CHAPTER V

ANALYSIS AND INTERPRETATION

COMMONSIZE STATEMENT OF CURRENT ASSETS AND CURRENT

LIABILITY
The common size statement represents. The relationship of different Item of a

financial statement with some common item by expressing each item as a percentage of that

common item as a percentage of that common item. Here in this common size statement each

item is started as a percentage of the currents assets and then each item as percentage of

current liabilities. The percentage for different item of current assets and current liabilities,

are computed by dividing the absolute amount of that item by the common base and then

multiplying by it 100. This percentage cell cur rated can be easing emperor with the

corresponding percentages of some other periods. Thus, the common size statement is useful

not only in intra-firm. Compression but also in maturing inter-firm comparison or the same

bear of far a several years.

The following is the table showing common size statement of current asset current

liability from 2002 to 2007

TABLE NO: 1

COMMON SIZE STATEMENT OF CURRENT ASSETS & CURRENT

LIABILITIES FROM 2003 TO 2007

PARTICULARS 2003 2004 2005 2006 2007

Current Assets: % % % % %
Debtors 9.65 11.15 12.42 9.56 17.47
Cash & Bank 10.46 5.72 10.41 13.66 2.52
Inventories 62.70 68.57 61.26 55.61 55.49
Loans & Advances 13.12 11.26 12.50 17.68 21.24
Other current Assets 4.67 3.30 3.41 3.49 3.28
Total Current Assets (A) 100 100 100 100 100
Current Liabilities:
Current Liabilities 92.46 91.63 89.63 79.95 78.68
Provision 7.54 8.37 10.70 10.05 21.32
Total Current Liabilities (B) 100 100 100 100 100

INFERENCE:

There seems to be an increasing trend in the part of cash and bank, and inventory holds

the large part of current assets compared to the rest of current assets.

In current liabilities, provisions show have an increasing trend, but other current liabilities

shows a down turn as the years goes by.

CHART NO: 1 COMMON SIZE STATEMENTS OF CURRENT ASSETS AND

CURRENT LIABILITIES FROM THE YEAR 2002 TO 2003

CURRENT ASSETS FOR 2003:

 120

100
100

80 Debtors
Cash & Bank
Percentage

62.7
Inventories
60
Loans & Advances
Other current Assets
40 Total Current Assets (A)

20 13.12
9.65 10.46
4.67

0
2003
Year

CURRENT LIABITIES FOR 2003:

 %

120

100
100 92.46

80
percentage

60

40

20
7.54

0
Current Liabilities Provision Total Current Liabilities
(B)
particulars

CHART NO: 2 COMMON SIZE STATEMENTS OF CURRENT ASSETS AND

CURRENT LIABILITIES FROM THE YEAR 2003 TO 2004
CURRENT ASSETS FOR 2004:

120

100
100

Debtors
80
68.57 Cash & Bank
percentage

Inventories
60
Loans & Advances
Other current Assets
40
Total Current Assets (A)

20 11.15 11.26
5.72 3.3
0
2004
Year

CURRENT LIABILITIES FOR 2004:

 120
100
100 91.63

80
percentage

60

40

20
8.37

0
Current Liabilities Provision Total Current Liabilities
(B)
particulars

CHART NO: 3 COMMON SIZE STATEMENTS OF CURRENT ASSETS AND

CURRENT LIABILITIES FROM THE YEAR 2004 TO 2005
 CURRENT ASSETS FOR 2005

120
100
100
Debtors
80
Cash & Bank
Percentage

61.26 Inventories
60
Loans & Advances
Other current Assets
40
Total Current Assets (A)
20 12.42 10.41 12.5
3.49
0
2005
Year

CURRENT LIABILITIES FOR 2005

120
100
100 89.63

80
ce
er

nt
P

g
a

60

40

20 10.7

0
Current Liabilities Provision Total Current Liabilities
(B)
Particulars
CHART NO: 4 COMMON SIZE STATEMENTS OF CURRENT ASSETS AND
CURRENT LIABILITIES FROM THE YEAR 2005 TO 2006
 CURRENT ASSETS FOR 2006

120
100
100
Debtors
80 Cash & Bank
Percentage

55.61 Inventories
60
Loans & Advances
40 Other current Assets
Total Current Assets (A)
17.68
20 13.66
9.56
3.28
0
2006
Year

