CHAPTER-1

INTRODUCTION
 CHAPTER-1

INTRODUCTION

1.1 General Introduction

Finance is one of the basic foundations of all kind of business activities. It is the
master key which provides access to all the sources for being employed in manufacturing
and merchandising activities. It has been rightly been said that business needs money to
make more money. However it is also true that money generate more money, only when
it is properly managed. Hence efficient management of every business enterprise is
closely linked with the efficient management of finance, financing of a firm means
providing money for investments in the form of fixed asset and in form of working capital
need for day to day operations.

In general term finance means management of money for your expenses. In broad
term finance is the science of funds management. Finance includes saving money and
often includes lending money. The general areas of finance are business finance, personal
finance, and public finance. Finance is also a money budget management. The field of
finance deals with how money is spend and budgected.it also deals the concepts of time,
money risk and how they are interrected.finance is used by individuals as personal
finance, by governments as public finance, by business as corporate finance. As well as
by a wide verity of organisations including schools and non profit organusations.finance
is the need of the today world economy.

Business finance mainly involves, rising of funds and their effective utilisation
keeping in view the overall objectives of the firm. This requires great caution and wisdom
on part management, the management makes use of various financial techniques, devices,
etc for administrating the financial affairs of the firm in most efficient and effective way.
Financial statement analysis is to find out the profitability and financial position of the
firm. To analyses the financial statement, the financial statements are classified
methodically, analysed ad compared with the figure of previous year or other similar
firms.
 Financial statement is an organised collection of data according to logical and
constituent accounting purpose. Its purpose is to convey an understanding of financial
aspects of business firms. It may show a position at a moment of time as in the case of an
income statement. Simply it highlights a clear picture about the financial information of
an organisation.

The purpose of conventional revenue statement and balance sheet firstly, is to

show the result of operations for the period under review secondly, the assets and
liabilities in the form of relevant data. But it is difficult to deduct any inference form mss
of figure includes in the usual finance statement. So in order gauge the financial health of
a firm. It is generally necessary to regroup and analyse the figures as disclosed by the
conventional statement to measure business performance.

Financial statement is the statement is the statement shows the financial

performance and financial position of an organisation during a particular period. Financial
statement includes trading and profit and loss account and balance sheet. Trading and
profit and loss account is prepared to know the profit earned and loss sustained during a
specified period. Balance sheet is prepared to know the financial position of a concern.
Financial statements are prepared at the end of every accounting period.

Financial statements are prepared for the purpose of presenting a periodical

review or report by the management and deal with the state of investment in business and
result achieved during the period under review. Hey reflect a combination of recorded
facts, accounting concepts and conventions and personal judgements.

Financial analysis is the process of identifying the financial strengths and

weakness of a firm properly establishing relationship between the iron of balance sheet
and profit and loss account. Analysis is the process of critically examining in detail
accounting information given in the financial statements. Analysing financial statement is
a process of evaluating relationship between component purls of financial statement to
obtain a better understanding of firms and performances. The main aim of the financial
statement analysis is to find out the profitability and financial position of the firm. To
analyses the financial statement, the financial statements are classified methodically, and
compared with the figures of previous years or other similar firms.
 Financial statement analysis is defined as the process of identifying financial
strength and weaknesses of the firm by properly establishing relationship between the
items of the balance sheet and the profit and loss account. There are various methods or
techniques that are used in analysing financial statements, such as comparative
statements, schedule of change in working capital, common size percentages, funds
analysis, trend analysis, and ratio analysis.

Financial statements are prepared to meet external reporting obligations and also
for decision making purpose. They played a dominant role in setting the frame work of
managerial decisions. But the information provided in the financial statements is not an
end in itself as no meaning full conclusions can be drawn from these statement alone.
However the information provided in the financial statements is immense use in making
decisions through analysis and interpretation of financial statements.

Ratio analysis is a financial statement is the usual tool for analyzing the financial
statement and performance of a company. Ratios are established by comparing two pieces
of financial data. The trend of a ratio over a period of time will help to understanding
whether there has been an improvement or deterioration in the financial condition and
performances of the companies. Inter firm comparisons are possible where the ratios of
the firm are compared with that of other similar firms.

Ratio analysis is the method of analyzing data to determine the overall financial
strength of a business. Financial analysts take the information’s of the balance sheets and
income statements of a business and calculate ratios that can then be used to make
assessment of the operation ability and future prospects of the business. These ratios are
useful only when compared to other ratios, such as the comparable ratios of similar
businesses or the historical trend of single business over several business cycles. There
are various ratios that measure a company’s efficiency, short term strength, profitability,
and solvency.

The techniques of financial analysis serve as a tool for the management in

determining the impact of financial decisions on financial conditions and the profitability
of the enterprise. This can be used by the financial manager as the basis to plane future
financial requirements by means locating and budgeting procedure. With the help of tools
of financial manager can rationalize and reach of goals.
 Multiple discriminant analysis can be used to classify companies, on the basis
of their characteristics as measured by financial ratios, into two groups those, which are
likely to fail and go bankrupt and those not likely to fail. In the literature, the likelihood
of bankruptcy is associated with financial ratios. For instance, it is assumed that the
profitability of bankruptcy is higher for return. The empirical studies of beaver in the
USA and Gupta in India identified ratios, which has discriminating power. What is,
however, required from practical point of view is the understanding of soreness posed by
low performing ratios and the combined effect of favourable and unfavourable ratios. The
use of multiple discriminant analysis helps to consolidate the effect of all ratios. Multiple
discriminant analysis construct a boundary line a discriminant function using historical
data of the bankruptcy and non bankruptcy firms.

DuPont analysis is an approach to analyze the firm by evaluating inters

relationship between among many of the performance measures. In the DuPont analysis
we try to find out what are the factors/drivers that are causing the profits to move up. By
identifying these factors/drivers we can concentrate on them and improve our efficiency.
The three components of DuPont measures of profitability, efficiency and the degree of
leverage of the firm. The DuPont chart makes an intra firm comparison among these three
parameters for three years.

The profitability of the firm shows by the first component has decreased from
0.26 to 0.05 which is not good for the company. This can be further explained as a
consequence of the increase in the cost of goods sold which is in turn due to the increase
in raw material and labour cost. There is also a marginal increase in the marketing
expenses which may not significantly affect profitability. Therefore the major causes for
poor profitability are raising materiel and labour costs.

The second component is indicates of the asset use efficiency of the firm. The
asset turnover has decreased from 0.73 to 0.59. This shows a declining trend in the usage
efficiency in the assets. When the DuPont chart is used to track down then area of
concern, we can find that fixed asset turnover has remained fairly constant and in some
cases even improved over the three years. However current asset turnover is not so
satisfactory. Even among the current asset, we can find the ratio of sales to cash has been
fairly consistent. Stock turnover has on the other hand declined and this is the reason for
inefficient asset usage. Stock here implies both raw materials and finished goods. We can
see that the stock turnover ratio has declined from 7.1 to 5.69 thereby causing recourse
inefficiency.
 The third component shows the degree of leverage of the firm. Through the ratio
between total assets and capital employed has remained fairly consistent, on closer
examination, one can find that there is a huge anomaly with respect to long term loans.
There is a steep decline from 62 times to 11 times. This shows how the leverage of the
firm has changed as result of long term loans. The company has taken long term loans to
finance its actives and this has rightly been reflected in the DuPont chart.
 1.2 Industry profile

Health or healthcare is the treatment and prevention of illness. Health care is

delivered by professionals in medicine, dentistry, nursing, pharmacy and allied health.

The social and political issues surroundings access to healthcare in the US have
led to vigorous public debate and the almost colloquial use of term such as health care
(medical management of illness), health insurance (reimbursement of health care costs),
and public health (the collective state and range of health in a population).

HEALTH CARE INDUSTRY

The delivery of modern health care depends on an expending group of trained

professionals coming together as an interdisciplinary term.

The health care industry incorporates several sectors that are dedicated to
providing health care services and products. According to industry and market
classifications, such as the global industry classification standard and industry
classification benchmark, the health care industry includes health care equipments and
service as well as pharmaceuticals, biotechnology, and life science. The particular sector
associated with these groups are: biotechnology, diagnostic substances, drug delivery,
drug manufactures, hospitals, medical equipments and instruments, diagnostic
laboratories, nursing homes, providers of health care plans and home health care.

