OF FUNDS 1)Fixed Assets a)Gross Block b)Less:Depreciation c)Net Block d)Capital work-in-progress 2)Investments 3)Current Assets.13 18.39 5872.67 387.09 5365.03 4789.21 833.57 12.62 3168.

06 386.21 335.24 27.53 65.24 577.64 70.24 36.58 220.15 29.33 197.41 27.01 ---129.00 2352.39 1040.20 199.38 139.02 1533.INCOME: Sales Other Income Total EXPENDITURE: Variation in stock Consumption of Raw material and Consumables Manufacturing Expenses Administrative Expenses Marketing Expenses Interest And Financial charges Depreciation Preliminary/Deferred revenue expenditure Prior Period Expenditure Provision For Contingent Liabilities Total NET PROFIT/(LOSS) BEFORE TAX AND EXTRAORDINARY ITEMS ADJUSTED Deffered Tax Interest Waiver NET PROFIT/(LOSS) BEFORE EXTRA ORDINARY ITEMS NET PROFIT/(LOSS) Balance brought From last year Balance carried to the Balance sheet Notes attached to and forming part of the accounts 1978.46 2400.19 60.86 2342.68 273.35 275.87 4.37 1739.52 0.53 420.28 476.62 3687.39 441.60 2541.41 46.61 276.63 2403.68 37.55 76.70 1534.10 4075.87 3255.70 0.97 2926.84 293.33 2794.33 2464.61 3225.16 136.61 4.78 441.16 47.30 27.51 605.60 206.53 476.21 2253.59 351.39 4789.26 2 .99 38.48 1876.12 461.78 2352.43 9.06 461.52 311.53 1455.63 151.59 149.28 2794.33 -420.34 129.28 1876.78 3165.80 11.07 61.19 3065.86 274.57 322.44 281.83 27.87 620.33 3368.09 64.06 3255.34 15.41 239.72 1782.64 391.56 3009.47 150.24 821.12 2024.39 1533.28 --441.24 8.81 2855.

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