CURRENT LIABILITIES FOR 2006

120
100
100
79.95
80
Percentage

60

40

20 10.05

0
Current Liabilities Provision Total Current Liabilities (B)
Particulars
CHART NO: 5 COMMON SIZE STATEMENTS OF CURRENT ASSETS AND
CURRENT LIABILITIES FROM THE YEAR 2006 TO 2007

CURRENT ASSETS FOR 2007

120

100
100

80 Debtors
Cash & Bank
Percentage

Inventories
60 55.49
Loans & Advances
Other current Assets
40
Total Current Assets (A)
21.24
17.47
20
2.52 3.34
0
2007
Year
 CURRENT LIABILITIES FOR 2007

120
100
100
78.68
80
Percentage

60

40
21.32
20

0
Current Liabilities Provision Total Current Liabilities
(B)
Particulars

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR SSM LTD

2002 TO 2003
 Particular 2002 2003 Increase Decrease
CURRENT ASSETS
Inventory 15,19,81,648 23,42,87,514 8,23,05,866 ----
Sundry Debtors 3,57,37,731 3,60,71,265 3,33,534 ----
Cash & Bank Balance 1,15,21,626 3,90,82,865 2,75,61,239 ----
Other Assets 1,45,76,091 1,51,91,610 6,15,519 ----
Loans & Advances 5,57,48,039 4,90,33,035 ---- 67,15,004
Net Increase in C.A.(1) 26,95,65,135 37,36,66,289 11,08,16,158 67,15,004
CURRENT LIABILITIES
Liabilities 9,84,25,287 20,68,07,381 ---- 10,79,32,094
Prevision 85,29,000 1,68,38,507 ---- 83,09,507
Increase in C.L.(2) 10,69,54,287 22,31,95,888 11,08,16,158 12,29,56,605
16,26,10,848 15,04,70,401 11,08,16,158 12,29,56,605
Decrease in W.C. 1,21,40,447 1,21,40,447
Total Working Capital 16,26,10,848 16,26,10,848 12,29,56,605 12,29,56,605

INFERENCE:
From the above table we infer that the working capital is decreasing from 2002 to

2003.

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR SSM LTD

FROM 2004 TO 2005

Particular 2004 2005 Increase Decrease

CURRENT ASSETS
Inventory 33,68,99,942 34,81,82,919 1,12,82,977
Debtors 5,47,92,7888 7,06,15,235 1,58,22,447 ----
Cash & Bank Balance 2,80,93,298 5,92,11,722 3,11,18,424 ----
Other Current Assets 1,62,29,847 1,93,77,742 31,47,895 ----
Loans & Advances 5,53,02,665 7,10,83,423 1,57,80,758 ----
Net Increase C.A. (1) 49,13,18,540 56,84,71,041 7,71,52,501 ----
CURRENT LIABILITIES
Liabilities 18,44,36,870 20,11,86,250 ---- 1.67,49,380
Prevision 1,68,38,506 2,41,09,650 ---- 72,71,144
Increase Liabilities (2) 20,12,75,376 22,52,95,900 7,71,52,501 2,40,20,524
29,00,43,164 34,31,75,141 7,71,52,501 2,40,20,524
Increase in W.C. 5,31,31,977 ---- ---- 5,31,31,977
Total Working Capital 34,31,75,141 34,31,75,141 7,71,52,501 7,71,52,501

INFERENCE
From the above table we infer that the working capital is increasing from 2004 to

2005.

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR SSM LTD

FROM 2005 TO 2006

PARTICULAR 2005 2006 INCREASE DECREASE

CURRENT ASSETS
Inventory 34,81,82,919 36,34,95,069 1,53,12,150 ----
Sundry Debtors 7,06,15,235 6,25,13,290 ---- 81,01,945
Cash & Bank Balance 5,92,11,722 8,92,80,727 3,00,69,005 ----
Other Assets 1,93,77,742 2,28,14,885 34,37,143 ----
Loans & Advances 7,10,83,423 11,55,53,321 4,44,69,898 ----
Net Increase in C.A.(1) 56,84,71,041 65,36,57,292 9,32,88,196 81,01,945
CURRENT LIABILITIES
Liabilities 20,11,86,250 12,59,69,161 7,52,17,089 ----
Provision 2,41,09,650 3,16,07,616 ---- 74,97,966
Increase in C.L.(2) 2,52,95,900 15,75,76,777 16,85,05,285 1,55,99,911
34,31,75,141 49,60,80,515 16,85,05,285 1,55,99,911
Decrease in W.C. 15,29,05,374 ---- ---- 15,29,05,374
Total Working Capital 49,60,80,515 49,60,80,515 16,85,05,285 16,85,05,285