According to government industry classifications, which are mostly based on

the United Nations system, the international slandered industrial classification, health care
generally consist of hospital activities, medical and dental practice activities, and human
health activities. The last class consist of all activities for human health not performed by
hospitals, physicians, or dentists. This involves activities of, or under the supervision of,
nurses, midwives, physiotherapists, scientific or diagnostic laboratories, pathology
clinics, home, or other Para medical practitioners in the field of optometry, hydrotherapy,
medical massage, yoga therapy, music therapy, occupational therapy, speech therapy,
chiropody, homeopathy, chiropractics, etc.
HEALTH CARE IN INDIA

The Indian health care sector is expected to become a US$ 280 billion industry
by 2020 with spending of health estimated to grow 14 per cent annually, according to a
report by an industry body. “Healthcare has emerged as one the most progressive and
largest service sector in India with an expected GDP spend of 8 per cent by 2012 from 5.5
Per cent in 2009. It is believed to be next big thing after IT and predicted to become a
US$ 280 billion industry by 2020,” the report said.

At present the sector is estimated to be around US$ 40 billion and will grow to
US$ 78.6 billion by 2023.

As per a study by an industry body and Ernst & young, India would require
another 1.75 million beds by the end of 2025. The public sector however it likely to
contribute only around 15-20 per cent of the require US$ 86 billion investment. The
corporate India therefore, leverages on this business potential and various healthcare
brands have started aggressive expansion in the country.

Sahara group is planning several healthcare projects such as a 200-bed multi

speciality tertiary care hospital at Gorakhpur in utter Pradesh, a 1,500-bed multy super
speciality, tertiary care hospital at aamby valley city and 30-bed multy speciality
secondary care hospitals across all the 217 Sahara city homes townships.

Meanwhile, arteries health sciences (AHS), a health care venture of the Apollo
tyre group, is also planning to establish four to eight multy speciality hospitals in Punjab,
Uttar Pradesh, Madhya Pradesh, Rajasthan and Haryana over the next three years.

The rural healthcare sector is also on an upsurge. The rural health survey report
2009, released by the ministry of health, stated that during the last five years rural health
sector has been added 15,000 health sub-centres and 28,000 nurses and midwives. The
report further started with the number of primary health centres have increased by 84 per
cent, taking the number to 20,107.

The size of the Indian medical technology industry may touch US$ 14 billion
by 2020 from US$ 2.7 billion in 2008 on account of strong economic growth, higher
public spending and private investment in healthcare, increased penetration of health
insurance and emergence of new mode of healthcare delivery, according to report,
“medical technology in India: enhancing access to healthcare through innovation”
released by PWC and an industry body.
HEALTH INSURANE

The Indian health insurance market has emerged as a new and lucrative growth
avenue for both the existing players as well as the new entrance. According to the latest
research report “booming health insurance in India” by research firm RNCOS released in
April, 2010, the health insurance market represents one the fastest growing and second
largest non-life insurance segment in the country.

The Indian health insurance market has posted record growth in the last two
fiscals (2008-09 and 2009-10). Moreover, as per the report, the health insurance premium
is expected to grow at a CAGR of over 25 per cent for the period spanning from 2009-10
to 2013-14.

MEDICAL TOURISM

According to a new report published by RNCOS, titled “booming medical

tourism in India” India’s share in the global medical tourism industry will reach around 3
per cent by the end of 2013. The report states the medical tourism is expected to generate
revenue around US$ 3 billion by 2013, growing at a CAGR of around 26 per cent during
2011-2013. The number of edictal tourist is anticipated to grow at CAGR of over a cent
during the forecast period to reach 1.3 million by 2013.

The Indian medical tourism industry is presently at a nascent stage, but has an
enormous potential for future growth and development on the back of low cost range of
treatments provided by the country. The growth in India’s medical tourist market will be
a boon for several associated industries, including hospital industries, medical equipment
industries and pharmaceutical industries.

Domestic medical tourism is the country has also seen growth in the recent
years. As per the report “domestic tourism in India, 2008-09” released by the national
sample survey office (NSSO), tips for “ health and medical” propose formed 7 per cent of
overnight trips in the rural population and about 3.5 per cent in the urban population.

“Health and medical” purposes accounted for 17 per cent of same day trips in
rural India and 8 per cent in urban India. Expenditure on medical trips accounted for 30
per cent of all overnight trip expenditure for rural India and 15 per cent for urban.
MOBILE HEALTHCARE

Computer-based bio-surveillance projects generating data about diseases and

creating databases on healthcare in rural areas are becoming popular in India with various
organisations entering into this arena.

❖ The Indian Institute of Chemical Technology (ICT) in Hyderabad has developed a

model to forecast possible epidemics of diseases such as malaria and encephalitis in
rural Andhra Pradesh

❖ A recent initiative by a global consortia consisting of the Indian Institute of

Technology, Madras, the National Centre for Biological Sciences, Carnegie Mellon
University's Auton Lab, LIRNEasia, University of Alberta, Respere Lanka, Lanka
Jathika Sarvodhaya Society and the International Development Research Centre
(IDRC), called the Real Time Biosurveillance Program (RTBP). Has attempted to use
the power of the mobile phone in developing a healthcare model.

❖ Narayana Hrudayalaya and the Mazumdar Shaw Cancer Centre tied up with SANA, a
research group at Harvard/MIT, to use smart phone-based detection of oral cancer and
other diseases

GOVERNMENT INITIATIVE

The Government launched the National Rural Health Mission (NRHM) in 2005. It aims
to provide quality healthcare for all and increase the expenditure on healthcare from
0.9 per cent of GDP to 2-3 per cent of GDP by 2012.

According to Union Budget 2010-11, the Finance Minister increased the plan
allocation for Ministry of Health and Family Welfare from USS 4.2 billion in 2009-10 to
US$ 4.8 billion in 2010-11,

Moreover, in order to meet revised cost of construction, in March 2010 the

government allocated an additional US$ 1.23 billion for six upcoming AllMS-like
institutes and up gradation of 13 existing Government Medical Colleges.

The Union Cabinet on October 20, 2010 approved the proposal of the Ministry of
Health & Family Welfare to declare National Institute of Mental Health and Neuro
Sciences (NIMHANS). Bangalore as an Institute of National Importance on the lines of
All India Institute of Medical Sciences, New Delhi, Post Graduate Institute of Medical
Education and Research, Chandigarh and Jawaharlal Institute of Postgraduate Medical
Education & Research, Puducherry.
1.3 Company profile

HLL Lifecare limited commenced its journey to serve the nation in the area of
healthcare, on 1 march 1996, with its incorporation as a corporate entity under the
ministry of health and family welfare government of India. HLL was set up in the rubber
rich state in Kerala, for the production of male contraceptive sheaths for the rational
family welfare Programme HLL commenced commercial operational on 5 April 1969
Peroorkada in Thiruvanathapuram (formerly Trivandrum). The plant was established in
technical collaboration with M/s Okamoto industries Inc Japan

Two most modern plants were added, one at Thiruvananthapuram and the other at
Belgaum in 1985 another plant was added in the early nineties at Aakkulam in
Thiruvananthapuram for the production of blood transfusion bags, Copper T IUD's,
surgical sutures and hydrocephalus shunt. HLL has grown today into a multi-product,
multi-unit organization addressing various public health challenges facing humanity HLL
had set its sights in 2003-when it had a turnover of a mere Rs 163 cores- to be a Rs 1000
core company by the year 2010. On the path of rapid growth, this year (2010) it has not
only surpassed this figure but has drawn a clear road map to achieve a fivefold growth by
the year 2015. HLL is today a Mini Ratna and upgraded as a Schedule B Central Public
Sector Enterprise.

HLL Lifecare limited is the only company in the world manufacturing and
marketing the widest range of contraceptives. It is unique in providing a range of
condoms, including female condoms, intra uterine devices, oral contraceptive pills
steroidal, non-steroidal and emergency contraceptive pills; and tubal rings. HLL produces
today 1316 billion condoms annually making it one of the world's leading manufacturers
of condoms, accounting for nearly 10 percent of the global production capacity.

HLL's Health care product ranged include: Blood collection bags, surgical sutures,
auto disable syringes, vaccines, in- vitro diagnostic test kits. Pharma products for women,
natural products, Hydrocephalus Shunt. Tissue Expanders, Surgical and Examination
Gloves, Blood Banking equipment, Neonatal equipment, Blood Transfusion and
Intravenous sets. Vending Machines, Iron and Folic Acid Tablets, Sanitary Napkins, Oral
Rehydration Salts and Medicated Plasters

HLL's blood bags were launched in Brazil in 2006. HLL also launched its non
steroidal contraceptive pill under the brand name Ivyfemme in Peru in October 2008.
HLL has introduced closed system blood bags that are integrated with leukocyte filter
called LD Bags. These bags are intended for leuko-depletion immediately upon collection
of blood from donors at blood banks.
 In collaboration with the Female health company (FHC), of US. HLL is marketing
FC female condoms in India. The female condom is the only female controlled prevention
technology approved by the US FDA and the WHO. HLL launched the nitrile female
condom- velvet in India in December 2007. Targeted at contemporary Indian women and
new age couple, nitrile condoms empower women providing dual protection against
unwanted pregnancy and STDs, HIV/AIDS.