INFERENCE
From the above table we infer that the working capital is increasing from 2005 to

2006.
SCHEDULE OF CHANGES IN WORKING CAPITAL FOR SSM LTD
FROM 2006 TO 2007
PARTICULAR 2006 2007 INCREASE DECREASE
CURRENT ASSETS
Inventory 36,34,95,069 40,44,86,786 4,09,91,717 ----
Sundry Debtors 6,25,13,290 12,73,75,579 6,48,62,289 ----
Cash & Bank Balance 8,92,80,727 1,83,81,768 ---- 7,08,98,959
Other Assets 2,28,14,885 2,39,01,605 10,86,720 ----
Loans & Advances 11,55,53,321 15,47,97,912 39,24,45,591 ----
Net Increase C.L. (1) 65,36,57,292 72,89,43,650 14,61,85,317 7,08,98,959
CURRENT LIABILITIES
Liabilities 12,59,69,161 16,99,54,977 ---- 4,39,85,816
Provision 3,16,07,616 4,60,61,578 ---- 1,44,53,962
Net Increase C.L. (2) 15,75,76,777 21,60,16,555 14,61,85,317 12,93,38,737
49,60,80,515 51,29,27,095 14,61,85,317 12,93,38,737
Increase in W.C. 1,68,46,580 ---- ---- 1,68,46,580
Total Working Capital 51,29,27,095 51,29,27,095 14,61,85,317 14,61,85,317

INFERENCE
From the above table we infer that the working capital is increasing from 2006 to

2007.
ANALYSIS OF CASH COMPONENT OF WORKING CAPITAL

CASH TO CURRENT LIABILITIES RATIO

This ratio measures the ability of the firm to meet its current liabilities. Cash is used

to pay current liabilities. Hence, higher the ratio the greater the short term solvency. But

however excessive cash will also means idle cash if otherwise invested would bring

considerable returns.

Cash and Bank balances

Cash to Current Liabilities Ratio = --------------------------------
Current Liabilities

Current Liabilities = Trade creditors + Trade Deposits and Advances

+ Other Liabilities + Interest accrued but not

due on Loans + Provision for Tax and dividend

TABLE NO.6

Cash to Current Liabilities Ratio of SSM for the Period of 2002-03 to 2006-2007
Financial Year Cash (Rs.) Current Liabilities Cash to Current
(Rs.) Liabilities Ratio
(%)
2002-03 390.83 2231.95 17.51
2003-04 280.93 2012.74 13.96
2004-05 592.12 2252.96 26.28
2005-06 892.81 1575.78 56.66
2006-07 183.82 2160.17 8.50

(Rs. in Lakhs)

INFERENCE
 From the above table we can infer that cash position Rs.892.81 is good and high due

to the reason of current liability Rs.1575.78 decreased and ratio of cash to current liabilities

56.66% has been increased in the year 2005-2006, it seems to be good.

CHART NO.6
 Cash to Current Liabilities Ratio

60 56.66
Cash to Current Liabilities (%)

50

40

30 26.28

20 17.51
13.96
8.5
10

0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

CASH TO CURRENT ASSETS RATIO

This ratio indicates the percentage of cash on current assets. Since cash has been

considered as a high asset, the higher the ratio greater the solvency position.
 Cash and Bank balances
Cash to Current Assets Ratio = --------------------------------
Current Assets
Current Assets = Inventories + Sundry Debtors + Cash and

Bank Balance + Loans and advances +

Current Assets

TABLE NO.7

Cash to Current asset Ratio of SSM for the Period of 2002-2003 to 2006-2007
(Rs. in Lakhs)
Financial Year Cash (Rs.) Current Assets (Rs.) Cash to Current Asset
Ratio (%)
2002-03 390.83 3736067 10.46
2003-04 280.93 4913.17 5.72
2004-05 592.12 5684.71 10.42
2005-06 892.81 6536.57 13.66
2006-07 183.82 7289.45 2.52

INFERENCE
From the above table we can inferred that cash position Rs.892.81 is good and high

due to the reason of current asset Rs.6536.57 has increased and ratio of cash to current asset

13.66% has been increased in the year 2005-2006, it seems to be good.

CHART NO.7
 Cash to Current Asset Ratio

16
13.66
Cash to Current Assets (%)

14
12 10.46 10.42
10
8
5.72
6
4 2.52
2
0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

CASH TO SALES RATIO

Cash to sales ratio means the availability of cash for making the sales. Higher the ratio

greater the availability of cash for making the sales.

 Cash and Bank balances
Cash to Sales Ratio = -------------------------------
Net sales

TABLE NO.8

Cash to Current asset Ratio of SSM for the Period of 2002-2003 to 2006-2007
(Rs. in Lakhs)
Financial Year Cash (Rs.) Sales (Rs.) Cash to Sales Ratio (%)
2002-03 390.83 6951.21 5.62
2003-04 280.93 8393.28 3.35
2004-05 592.12 9046.51 6.55
2005-06 892.81 11170.71 7.99
2006-07 183.82 12805.59 12.35

INFERENCE
From the above table we can inferred that cash position Rs.892.81 is high due to the

reason of sales increase at Rs-11,170.71 and it leads to ratio of cash to sales at 7.99% are also

be increased in the year 2005-2006.

CHART NO.8
 Cash to Sales Ratio

16
14.35
14
Cash to Sales Ratio (%)

12
10
7.99
8 6.55
5.62
6
4 3.35

2
0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

OPERATING CYCLE

Operating cycle is the time duration required to convert sales, after the conversion of

resources into inventories in to sales, into cash.

 Cash

Raw Materials

adeadadawrew
Accounts Work in Progress
Receivable

Finished Goods

Operating Cycle = Inventory conversion Period + Debtors’

Conversion period

INVENTORY CONVERSION PERIOD

The Average inventory conversion period represents the number of days the inventory

is kept for sales in the company

Average Inventory
Inventory Conversion Period = -----------------------------------------
Annual cost of goods sold / 360
TABLE NO.9

Inventory Conversion Period of SSM for the Period 2002-03 to 2006-2007

(Rs. InLakhs)
Financial Year Average Inventory Annual Cost of Inventory
(Rs.) Goods Sold (Rs.) Conversion Period
(in days)
2002-03 1931.35 5804.29 120
2003-04 2855.94 6839.21 150
2004-05 3425.41 7119.65 173
2005-06 3558.39 8810.98 145
2006-07 3839.91 10018.41 138

INFERENCE
The company holds for an average of 100 days in a year. In 2004-2005 the average

Inventory conversion is for 173 days.

CHART NO.9
 Inventory Conversion Period Ratios

200
Invertory Conversion Period (in days)

180 173

160 150
145
138
140
120
120
100
80
60
40
20
0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

DEBTORS’ CONVERSION PERIOD

The debtors’ collection period represents the number of days the debtors are

converted in to cash
TABLE NO.10
Debtors’ Conversion Period of SSM for the Period 2002-03 to 2006-2007
(Rs. in Lakhs)
Financial Year Average Accounts Annual Sales (Rs.) Debtors’
Receivable (Rs.) Conversion Period
(in days)
2002-03 359.04 6951.21 19
2003-04 454.32 8393.28 20
2004-05 627.04 9046.51 25
2005-06 665.64 11170.71 21
2006-07 949.45 12805.59 27

INFERENCE

From the company collects their receivable within a period of 27 days. In the year

2006-07 average number of days for which the debtors remain outstanding for 27 days. While

comparing the last years its is higher

CHART NO .10
 Debtors' Conversion Period Ratios

30
27
Debtors' Conversion Period (in days)

25
25
21
20
20 19

15

10

0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

OPERATING CYCLE

TABLE NO.11
 Operating Cycle of SSM for the Period 2003 to 2007
Financial Year Inventory Debtors’
Conversion Period Conversion Period Operating Cycle
(in days) (in days) (in days)
2002-03 120 19 139
2003-04 150 20 170
2004-05 173 25 198
2005-06 145 21 166
2006-07 138 27 165

INFERENCE
The operating cycle represents the number of days for the conversion of inventories

into sales into cash. The operating cycle days are in the increasing trend from the year 2002-

03 onwards except in the year 2006-06. The highest cycle days (198 days) are stated in the

year 2004-05 and lowest days are shown in the year 2002-03.