HLL has also launched several initiatives in the services sector -for medical
infrastructure development, diagnostic centres and procurement consultancy. These have
been conceived to bring about a whole new realm of accessible, affordable healthcare
delivery to every citizen.

Over the year each of the initiatives taken up by HLL are targeted at reaching
quality healthcare at the doorstep of every family. Associate institution of HLL namely
HLFPPT and LifeSpring hospitals have ensured this to the nation's underserved and
vulnerable populace, at an affordable cost. With a vast array of innovative products and
social programmes to meet the nation's health care needs, HLL Lifecare limited (HLL) is
firmly on track, with its vision of innovating for healthy generations.

HLL achieved a turnover of Rs.4420 million during 2009-10, registering a growth

of 20% over that for 2008-09 of Rs.3680 million. However the business handled by the
company totalled Rs 12960 million, including the value of transitions handled by its
procurement and consultancy division of Rs.48600 million and infrastructure
development division of Rs 3690 million.
MANUFACTURING FACILITIES

HLL has today six state of the art manufacturing facilities. HLL commenced its
commercial operation on april5, 1969 at Peroorkada in Thiruvananthapuram in the state
of Kerala. Together with the manufacturing facility at Peroorkada, hill today has five
states-of-the-art manufacturing facilities at:

1. Kanagala near Belgaum (1985) - for contraceptives and pharmaceutical products

2. Akkulam in Thiruvananthapuram (1994)-for hospital products

3. Kakkanad in the Cochin Special Economic Zone (2004)-For female condoms and Male
condoms for export

4. Manesar in Gurgaon (2007)-for rapid in-vitro diagnostic test kits

All these units have ISO 9001, ISO 14001-quality and environmental
management system certifications. HLL's Peroorkada, Akkulam and Kanagala plant have
OHSAS 18001 certification for efficient occupational health and safety management
system. The testing laboratory for finished products at Peroorkada factory has NABL
accreditation under ISO/EC 17025.

NEW BUSINESS AREAS

HLL has ventured into the area of vaccines - to take on the challenge posed by
communicable diseases, which are responsible for a significant share of the global burden
of diseases, particularly in developing nations. The need to have affordable high quality
vaccines for preventing communicable diseases is a public health priority in India
particularly for the underprivileged section of society. With this objectives in view, HLL
introduced Hivac-B: a recombinant vaccine for Hepatitis B and Tyfex: a highly purified
VI Capsular polysaccharide vaccine for typhoid, and recently Hilrab - the human rabies
vaccine.

The ministry of health and family welfare handed over to HLL in 2008, 430
acres of land at Chengalpet, near Chennai in Tamil Nadu, for its proposed integrated
vaccine project- a project of national importance and the MediPark an exclusive industrial
park for the development of medical technology products and the Auto- disable syringe
plant Innovative technologies, expertise and highly qualified and skilled manpower are
the main pillars which enable HLL to offer perfect solutions to many problems that the
world faced in healthcare.
 HLL started the LifeSpring hospital chain as an initiative for creating access to
good quality and affordable maternal and child care, for the low income population. The
first LifeSpring hospital was launched at Hyderabad in December 2005 and also at
Kanpur and at Agra in UP.

HLL and Acumen Fund, a nonprofit venture philanthropy fund based in the
US formed on 18th march, 2008, LifeSpring Hospital (pvt) Itd. - a joint venture intended
to create a chain of small hospitals (20-25 beds) focused on providing low-income clients
in the country, widespread access to maternal and child health care services.

The company, a 50/50 equity partnership between HLL and Acumen, has
already opened five hospital in 2008 and plans to open thirty across India by the end of
2010 and scale to 140 franchised hospitals between 2010 and 2012. This is a unique
social franchising LifeSpring charges ranged between 30-50% of the prevailing market
rates, and will significantly reduce the burden of rising health cost on the nation's low-
income communities, helping to reduce poverty.

LifeSpring hospital offers the following key services: antenatal care, postnatal
care, deliveries (normal and caesarean), family planning services and medical termination
of pregnancy, pediatric care, including immunizations, as well as diagnostic services, a
pharmacy, and health care education to the communities in which it works.

MOTTO, VISION AND MISSION

Motto

➢ Innovating for Healthy Generations.

Vision

➢ HLL will establish itself as the Leader in its core activities, through a process of
continuous innovation and participatory approach in order to -

➢ Provide best value to the customer.

➢ Be an employer of choice.

➢ Promote the cause of family health in general, and women's health in particular
Mission

➢ To accomplish the Corporate Vision, HLL has outlined a Mission to be a World

Class Health Care Company by the year 2010, with focus on five key areas,
namely

• Business

• Customer

• Innovation

• Employee

• Social Sector initiatives

❖ Business Leadership

▪ Be among the top three players in each main product category. .

▪ Become the organization to be benchmarked with.

▪ Become an acknowledged and admired leader at industry forums.

▪ Attain rapid growth and global levels for operations with

costcompetativeness.

❖ Customer Focus

▪ Focus on quality and customer delight at all time

❖ Innovation

▪ Establish core competence through a process of learning and

innovation.

▪ Create a culture of continuous innovation resulting in at least 10%

of turnover from Research and Development initiative.

❖ Employee Satisfaction

▪ Strive to be the employer of choice in India with employee

satisfaction levels of over 90%,

❖ Social Sector Initiatives

▪ Be recognized as the leading social organisation in the field of

Reproductive and Women's Health, with a commitment to the
society - a partner of choice for implementing all government
and multi-lateral initiatives in these segments.
 CHAPTER-2

REVIEW OF LITERATURE
 CHAPTER-2

REVIEW OF LITERATURE

Financial Statement:

Myer (2006) Financial Statement provide a summary of the accounts of a

business enterprise, the balance sheet reflecting the assets and liabilities and the income
statement showing the result of operations during a certain period. It emphasis the
important of balance sheet and profit and loss account, but ignores the important of other
Financial Statement like Cash flow Statement, Fund Flow Statement, and Statement of
Retained Earning.

Smith and Asbburne (2006) financial statements as the end product of financial
accounting is a set of financial statement, that purport to reveal the financial position of
the enterprises the result of its recent activities and analysis of what has been done with
earnings. The financial statements are the outcomes of preparing final accounts and these
statements reveals financial position and profitability of the concern and the utilization of
retained earnings.

Financial Statement Analysis:

Metcalf'S Titord (2000) "Analysis of financial statement is a process of

evaluating the relationship between component part of a financial statement to obtain a
better understanding of a firms position and performance".

Ramachandran and Ramkumar (2000) say that a meaningful analysis of

financial statement involves aggregation and disaggregating of the information and
comparison and relation of that information. Ratios reduce large figures to easily
undesirable relationship. Ratios do not make conclusions. Financial statement information
can be used as an important tool for internal management.

Sreevastavas, (2000) says that financial analysis are undertaken to interpret the
position of an enterprise. Financial analysis includes the study of relationships within a
set of financial statements at a point in time. Analysis of financial statement is a process
of evaluating the relationship between component part of a financial statement to obtain a
better understanding of a firm's position and performance.

Guthmann, (2002) The Statement of Profit and Loss is the condensed and
classified record of gains and losses causing changes in the owner's interest in the
business for a period of time. Hence profit and loss account in the statement of revenues
earned and expenses incurred during a particular period. It is prepared taking into
consideration all expenses paid and payable and all incomes received and receivable
during a particular period, generally a year. The excess of revenues earned over the
expenditure incurred is termed as profit or earnings and excess of expenditure incurred
over the revenues earned is termed as loss.

Jawahar lal (2002) described that financial statement analysis an analysis

which highlights important relationship in the financial statements. It focuses on
evaluation of past operation as revealed by the analysis of basis statements. Financial
statement analysis embraces the methods used in assessing and interpreting the results of
past performance and current financial position as they relate to the particulars factors of
interest in investment decision. It is an important means of assessing past performance
and in forecasting and planning future performance.

Bolong Cao, (2006) financial statement analysis is one of the cornerstones of

the modern financial analysis. The financial statements from firms provide the
information upon the dynamic and innovative process of contemporary business practices
by analyzing financial statements, investors, business partners, managers and government
agencies can inter the efficiency and risk involved in the business of the firm. Which is
extremely important in their decision making therefore understanding how to deduct
useful information or detect accounting shenanigans from financial statements becomes
indispensable in today’s business world? Researchers in modern accounting, corporate
finance and investment rely heavily on financial statement analysis techniques,
proficiency in financial statement analysis is also essential in professional certificate like
CPA or CFA exams.