CHART NO.11
 Operating Cycle

250

198
Operation cycle (in days)

200
170 166 165
150 139

100

50

0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

CASH CYCLE
This cash cycle denotes the number of days required to convert the cash into cash,

which was invested in business

Cash Cycle = Operating Cycle – Creditors’ Conversion Period

CREDITORS’ CONVERSION PERIOD
The creditors’ conversion period refers to the number of days the creditors remain

outstanding for payment

TABLE NO.12

Creditors’ Conversion Period of SSM for the Period 2003-2007

(Rs. in Lakhs)
Financial Year Average Accounts Annual Cost of Creditors’
payable (Rs.) Goods Sold (Rs.) Conversion Period
(in days)
2002-03 1283.22 5804.29 80
2003-04 1550.33 6839.21 82
2004-05 1486.31 7119.65 75
2005-06 3727.40 8810.98 54
2006-07 1309.73 10018.41 47

INFERENCE
The creditor’s conversion period is in decreasing trend. From the year 2002-03 to

2006-07 i.e., from 80 days to 47 days.

CHART NO.12
 Creditors' Conversion Period ratio

90
82
Creditors Conversion Period (in days)

80
80 75

70

60 54
50 47

40 cccc
30

20

10

0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

CASH CYCLE OF SSM FOR THE PERIOD 1999-2000 TO 2003-2004

TABLE NO.13
 Cash cycle of SSM for the period 2002-2003 to 2006-2007
Creditors Conversion
Financial Year Operating cycle Period Cash Cycle
(in days) (in days) (in days)
2002-03 139 80 59
2003-04 170 82 88
2004-05 198 75 123
2005-06 166 54 112
2006-07 165 47 118

INFERENCE:

Cash cycle was very high in the year (i.e., 123 days) 2004-05 when compared to other

year and in 2007 it was 188 days showing a decreasing trend.

CHART NO .13
 CASH CYCLE RATIO

200 188
180
160
cash cycle (in days)

140
123
120 112
100 88
80
59
60
40
20
0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

ANALYSIS OF INVENTORY COMPONENT OF WORKING

CAPITAL.

INVENTORY TO SALES RATIO

 The above ratio indicates the availabilities of inventory to the sales level. Higher the

ratio higher the inventory level to meet out sales. Since inventory is considered as less liquid,

very high ratio will affect the solvency position of the company. Very less ratio will reduce

the supply, which will reduce the profitability.

Inventories
Inventory to Sales Ratio = ----------------
Net sales

TABLE NO.14

Inventory to Sales Ratio of SSM for the Period 2003-2007

(Rs. in Lakhs)
Financial Year Inventories (Rs.) Sales (Rs.) Inventory to Sales
Ratio (%)
2002-03 2342.88 6951.21 33.70
2003-04 3368.99 8393.28 40.13
2004-05 3481.83 9046.51 38.49
2005-06 3634.95 11170.71 32.54
2006-07 4044.87 12805.59 31.59

INFERENCE
From the above table we can inferred that inventories and sales are increased from the

beginning of year increased from the beginning of year 2002-2003 and ratio of inventory to

sales has not be in constant. From the year 2003-2004 it leads to its position in decreasing of

31.59% in the year 2006-2007.

CHART NO .14

INVENTORY TO SALES RATIO

 Inventory to Sales Ratio

45
40.13
40 38.49

ve

es
33.7

or
nt

to
In

%
at
io
al

R
S
35 32.54

)
31.59
30
25
20
15
10
5
0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

INVENTORY TO TOTAL ASSETS RATIO

This ratio represents the proportion of inventory on total assets. The higher the ratio,

lesser the liquidity position of the company.

 Inventories
Inventory to Total Assets Ratio = ------------------
Total Assets

Total assets = Net Fixed Assets + Current Assets

TABLE NO.15

Inventory to Total Assets Ratio of SSM for the Period 2003-2007

(Rs. in Lakhs)
Financial Year Inventories (Rs.) Total Assets (Rs.) Inventory to Total
Assets Ratio (%)
2002-03 2342.88 9028.36 25.95
2003-04 3368.99 10485.75 32.13
2004-05 3481.83 12049.43 28.90
2005-06 3634.95 14447.55 25.16
2006-07 4044.07 19662.54 20.57

INFERENCE
From the above table we can inferred that position of Inventories and assets are

increased for each year as Rs.4044.87 and Rs.19662.54 in the year 2006-07 and its position is

20.57.

CHART NO.15
 Inventory to Total Assets Ratio

ent

set
Inv

As
To
tal
or

to
y

s
35
30
25
20
Ratio %
15
10
5
0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

INVENTORY TO CURRENT ASSETS RATIO

This ratio elucidates proportion o inventory on current assets. Since the inventory is

illiquid in nature the ratio will affect the liquidity position of the firm.

Inventories
Inventory to Current Assets Ratio = ------------------
Current Assets

Current Assets = Inventories + Sundry Debtors + Cash

And Bank Balances + Loans and Advances

+ Other Current Assets

TABLE NO.16

Inventory to Current Assets Ratio of SSM for the Period 2003-2007 (Rs.in Lakhs)
Financial Year Inventories (Rs.) Current Assets (Rs.) Inventory to
Current Assets
Ratio (%)
2002-03 2342.88 3736.67 62.70
2003-04 3368.99 4913.17 68.57
2004-05 3481.83 5684.71 61.25
2005-06 3634.95 6536.57 55.61
2006-07 4044.07 7289.45 55.49

INFERENCE
From the above table it sows that is increased at Rs.4044.87 and Rs.7289.45 in the

year 2006-07 but it proportion of inventory on current assets is 55.49%.

CHART NO.16
 Inventory to Current Assets Ratio

80
Inventory to Current Assets

70
60
50
Ratio (%)

40
30
20
10
0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

ANALYSIS OF DEBTORS’ COMPONTENT OF WORKING

CAPAITAL- DEBTORS’ TO SALES RATIO
 This ratio measures the debtors generated while making the sales. Collection of

outstanding will become a big problem if the ratio is high. Lesser the ratio reduces credit

sales and the problem of collection.

Debtors
Debtors to Sales Ratio = -------------
Sales

TABLE NO.17
Debtors to Sales Ratio of SSM for the Period 2003-2007(Rs.in Lakhs)
Financial Year Debtors (Rs.) Sales (Rs.) Debtors to Sales
Ratio (%)
2002-03 360.71 6951.21 5.18
2003-04 547.93 8393.28 6.53
2004-05 706.15 9046.51 7.81
2005-06 625.13 11170.70 5.51
2006-07 1273.76 12805.59 9.94

INFERENCE
From the table it inferred that debtors Rs.360.71 and sales Rs.6951.20 increased from

the year 2002-03 to 2006-07 at debtors Rs 1723.76 and sales Rs 12805.59.this position of

debtors to sales ratio 9.94% 8in the year 2006-07

CHART NO.17
 Debtors to Sales Ratio

12
Debtors to Sales Ratio (%)

9.94
10
7.81
8
6.53
6 5.18 5.51

0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

DEBTORS’ TO CURRENT ASSETS RATIO

This ratio measures the proportion of debtors on current assets. Since debtors are also

not that much liquid higher the ratio will also affect the solvency of the firm.

Debtors
Debtors to Current Assets Ratio = ---------------------
Current Assets

Current Assets = Inventories + Sundry Debtors + Cash

And Bank Balances + loans and Advances

+ Other Current Assets

TABLE NO.18

Debtors to Current Assets Ratio of SSM for the Period 2003-2007 (Rs.in Lakhs)
Financial Year Debtors (Rs.) Current Assets Debtors to Current
(Rs.) Assets Ratio (%)
2002-03 360.71 3736.67 9.65
2003-04 547.93 4913.17 11.15
2004-05 706.15 5684.71 12.42
2005-06 625.13 6536.57 9.56
2006-07 1273.76 7289.45 17.47

INFERENCE
From the above table we can infer that debtors Rs.1273.76 and current assets

Rs.7289.45 has been increased in the year 2006-07 with 17.47%.