Myers (2006) "Financial statement analysis is largely a study of relationship

among the various financial factors in business as disclosed by a single set of statement
and a study of the trend of these factors as shown in a series of statements.

Financial Ratio Analysis:

Maheshwari (1996) states that accounting ratios are relationships expressed in

mathematical terms between figures which are connected with each other in some
manner. Obviously, no purpose will be served by comparing two sets of figures which are
not at all connected with each other. Moreover absolute figures are unit for comparison.

Coderre, (2000) Ratio analysis identifies potential frauds by computing the

variance in asset of transactions of then calculating the ratios for selected numeric fields.
Three commonly employed ratios are the ratio of the highest value to the lowest value
(maximum / minimum), the ratio of the highest value to the next highest (maximum/2nd
highest), and the ratio of one numeric field to another, such as the current year to the
previous year or one operational area to another (field / field2).

Khan and P K Jain, (2000) ratio analysis is a widely used tool of financial
analysis. It is defined as the systematic use of ratio to interpret financial statements so that
the strengths and weaknesses of a firm, as well as its historical performance and current
financial condition can be determined. Ratios are relative figures reflecting the
relationship between related variables.

Ismael D. Tabije, (2002) says that financial ratio analysis doesn't involve
just comparing different numbers from the balance sheet, income statement, and cash
flow. statement. It's comparing the numbers against previous years, other companies, the
industry, or even the economy in general. It's an excellent method for determining the
overall financial condition of a business. Ratios can also help you spot potential threats to
company health to help you decide where to dive deeper into the analysis. Financial ratio
analysis is well developed and the actual ratios are well known. Don't assume, however,
that the conclusions based on the analysis are cut and dried. Accountants who spend a lot
of time doing financial analysis develop their own measures for particular industries and
even for individual companies. They often differ drastically in their conclusions from the
same ratio analysis.

K.G.C.Nair and Jayan (2006) states ratio analysis is an important and useful
technique to check upon the efficiency with which working capital is being used in the
enterprise. Some ratio indicates the trend or progress or downfall of the firm It helps the
financial management in e3valuating the financial position and performance of the firm.
The trade creditors, bank, lending institutions and experienced investor all use ratio
analysis as their initial tool in evaluation the firm as a desirable borrower as a potential
investment outlet.

Keown, Martin and Petty (2009) say that financial ratios are used to restate
the accounting data in relative terms to identify some of the financial strengths and
weaknesses of a company. The objective in using a ratio when analyzing financial
information is simply to standardize the information being analyzed, so that the
comparison can be made between ratios of different firms or possibly the same firm at
different points in time,

Julie. Et, al (2009) says that cash flows provide considerable information
about what is really happening business beyond that contained in either be income
statement or the balance sheet. Analyzing this statement should not present and
intimidating task; instead it will quickly become obvious that the benefits of
understanding the sources and uses of a company's cash for outweigh the costs of
undertaking some very straight forward analysis.

Multiple Discriminant Analysis:

Narayanaswamy, (2002) "Multiple Discriminant Analysis is a statistical

technique used to evaluate financial decisions that proposes a set of alternatives, such as
different shares of stock in a portfolio. An analyst takes multiple factors into account,
such as different financial ratios, when choosing between stocks in order to design an
efficient portfolio".

IM Pandey, (2006) "Multiple Discriminant Analysis can be used to classify

companies, on the basis of their characteristics as measured by financial ratios, into two
groups those, which are likely to fail and go bankrupt and those not likely to fail. In the
literature, the likelihood of bankruptcy is associated with financial ratios".

Kothari, (2008) "Multiple discriminant analysis is used to predict an objects

likely hood of belonging to a particular group based on several independent variables".

Dupont Analysis:

M.Y. Khan and P.K. Jain (2007) "DuPont Analysis is an approach to analyze
the firm by evaluating inters relationships among many of the performance measures. In
the DuPont Analysis we try to find out what are the factors/drivers that are causing the
profits to move up. By identifying these factors/drivers we can concentrate on them and
improve our efficiency. The three components of DuPont measure the profitability,
efficiency and the degree of leverage of the firm".

I.M Pandey (2002) "DuPont Analysis is an approach to analyze the firm by

evaluating inters relationships among many of the performance measures. In the DuPont
Analysis we try to find out what are the factors/drivers that are causing the profits to
move up. By identifying these factors/drivers we can concentrate on them and improve
our efficiency".
 CHAPTER-3

RESEARCH METHODOLOGY
 CHAPTER -3

RESEARCH METHODOLOGY

2.1 Title of the project

Title of the project is "A study of financial performance in HLL Lifecare
limited, Trivandrum".

2.2 Need for the study

Financial analysis (also referred to as financial statement analysis of accounting

analysis) helps in assessment of the viability, stability and profitability of a business, sub
business or project. These reports are usually presented to top management as one of their
bases in making business decisions. Based on these reports, management may Continue of
discontinue its main operation or part of its business and Acquire or rent/lease certains
machineries and equipment in the production of its goods. Multiple discriminant analysis is
used to predict an objects likely hood of belonging to a particular group based on several
independent variables

2.3 Objectives of the study

The objectives of the study are:

• To study the financial performances of the organization.

• To know the efficiency or profitability of financial operations
• To analyze the liquidity position of the company
• To find whether company is going to bankruptcy or not
• To study the trend of various performances indicators
• To provide suggestions for improving the financial position
2.4 Type of research

Research refers to the search for knowledge. Research is an art of scientific

investigation. It is an attempt to discover answer to intellectual and practical problems
through the application of scientific method. Research Methodology is a way to
systematically solve the research problem. It may be understood as a science of studying how
research is done scientifically.

The type of research will be an analytical research. In analytical research the

researcher has to use facts or information already available, and analyze these to make a
critical evaluation of the material.

2.5 Data collection method

Secondary Data: Secondary data mainly consists of data and information collected
from company records, company profiles, company's annual report, websites of HLL and
various other websites and also from the text books available in library.

2.6 Tools for analysis.

• To analysis the data the researcher used:

• Ratio Analysis
• Multiple discriminate analysis
• Trend Analysis
• Comparative statement Analysis
• DuPont chart
2.8 Limitations of the study

• The analysis and interpretation are based on secondary data contained in the published
annual report of HLL
• The study of financial performance can be only a means to know about the financial
condition of the company and cannot show a through picture of the activities of the
company.
 CHAPTER-4

DATA ANALYSIS AND INTERPRETATION

 CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

Data analysis is a body of methods that helps to describe facts, detect patterns,
develop explanations and test hypothesis. It is used in all of the sciences. It is used in
business, in administration, and in policy. The process of evaluating data using analytical and
logical reasoning to examine each component of the data provided. This form of analysis is
just one of the many steps that must be completed when conducting a research experiment.
Data from various sources is gathered, reviewed, and then analyzed to form some sort of
finding or conclusion.

The analyzed and tested results are represented by formulating tables and
charts based on the information gathered. Based on these analyzed data, the findings and
suggestions for the study are prepared by the researcher.

Tools used

Ratio Analysis: -

Ratio analysis is an important and widely used tool of financial statement. One of the
most important financial tools which have come to be very frequently used for analyzing the
financial strength and weakness of the enterprise is ratio analysis. There are many ratios that
can be calculated from the financial statements. pertaining to a company's performance,
activity, financing and liquidity. Some common ratios include the price-earnings ratio, debt-
equity ratio, earnings per share, asset turnover and working capital.

Ratio analysis is a method of analyzing data to determine the overall financial

strength of a business. Financial analysts take the information off the balance sheets and
income statements of a business and calculate ratios that can then be used to make
assessments of the operating ability and future prospects of that business These ratios are
useful only when compared to other ratios, such as the comparable ratios of similar
businesses or the historical trend of a single business over several business cycles. There are
various ratios that measure a company's efficiency, short-term strength, profitability, and
solvency.
Multiple Discriminant Analysis:

A statistical technique used to evaluate financial decisions that proposes a set of

alternatives, such as different shares of stock in a portfolio. An analyst takes multiple factors
into account, such as different financial ratios, when choosing between stocks in order design
an efficient portfolio. A statistical technique used to reduce the differences between variables
in order to classify them into a set number of broad groups. In finance, this technique is used
to compress the variance between securities while also allowing the person to screen for
several variables. It is related to discriminant analysis, which, in simplified terms, tries to
classify a data set by setting a rule or selecting a value that will provide the most meaningful
separation.

Multiple discriminant analysis (MDA) is also termed Discriminant Factor Analysis

and Canonical Discriminant Analysis. It adopts a perspective similar to Principal
Components Analysis, but PCA and MDA are mathematically different in what they are
maximizing. MDA maximizes the difference between values of the dependent, whereas PCA
maximizes the variance in all the variables accounted for by the factor.