CHART NO.18
 Debtors to Current Assets Ratio

20
Debtors to Current Assets Ratio

17.47
18
16
14 12.42
12 11.15
9.65 9.56
(%)

10
8
6
4
2
0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

DEBTORS’ TURNOVER RATIO

Credit Sales
Debtors Turnover Ratio = --------------------------
Average Debtors
 Average Debtors = (Opening Debtors + Closing Debtors)/2

TABLE NO.19

Debtors’ Turnover Ratio of SSM for the Period 2003-2007 (Rs.in Lakhs)
Financial Year Credit Sales Average Debtors Debtors’ Turnover
Ratio
2002-03 6951.21 359.04 19.37
2003-04 8393.28 454.32 18.47
2004-05 9046.51 627.04 14.43
2005-06 11170.70 665.64 16.78
2006-07 12805.59 949.44 13.49

INFERENCE
From the above table, we can inferred that credit sales are increased to Rs.12805.59

and average debtors Rs 949.44 in the year 2006-07 and it leads to ratio in 13.49%.

CHART NO.19
 Debtors' Turnover Ratio

25

19.37
20 18.47
16.78
Ratios (Times)

14.43
15 13.49

10

0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

LIQUIDITY RATIOS
CURRENT RATIO
The current ratio measures the ability of firm to meet its current liabilities. Current

assets get converted into cash in operating cycle of the firm and provide funds needed to pay

current liabilities. General norm is 2:1.

 Current Assets
Current Ratio = ---------------------
Current Liabilities

Current Assets = Inventories + Sundry Debtors + Cash

And Bank Balances + Loans and Advances

+ Other Current Assets

Current Liabilities = Trade Creditors + Trade Deposits and

Advances + Other Liabilities + Interest

Accrued but not due on loans + Provision

for tax And dividend

TABLE NO.20

Current Ratio of SSM for the Period 2003-2007 (Rs.in Lakhs)

Financial Year Current Assets Current Liabilities Current Ratio
2002-03 3736.67 2231.95 1.67
2003-04 4913.17 2012.74 2.44
2004-05 5684.71 2252.96 2.52
2005-06 6536.57 1575.78 4.15
2006-07 7289.45 2160.17 3.37
INFERENCE
From the above table, we can infer that current assets are increased to Rs 7289.45 and

current liabilities rs2160.17 and its ratio at 3.37%.

CHART NO.20
 Current Ratio

4.5 4.15
4
3.37
3.5
Ratios (Times)

3 2.52
2.44
2.5
2 1.67
1.5
1
0.5
0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

LIQUID RATIO
Quick ratio established a relationship between liquid assets and current liabilities.

The liquid ratio is most penetrating test of liquidity than current ratio and the general norm is

1:1.

Liquid Assets
 Liquid Ratio = --------------------------
Current Liabilities

Liquid Assets = Current Assets – Inventories

Current Liabilities = Trade Creditors + Trade Deposits and

Advances + Other Liabilities + Interest

Accrued but not due on loans +

Provision for tax and dividend

TABLE NO.21
Liquid Ratio of SSM for the period 2002-2003 to 2006-2007
Financial Year Liquid Assets (Rs.) Current Liquid Ratio
LIABILITIES (Rs.)
2002-03 1393.79 2231.95 0.62
2003-04 1544.18 2012.74 0.77
2004-05 2202.88 2252.96 0.98
2005-06 2901.62 1575.78 1.84
2006-07 3244.58 2160.17 1.50

INFERENCE
From the table, we can infer that liquid assets are increased to Rs 3244.58 and current

liabilities Rs 2160.17 for each year with its ratio of 1050% in the year 2006-07.

CHART NO.21
 Liquid Ratio

2 1.84
1.8
1.6 1.5
Ratios (Times)

1.4
1.2
0.98
1
0.77
0.8 0.62
0.6
0.4
0.2
0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

NET WORKING CAPITAL RATIO

This ratio measures the liquidity position of the firm. The firm having larger net

working capital has greater ability to meet its current obligations.

Net Working Capital

Net working Capital Ratio = ----------------------------
Capital Employed
Net Working Capital = Current Assets – Current Liabilities

Capital Employed = Fixed Assets + Current Assets -

Current Liabilities

TABLE NO.22
Net Working Capital Ratio of SSM for the period 2003-2007
Financial Year Net Working Capital Employed (Rs.) Net Working
Capital (Rs.) Capital Ratio
2002-03 1504.72 6796.41 0.22
2003-04 2900.43 8473.01 0.34
2004-05 3431.75 9796.47 0.35
2005-06 4960.79 12871.77 0.38
2006-07 5129.28 17502.37 0.29

INFERENCE
From the above table, we can infer that net working capital Rs.5, 129.28 and capital

employed Rs. 17502.37 is increased its ratio 0.29% in the year 2006-07.