Multiple Discriminant Analysis can be used to classify companies, on the basis of

their characteristics as measured by financial ratios, into two groups those, which are likely to
fail and go bankrupt and those not likely to fail The use of Multiple Discriminant Analysis
helps to consolidate the effects of all ratios. Multiple Discriminant Analysis constructs a
boundary line a discriminant function using historical data of the bankruptcy and non
bankruptcy firms.

Edward Altman was the first person to apply discriminant analysis in 1 finance for
studying bankruptcy. His study helped in identifying five ratios that were efficient in
predicting bankruptcy. The model was developed from a sample of 66 firms. half of which
went bankrupt. He derived the following discriminant function:

Z= 0.012X1+0.014X2+0.033X3+0.006X4+0.010X5

Where
Z= discriminant function score of a firm

XI= net working capital/total assets (%) X2-retained earnings/total assets (%)

X2= retained earnings total asset (%)

X3 EBIT/total assets (%)

X4-market value of common and preferred stock/book value of debt (%)

X5 sales/total assets.

Altman established a guideline Z score which can be used to classify firms as either
financially sound a score above 2.675 or headed towards bankruptcy a score below 2.675.
The lower the score, the greater the likelihood of bankruptcy and vice versa.

Trend Analysis: -

The term trend analysis refers to the concept of collecting information and
attempting to spot a pattern, or trend, in the information. Trend percentages are immensely
helpful in making a comparative study of the financial statement for several years. Trend
analysis is a form of comparative analysis that is often employed to identify current and
future movements of an investment or group of investments. The process may involve
comparing past and current financial ratios as they related to various time series refers to the
values of a variable chronologically ordered over a successive period of time. The time series
is a record of observation or measurement of a variable over a period of time. A time series is
a dynamic distribution which reveals good deal of variation over time

Comparative statement analysis: -

The comparative financial statements are statements of the financial position of

different periods of time. Normally it is the Balance sheet and Profit and Loss account which
alone are prepared in a comparative form. It is these two statements, which are considered as
important financial statements.
Comparative Balance Sheet: -

The comparative Balance sheet analysis is the study of trend of the same items,
group of items and computed items in two or more balance sheets of the same business
enterprise on different dates.

Comparative Income statement:

The income statement gives an idea of the progress of a business over a period
of time. The changes in absolute data in money values and percentages can be determined to
analyze the profitability of the business.

DuPont Analysis:

DuPont Analysis is an approach to analyze the firm by evaluating inters

relationships among many of the performance measures. In the DuPont Analysis we try to
find out what are the factors/drivers that are causing the profits to move up. By identifying
these factors/drivers we can concentrate on them and improve our efficiency.
3.1 RATIO ANALYSIS

Ratio Analysis of a financial statement is the usual tool for analyzing the financial
statement and performances of a company. Ratios are established by comparing mo pieces of
financial data. The trend c the ratio over a period of time will help to understand whether
there has been an improvement or deterioration in the financial condition and performances
of the companies Inter firm comparisons are possible where the ratios of the firm are
compared with that of other similar firms.

Ratio analysis is a method of analyzing data to determine the overall financial

strength of a business. Financial analysts take the information off the balance sheets and
income statements of a business and calculate ratios that can then be used to make
assessments of the operating ability and future prospects of that business These ratios are
useful only when compared to other ratios, such as the comparable ratios of similar
businesses or the historical trend of a single business over several business cycles. There are
various ratios that measure a company's efficiency, short-term strength. Profitability, and
solvency,

3.1.1 LIQUIDITY RATIO

It is extremely essential for a firm to meet its obligations as they become due.
Liquidity ratio measures the ability of the firm to meet its current obligations/liabilities. By
establishing a relationship between cash and other current assets to current obligations
provide a quick measure of liquidity. A firm should ensure that it should not suffer from lack
of liquidity and also that it should not have excess liquidity The failure of a company to meet
its obligations due to lack of sufficient liquidity, will result in a poor credit worthiness, loss
creditor's confidence or even in legal angles resulting in the closure of the company. A very
high degree of liquidity is bad idle assets earn nothing. The firms fund will be necessarily tied
up in current asset Therefore it is necessary to strike a proper balance between high liquidity
and lack of liquidity.
3.1.2 CURRENT RATIO

The current ratio is a measure of the firm's short-term solvency. It indicates the
availability of current assets in rupees for every one rupees of current liability. This ratio is
calculated as follows:

CURRENT RATIO-CURRENT ASSETS/CURRENT LIABILITY

Table 3.1:

Table showing the Current Ratio for the period 2016-2017 to 2020-2021

YEARS CURRENT ASSET CURRENT CURRENT

(lakhs) LIABILITIES (lakhs) RATIO

2016-2017 13486.07 6003.00 2.25

2017-2018 21850.11 12550.12 1.74

2018-2019 22325.27 10091.74 2.21

2019-2020 28303.90 17225.80 1.64

2020-2021 25968.88 16109.80 1.61

Source: annual reports of HLL lifecare limited

INTERPRETATION:

The current ratio reveals the ability of a company to meet its current obligation. As
a conventional rule a current ratio of 2:1 or more is considered satisfactory. In case of HLL,
during the year 2016-2017 the current ratio was 2.25.But during 2017 2018 and 2018-2019
the current ratio decreased to 1.74 and 2.21 respectively. In 2019 2020, it again decreased to
1.64 and in 2020-2021 it again decreased to 1.61. Therefore the firm is an insufficiently
liquid and the condition is not satisfactory. The over the five year period HLL has maintained
a low level of current ratio. This indicates a lower margin of safety for creditors, as HLL is
not a good position to meet its current obligations.
 Figure 3.1:

Figure show the current asset and current liabilities for the period 2016-17 to 2020-21

30000

25000

20000

15000 CURRENT ASSET

CURRENT LIABILITIES

10000

5000

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Figure 3.2:

Figure showing the current ratio for the period 2016-17 to 2020-21

CURRENT RATIO
2.5

1.5

CURRENT RATIO
1

0.5

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
3.1.3 QUICK RATIO
Quick ratio, also called acid-test ratio, establishes a relationship between quick or
liquid assets and current liabilities. This ratio is calculated as follows:

QUICK RATIO=QUICK ASSETS/CURRENT LIABILITIES

Table 3.2:

Table showing the Quick Ratio for the period 2016-17 to 2020-21

YEAR QUICK ASSET CURRENT QUICK RATIO

(LAKHS) LIABILITIES
(LAKHS)
2016-2017 10332.59 6003.00 1.72

2017-2018 16766.58 12550.12 1.33

2018-2019 17986.95 10091.75 1.78

2019-2020 22173.39 17225.80 1.29

2020-2021 20656.88 16109.80 1.28

Source: Annual reports of HLL lifecare limited

INTERPRETATION:

A firm that had additional sufficient quick assets available to creditors was believed
to be in sound financial condition. A quick ratio of 1:1 is considered to represent a
satisfactory financial condition because it is wise to keep the liquid assets at least equal to the
liabilities at all times. If the ratio is less than 1:1, then the financial position of the concern
can be deemed to be unsound and if it is more than 1:1 then the concern financial position is
sound. Here it is seen that the quick assets ratio is 1.72 in the year 2016-2017, which then
decreases to 1.33 in the following year. In 2017-2018, the ratio in 1.78. The ratio then
decreases in the following year, to 1.29 and the ratio is in the year 2020-2021 is 1.28. The
over the five year period the HLL is having the quick ratio above the standard ratio.
 Figure 3.3:

Figure showing the quick asset and current liability for the period 2016-2017 to 2020-21

25000

20000

15000
QUICK ASSET
CURRENT LIABILITIES
10000

5000

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Figure 3.4:

Figure showing the quick ratio for the period 2016-2017 to 2020-2021

QUICK RATIO
2
1.8
1.6
1.4
1.2
1
QUICK RATIO
0.8
0.6
0.4
0.2
0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
3.1.4 SUPER QUICK RATIO
This ratio is also called the Absolute liquidity ratio, Cash ratio. Since cash is the
most liquid asset a financial analyst may examine cash ratio and its equivalent to currem
liabilities. This ratio is calculated as follows:

SUPER QUICK RATIO=ABSOLUTE LIQUID ASSETS/CURRENT LIABILITIES.

Table 3.3:

Table showing the Absolute liquidity ratio for the period 2016-17 to 2020-21

YEAR ABSOLUTE CURRENT SUPER QUICK

LIQUID(lakhs) LIABILITIES(lakhs) RATIO
2016-2017 2187.35 6003.00 0.36

2017-2018 3246.12 12550.12 0.26

2018-2019 1644.80 10091.75 0.16

2019-2020 5504.47 17225.80 0.32

2020-2021 3981.92 16109.80 0.25

INTERPRETATION:

The super quick ratio is a very rigid ratio of liquidity, here the absolute liquid assets
like cash and hank balances are rationed with the current liabilities. The standard set for this
is 0.75:1. In case of HLL the absolute liquidity position is not satisfactory when compared to
the standard the ratios in the span of five years (2017-2021) are 0.36, 0.26, 0.16, 0.32 and
0.25 respectively in each year. The value was lowest in the year 2018-2019 and the highest in
the year 2019-2020. Thus it is inferred that the company has a high amount of cash when
compared to the liability every year. The same time there is nothing to be worried about the
lack of cash if the company has reserve borrowing power. In India firms have credit limits
sanctioned from banks, and can easily draw cash.
 Figure 3.5:

Figure showing the absolute liquid assets and current liabilities for the period 2016-17
to 2020-21

18000

16000

14000

12000

10000
ABSOLUE LIQUID
8000 CURRENT LIABILITES

6000

4000

2000

0
2016-17 2017-18 2018-19 2019-20 2020-21

Figure 3.6

Figure showing he absolute liquidity ratio for the period 2016-17 to 2020-21

SUPER QUICK RATIO

0.4

0.35

0.3

0.25

0.2
SUPER QUICK RATIO
0.15

0.1

0.05

0
2016-17 2017-18 2018-19 2019-20 2020-21
3.1.5 PROPRIETARY RATIO
This ratio brings out the relationship between owner's equity (capital) and total
assets, expressing the financial commitment of the owners to the business as a whole. The
two components that are used to calculate the ratio are proprietor's funds and total assets of
the business. This ratio is calculated as follows:

PROPRIETARY RATIO PROPRIETARY FUND/TOTAL ASSETS

Table 3.4:

Table showing the Proprietary ratio for the period 2016-17 to 2020-21

YEAR PROFITABILITY TOTAL ASSET PROFITABILITY

FUND(lakhs) (lakhs) RATIO

2016-2017 9727.72 17375.48 0.55

2017-2018 10996.66 26474.48 0.41

2018-2019 12242.45 28795.82 0.42

2019-2020 12803.43 39135.12 0.33

2020-2021 14024.25 38447.93 0.36

Source : annual report of HLL lifecare limited

INTERPRETATION:

The proprietary fund is the sum of the equity capital and surplus. The total assets
include both the current assets and fixed assets. It helps the creditors to find out the
proportion of shareholders fund in the total assets. A higher ratio indicates a secured position
to the creditors of the company. In the case of a low ratio, indicates greater risk to creditors.
From the table above it is observed that during the years under the study, there has not been
any wide stretched fluctuation in the ratio. Here it is seen that the proprietary ratio is 0.55 in
the year 2016-2017, which then decreases to 0.41 in the following year. The lowest
proprietary ratio was 0.33 in 2019-2020 and the ratio in the year 2020-2021 has been
increases to 0.36.
 Figure 3.7:

Figure showing the proprietary and fund and total asset of the period

2016-2017 to 2020-2021

45000

40000

35000

30000

25000
PROPRIETARY
20000 TOTAL ASSET

15000

10000

5000

0
2016-17 2017-18 2018-19 2019-20 2020-21

Figure 3.8:

Figure showing the proprietary ratio for the period 2016-17 to 2020-21

PROPRITARY RATIO
0.6

0.5

0.4

0.3
PROPRITARY RATIO

0.2

0.1

0
2016-17 2017-18 2018-19 2019-20 2020-21
3.1.6 NET PROFIT RATIO
Net profit ratio is used to measure the overall profitability and hence it is very
useful to the management. It is index of efficiency and profitability The components of Net
profit ratio are net profit after tax and net sales. This ratio is calculated as follows:

NET PROFIT RATIO (NET PROFIT/NET SALES) *100

Table 3.5:

Table showing the Net Profit Ratio for the period 2016-17 to 2020-21

YEAR NET PROFIT NET SLES NET PROFIT

(lakhs) (lakhs) RATIO

2016-2017 3109.19 21288.58 14.60

2017-2018 2724.03 24348.17 11.19

2018-2019 2189.11 32850.88 6.67

2019-2020 1689.32 36641.86 4.61

2020-2021 2230.31 44006.29 5.07

Source : annual report of HLL lifecare limited

INTERPRETATION:

The Net profit ratio of the company shows the overall profitability of the
company. The net profit during the year 2016-2017 was 14.60. It decreased to 11.19 during
the year 2017-2018. The lowest net profit ratio is 4.61 in 2019-2020. The table shows that net
sales are increasing but net profit shows a decreasing trend. This is due to the increase in the
cost of production or sales. It might affect the survival of the company. The net profit has
increased from 2016-2017 to 2020-2021 by around 94%.
 Figure 3.9:

Figure showing the net profit and sales for the period 2016-17 to 2020-21

50000

45000

40000

35000

30000

25000 NET PROFIT

NET SALES
20000

15000

10000

5000

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Figure 3.10:

Figure showing the net profit ratio for the period 2026-17 to 2020-21

NET PROFIT RATIO

16

14

12

10

8
NET PROFIT RATIO
6

0
2016-17 2017-18 2018-19 2019-20 2020-21
3.1.7 FIXED ASSET TO TURN OVER RATIO
Fixed assets turnover ratio is used to determine the utilization of the fixed assets.
The components of this ratio are the net sales and the net fixed assets which consist of the
gross block and the net block as mentioned in the balance sheet of HLL life care Ltd. This
ratio is calculated as follows:

FIXED ASSET TO TURN OVER RATIO-SALES/FIXED ASSETS

Table 3.6:

Table showing the Fixed Asset to Turnover Ratio for the period 2016-17 to 2020-21

Year Sales Fixed Assets Fixed Assets To

(Lacks) (Lacks) Turnover Ratio
2016-2017 21288.58 3852.9 5.53

2017-2018 24348.17 3919.37 6.21

2018-2019 32850.88 5631.4 5.83

2019-2020 36641.86 7289.69 5.03

2020-2021 44006.29 12248.64 3.59

Source: Annual reports to HLL lifecare limited

INTERPRETATION:

The higher the ratio the greater is the utilization of fixed assets A lower ratio means
under utilization of fixed assets. There is no set standard but anything above 3.8 is considered
to be good. From the above table we can infer that the company has been utilizing its fixed
asset efficiently. The highest was in the year 2016-2017 which was 6.21 and the lowest ratio
was 3.59 in the year 2020-2021.
 Figure 3.11:

Figure showing the sales and fixed asset to turnover ratio for the period 2016-17 to
2020-21

50000

45000

40000

35000

30000

25000 SALES
FIXED ASSET
20000

15000

10000

5000

0
2016-17 2017-18 2018-19 2019-20 2020-21

Figure 3.12:

Figure showing the fixed asset to turnover ratio for the period 2016-17 to 2020-21

FIXED ASSET TOURNOVER RATIO

7

4
FIXED ASSET TOURNOVER
3 RATIO

0
2016-17 2017-18 2018-19 2019-20 2020-21
3.1.8 WORKING CAPITAL TO TUTNOVER RATIO

Working capital turnover ratio is the ratio of net sales upon working capital; this
ratio helps to determine the sales that could be generated with the working capital and the
relation that exists between the sales and the working capital.