CHART NO.22
 Net Working Capital Ratio

0.4 0.38
0.34 0.35
0.35
0.29
0.3

es
(T
at

m
io
R

s
0.25

)
0.22
i
0.2
0.15
0.1
0.05
0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

TREND ANALYSIS:
Trend analysis or secular trend is one among the variations involved in time
series.Forcasting, or predicting, is an essential tool in any decision-making processes. Its uses
vary from determining inventory , working capital or annual sales. The quality of the
forecasting can make is strongly related to the information that can be extracted and used
from past data. Trend analysis as one of the variations in time series is one quantitative
method we use to determine patterns in data collected over time.
Trend analysis is used to detect patterns of change in statistical information over regular
interval of time. We project these patterns to arrive at an estimate for the future. Thus trend
analysis helps us cope with uncertainty about the future.
In this case trend analysis is calculated by the method of LEAST SQUARE METHOD to
calculate the past five and predict the next five years working capital secular trend.

Reasons for Studying Trends

1. It allows us to describe a historical pattern.
2. It permits us to project past patterns into the future.

Calculations:
Trend analysis by the method of least square, for the past five years and estimation of the
next five presiding years.

Formula:
 Y=a+bx Straight line equation.

∑y=Na+b∑ x² a and b are constants.

∑xy=a∑x+b∑ x² N is the number of years.

Since ∑x=0, therefore;

∑y=Na a= ∑y (Mean of Y series)

N

∑xy=b∑ x² b=∑xy (Year increment)

∑ x²

Trend values for the past five years:

Year Working x X² xy Trend Line
capital(y)
2003 162610848 -2 4 -325222169 1668.89
2004 343175141 -1 1 -343175141 2892.37
2005 496080515 0 0 0 4115.83
2006 512927095 1 1 512927095 5339.30
2007 543120100 2 4 1086240200 6562.77
TOTAL(∑) 2057913699 0 10 1223469985

a=2057913699 =411582740(4115.83)
 5

b=1223469985 =122346999(1223.47)
10
Y=a+bx
Y2003=4115.83+ (1223.47x-2) =1668.89
“2004=4115.83+ (1223.47x-1) =2892.37
“2005=4115.83+ (1223.47x0) =4115.83
“2006=4115.83+ (1223.47x1) =5339.30
“2007=4115.83+ (1223.47x2) =6562.77

Estimate trend values for the next five years:

Y=a+bx, where base year=2005 and x= (year-2005)
Y2008=4115.83+ (1223.47x3) = 7786.24

“2009=4115.83+ (1223.47x4) = 9009.71

“2010=4115.83+ (1223.47x5) =10233.18

“2011=4115.83+ (1223.47x6) =11456.65

“2012=4115.83+(1223.47x7)=12680.12

TABLE NO.23:

Table showing the trend values of 2003 to 2007 and 2007 to 2012
(Rs.in Lakhs)

YEARS WORKING CAPITL TREND VALUES

2002-03 1626.11 1668.89

2003-04 3431.75 2892.37

2004-05 4960.80 4115.83

2005-06 5129.27 5339.30

 2006-07 5431.20 6562.77

2007-08 - 7786.24

2008-09 - 9009.71

2009-10 - 10233.18

2010-11 - 11456.65
-
2011-12 - 12680.12

INFERENCE:
The trend line figures show an increasing trend in working capital, this also applies to the
predicted five years.

CHART NO.23
 WORKING CAPITAL TREND FOR 2003-07

7000 6562.77

6000
5339.3
5000
TREND VALUES

4115.83
4000
2892.37
3000

2000 1668.89

1000
0
0
S

7
AR

-0

-0

-0

-0

-0
02

03

04

05

06
YE

20

20

20

20

20

CHART NO.24
 WORKING CAPITAL TREND FOR 2007-2012

14000
12680.12
12000 11456.65
10233.18
10000 9009.71
TREND VALUES

7786.24
8000

6000

4000

2000
0
0

A RS -0
8
-0
9
-1
0
-1
1
-1
2
0 7 0 8 0 9 1 0 1 1
YE 20 20 20 20 20