WORKING CAPITAL TO TUTNOVER RATIO = SALES/WORKING CAPITAL

Table 3.7:

Table shows the Working Capital to Turnover Ratio for the period 2016-17 to 2020-21

Year Sales(lakhs) Working capital Working capital to

(lakhs) turnover ratio
2016-2017 21288.58 7483.07 2.84

2017-2018 24348.17 12550.12 1.94

2018-2019 32850.88 12011.38 2.73

2019-2020 36641.86 11078.1 3.31

2020-2021 44006.29 9859.08 4.46

Source: annual report of HLL lifecare limited

INTERPRETATION:

The higher the ratio the lower is the investment in the working capital. In the span of
study the lowest was seen in the year 2017-2018 which was 1.94. It increased 10 2.73during
the 2018-2019. Then on up to the year 2018-2019 there has been a increase in the ratio which
shows a steady increase in the working capital, which shows that there has been an increase
in the working capital usage. This was mainly due to the increase in production over the years
and the extension of credit period. Though the working capital has increased in the year
2020-2021 the ratio did not decrease as there was an increase in the sales in the same year.
 Figure 3.13:

Figure showing the sales and working capital for the period 2016-17 to 2020-21

50000

45000

40000

35000

30000

25000 SALES
WORKING CAPITAL
20000

15000

10000

5000

0
2016-17 2017-18 2018-19 2019-20 2020-21

Figure 3.14:

Figure showing the working capital to turnover ratio for the period 2016-7 to 2020-21

WORKING CAPITAL TURNOVER RATIO

5
4.5
4
3.5
3
2.5 WORKING CAPITAL TURNOVER
RATIO
2
1.5
1
0.5
0
2016-17 2017-18 2018-19 2019-20 2020-21
3.1.9 DEBTORS TURNOVER RATIO

The purpose of this ratio is to discuss the credit collection power and policy of the
firm. For this ratio a relationship is established between net credit sales and debtors of the
period. This ratio is calculated as follows:

DEBTORS TURNOVER RATIO = SALES/DEBTORS

Table 3.8:

Table showing the Debtors Turnover Ratio for the period 2016-17 to 2020-21

Year Sales Debtors Debtors Turnover

(Lacks) (Lacks) Ratio
2016-2017 21288.58 5726.64 3.72

2017-2018 24348.17 8356.95 2.91

2018-2019 32850.88 12954.38 2.54

2019-2020 36641.86 13235.8 2.77

2020-2021 44006.29 11776.75 3.74

Sours; Annual reports of HLL Lifecare Limited

INTERPRETATION:

In the year 2016-2017, the debtor turnover ratio was 3,72. In the year 2017 2018
debtors' turnover ratio was 2.91 which show an increase in the ratio. But in the next years it is
showing a fluctuating trend and in 2020-2021 it shows an increasing trend as compared to
2019-2020. Generally, the higher the value of debtor's turnover the greater is the efficiency in
credit management.
 Figure 3.15

Figure showing the debtors turnover ratio for the period 2016-17 to 2020-21

50000

45000

40000

35000

30000

25000 SALES
DEBTORES
20000

15000

10000

5000

0
2016-17 2017-18 2018-19 2019-20 2020-21

Figure 3.16:

Figure showing the debtors turnover ratio for the period 2016-17 to 2020-21

DEBTORES TURNOVER RATIO

4

3.5

2.5

2
DEBTORES TURNOVER RATIO
1.5

0.5

0
2016-17 2017-18 2018-19 2019-20 2020-21
3.1.10 FIXED ASSET TO NETWORTH

Fixed assets are divided by net worth. The portion of net worth that consists of fixed assets
will vary greatly from industry to industry but generally a smaller proportion is desirable. A
high ratio is unfavourable because heavy investment in fixed assets indicates that either the
concern has a low net working capital and is over-trading or has utilized large funded debt to
supplement working capital. This ratio is calculated as follows:

Table 3.9:

Table showing the Fixed Asset to Net Worth for the period 2016-17 to 2020-21

year Fixed asset Net worth Fixed asset to net

(lakhs) (lakhs) worth
2016-2017 3856.9 9727.72 0.39

2017-2018 3919.37 10996.66 0.36

2018-2019 5631.4 12242.45 0.46

2019-2020 7289.69 12803.43 0.57

2020-2021 12248.64 14024.25 0.87

Source: Annual reports of HLL Life care Limited

INTERPRETATION:

This ratio shows the percentage of owners fund invested in fixed assets. The fixed asset
to net worth ratio during 2016-2017 was 0.39, which then decreases to 0.36 in the following
year. The maximum fixed asset to net worth ratio was 0.87 during the year 2020-2021. From
the analysis it is realized that the creditor's funds are not utilized for purchasing fixed assets.
So we can understand that the firm's investments in fixed assets are within the standard
norms.
 Figure 3.17

Figure showing the fixed asset to net worth ratio for the period 2016-17 to 2020-21

16000

14000

12000

10000

8000 fixed asset

net worth
6000

4000

2000

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Figure 3.18:

Figure showing the fixed assets to net worth ratio for the period 2016-17 to 2020-21

fixed asset to net worth

0.9

0.8

0.7

0.6

0.5

0.4 fixed asset to net worth

0.3

0.2

0.1

0
2016-17 2017-18 2018-19 2019-20 2020-21
3.1.11 RETURN ON INVESTMENT

The conventional approach of calculating return on investment (ROI) is to divide PAT

(profit after tax) by investment. Investment is the total assets which represent the pool of
funds supplied by shareholders and lenders, while PAT represents residue income of
shareholders, therefore it is conceptually unsound to use PAT in the calculation of ROI. This
ratio is calculated as follows:

RETURN ON TOTAL ASSETS = (EBIT/TOTAL ASSETS)*100

Table 3.10:

Table showing the return on investment for the period 2016-17 to 2020-21

year E.B.I.T (lakhs) Total asset (lakhs) R.O.I ratio

2016-2017 3114.88 17375.48 17.92%

2017-2018 2750.88 26474.48 10.39%

2018-2019 2142.95 28795.82 7.44%

2019-2020 1654.43 39135.12 4.22%

2020-2021 2261.40 38447.93 5.88%

Source: Annual reports of HLL Lifecare Limited

INTERPRETATION:

From the above table it is visible that there is decrease in returns to the company from
the year 2017-2018 to 2020-2021, though the decrease in 2017-2018 when compared to its
previous year is not as drastic as that of its succeeding years. This decrease in returns was due
to the launch of many rural awareness programs and due to the supply of samples free of cost.
The other most important expenditure was in the Research and Development wing which was
under pressure for product innovation. The highest returns on assets were in the year 2016-
2017 which was 17.92%.
 Figure 3.19:

Figure showing the EBIT and total assets for the period 2016-17 to 2020-21

45000

40000

35000

30000

25000
E.B.I.T
20000 TOTAL ASSET

15000

10000

5000

0
2016-17 2017-18 2018-19 2019-20 2020-21

Figure 3.20:

Figure showing the return of investment ratio for the period 2016-17 to 2020-21

20.00%

18.00%

16.00%

14.00%

12.00%
R.O.I RATIO
10.00%
Column1
8.00% Column2
6.00%

4.00%

2.00%

0.00%
2016-17 2017-18 2018-19 2019-20 2020-21
3.2 MULTIPLE DISCRIMINANT ANALYSIS

Multiple Discriminant Analysis can be used to classify companies, on the basis of

their characteristics as measured by financial ratios, into two groups those, which are likely to
fail and go bankrupt and those not likely to fail. In the literature, the likelihood of bankruptcy
is associated with financial ratios.

Table 3.11

Table showing the working capital and total assets for the period 2016-17 to 2020-21

year Working Total asset X1 % charges

capital (lakhs) (lakhs)

2017 7483.07 17375.65 0.43066 25.04

2018 9299.99 26474.48 0.35128 20.43

2019 12233.53 30715.46 0.39829 23.16

2020 11078.1 39135.12 0.28307 10.46

2021 9859.08 38447.93 0.25643 14.91

Source: Annual reports of HLL lifecare limited

Table 3.12:

Table showing the retained earnings and total assets for the period 2016-17 to 2020-21

year Retained Total asset X2 % charges

earnings (lakhs)
(lakhs)
2017 11249.99 17375.65 0.64746 32.97

2018 9442.66 26474.48 0.35667 18.16

2019 10688.95 30715.46 0.348 17.72

2020 11249.99 39135.12 0.28747 14.64

2021 12470.75 38447.93 0.32435 16.52

Source : Annual reports of HLL lifecare limited

 Table 3.14

Table showing the EBIT and total asset for the period 2016-17 to 2020-21

year EBIT(lakhs) Total X3 % charges

asset(lakhs)

2017 3114.87 17375.65 0.17927 39.48

2018 2750.88 26474.48 0.10391 22.89

2019 2142.96 30715.46 0.06977 15.37

2020 1654.43 39135.12 0.04227 9.31

2021 2261.4 38447.93 0.05882 12.95

Source: Annual reports of HLL lifecare limited

Table: 3.14

Table showing the market value and total liability of the period 2016-17 to 2020-21

year Market value Total liability X4 % charges

(lakhs) (lakhs)
2017 11189.24 0 0.00

2018 1124.42 14220.74 0.07907 41.45

2019 919.1 19012.53 0.04834 25.34

2020 487.82 22416.02 0.02176 11.41

2021 961.31 231123.55 0.04157 21.79

Source: Annual report of HLL lifecare limited

 Table 3.15:

Table Showing the Sales and Total Asset for the period 2016-17 to 2020-21

year Sales Total Asset X5 %Change

2017 21288.58 17375.65 1.2252 23.52

2018 24348.17 26474.48 0.91968 17.65

2019 31556 31023.91 1.01715 19.53

2020 36641.86 39641.86 0.92432 17.74

2021 44006.29 39233.35 1.12166 21.53

Source; Annual reports of HLL Lifecare Limited

Table 3.16:

Table showing the multiple discrimination analysis for the period 2016-17 to 2020-21

Year 0.012X1 0.014X2 0.033X3 0.06X4 0.010X5 Z

2017 .30048 0.461 1.302 - 0.012 2.1636

2018 .24516 0.2542 0.755 2.4 9.2 3.75097

2019 0.277 0.2480 0.507 1.58 0.0102 2.56381

2020 0.197 0.204 0.684 0.684 9.2 1.40351

2021 0.178 0.2312 1.3078 1.3078 0.0112 2.15615

INTERPREATION:

Since HELZ.Score of 2.156 is below 2.675, there is a chance that it will go bankrupt
in the near future. In the year 2017-18 HLL Z.Score of 3.75 is above 2.675 there is no chance
that it will go bankrupt, because in that time earning per share was 1124.42. But during the
year 2020-21 the earning per share decreased to 961.31. For that the company has increased
its earnings per share.
3.3 TREND ANALYSIS

The term trend analysis refers to the concept of collecting information and
attempting to spot a pattern, or trend, in the information. Trend percentages are immensely
helpful in making a comparative study of the financial statement for several years. Trend
analysis is a form of comparative analysis that is often employed to identify current and
future movements of an investment or group of investments. The process may involve
comparing past and current financial ratios as they related to various institutions in order to
project how long the current trend will continue. This type of information is extremely
helpful to investors who wish to make the most from their investments

A trend ratio is also an important tool of horizontal financial analysis. Under this
technique of financial analysis, the ratios of different items for various periods are calculated
and then a comparison is made. An analysis of the ratios over the past few years may well
suggest the trend or direction in which the concern is going upward or downward. The
method of trend percentages is a useful analytical device for the management since by
substituting percentages for large amounts; the brevity and readability are achieved.

One year is taken as the base year. Usually, the first year is taken as the base year.
The figures of base year are taken as 100. Trend percentages are calculated in relation to the
base year. If a figure in a year is less than the base year, the trend percentage will be less than
100 and if the figure is more than the base year figure the trend percentage will be more than
100.

Current year amount

Trend percentage = Base year amount * 100

 Table 3.17:

Table showing the trend analysis of net profit and sales for the period

2016-17 to 2020-21

NET PROFIT NET SALES

YEAR AMOUNT TREND% AMOUNT TREND%

2016-17 3109.19 100 21288.58 100

2017-18 2724.03 87.6 24348.17 114.34

2018-19 2189.11 70.41 31556.00 148.23

2019-20 1689.32 54.33 36641.86 172.12

2020-21 2230.31 71.73 44006.29 206.71

Source : Annual report of HLL lifecare limited

INTERPRETATION:

During 2017-18 the sales have increased by 14.37% but net profit has decreased
by 12.4% this is due to the increase in material consumption and marketing expenses. In
2018-19 the sales have increased by 33.86% but net profit has decreased by 17.19%.this is
due to the increase in marketing expenses, administrative expenses and employees' salary. In
2019-20 the sales have increased by 23.89% but net profit has decreased by 16.08%.this is
due to the employees' salary and finished goods trading.
 Figure 3.21:

Figure showing the trend analysis of net profit and sales for the period

2016-17 to 2020-21

250

200

150

net profit
net sales
100

50

0
2016-17 2017-18 2018-19 2019-20 2020-21
3.4 COMPARATIVE BALANCE SHEET

Financial Analysis is the process of identifying the financial strengths

and weakness of a firm properly establishing relationships between the irons of Balance
Sheet and Profit and Loss account. Analysis is the process of critically examining in detail
accounting information given in the financial statements. Analyzing financial statement is a
process of evaluating relationship between component purls of financial statement to obtain a
better understanding of firm's position and performances. The main aim of the financial
statement analysis is to find out the profitability and financial position of the firm. To
analyses the financial statement, the financial statement are classified methodically, analyzed
and compared with the figures of previous years or other similar firms.

The comparative financial statements are statements of the financial

position of different periods of time. Normally it is the Balance sheet and Profit and Loss
account which alone are prepared in a comparative form. It is these two statements, which are
considered as important financial statements.

The comparative Balance sheet analysis is the study of trend of the same
items, group of items and computed items in two or more balance sheets of the same business
enterprise on different dates.

The comparative income statement gives an idea of the progress of a

business over a period of time. The changes in absolute data in money values and percentages
can be determined to analyze the profitability of the business.
 CHAPTER-5

FINDINGS, SUGGESTION AND CONCLUSION

 CHAPTER 5

FINDINGS, SUGGESTION AND CONCLUSION

Emphasis in the report is given on the findings of most practical interest and on the
implication of these findings. The suggestion for action on the basis of the findings of the
study is made in this section of the report. Conclusion is a detailed summary of the findings
and the policy implications drawn from the results be explained.

Findings shown below. have been found out from the analysis. As the analysis is to
find out the financial position and performances of the company. Also the findings on
profitability position and liquidity position of the company. The major from the study are as
follows:

4.1 FINDINGS

➢ The liquidity position of the organization is sound as the liquidity ratios current ratio,
quick ratio, super quick ratios all have a satisfactory measure.

➢ The sound liquidity position also indicates that the current assets of the organization
are managed efficiently.

➢ The company maintains its fixed assets and the fixed assets have been increasing over
the years; these new investments help in the future growth of the organization.

➢ The administrative expenses have been increasing throughout, hence there needs to be
some control measures to control ; it.

➢ Though the sales are high, the selling expenses are also high for the organization, for a
company which has very few competitors in the industry the selling expenses should
not be quite high.
➢ Though there has been an increase in income with the increase in sales there is no
increase in profit.

➢ The decrease in profit was because the company had given products on subsidized rates
considering the recommendations made by the health ministry.

➢ The sales also showed a sudden high increase in the year 2007-2008 which could not
be maintained in the similar manner in the following year 2008 2009, though there
was increase.

➢ There was a sudden increase in the working capital management in the year 2007-2008
which could not be maintained in the similar manner in the succeeding year.

➢ The investment on working capital is high for the company.

➢ The inventory turnover has been showing a decreasing trend, which is again due to the
subsidized rates and also giving off free samples.

➢ The return on shareholders' investment has been showing a decreasing trend in the five
years.

➢ The earnings per share too show a decreasing trend.

➢ The financial charge is an avoidable expense which is incurred by the company.

 4.2 SUGGESTION

Suggestions are based on the findings that got from the analysis. suggestions shown
below are based on the analysis is to find out the financial position performances of the
company. Also the suggestions on profitability position and liquidity position of the
company.

➢ The company needs to manage the funds more efficiently.

➢ The administrative expenses are increasing and hence it should be minimised.

➢ The selling expenses could be managed and controlled with better management of
logistics.

➢ The company could make more investment in inventory because it has an

➢ increasing trend in sales. If the company decreases its frequency of purchases the
working capital can be decreased and managed.

➢ The year 2019-2020 showed a drastic increase in sales which was not equally high in
the following year, methods could be adopted which can help the company increase
sales tremendously.

➢ The company has forward integration by opening its retail units the company can also
try out backward integration which would help in reducing the cost paid for raw
materials.

➢ The company can increase its tie up with hospitals so that sales could be increased
further.

➢ The collection of decentralized company can reduce transaction charges.

4.3 CONCLUSION

My study at HLL Life care Limited, Poojapura, Thiruvananthapuram one of the most
famous public sector undertaking firms producing various healthcare products and it has an
increasing income and sales throughout. Financial analysis helped in carving out an outline
regarding the financial performance practical difficulties faced while managing an
organization The study revealed that the organization is not just confined to profit making but
also functions for the welfare of the public. The organization is a well expanding one with its
growth spreading outside India, to the other developing countries. The company is not just
confined to any particular product but the a wide range of health care products. The company
has been diversifying throughout but in the same industry. In striking a right balance between
current assets and current liabilities. The various tools are adopted to analyses the past
performance of the firm. It has found that the company is financially very sound. HLL
Lifecare has been able to hold a good percentage of market shares of the industry.

The intrinsic quality and innovations carried out keeping the standards strictly for
its products and services underline HLL Lifecare's commitment to the industry and society
and provide the reason for the luminous reputation it is receiving HLL Lifecare products and
services enjoy a ready acceptance and appeal in markets both in India and abroad. This is
evident through its increased sales. As a manufacturer of contraceptive and healthcare
products the company has more chance for future diversification. Among the public sector
undertaking firms Hindustan Latex Limited earn adequate profit and its serve as bench mark
among the PSU's. With the customers health in mind the company has changed logo to pink
colour indicating the pink of health of its customers.
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Manuals

Annual reports of HLL Lifecare Limited