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EVALUATION OF APLAB LIMITED THROUGH RATIO

COMPANY PROFILE THE COMPANY APLAB Limited is a professionally managed Public Limited company quoted on the Bombay Stock Exchange. Since its inception in 1962, APLAB has been serving the global market with wide range of electronic products meeting the international standards for safety and reliability such as UL, VDE etc. They specialize in Test and Measurement Equipment, Power Conversion and UPS Systems, Self-Service Terminals for Banking Sector and Fuel Dispensers for Petroleum Sector. APLAB enjoys worldwide recognition for the quality of its products, business integrity and innovative engineering skills.

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ABOUT APLAB: Aplab started its operation in October 1962. It is a professionally managed 40 years old public limited company. It is quoted on BOMBAY STOCK EXCHANGE. It serves customer global customer par excellence. It specialized in Test & measurement instruments, power conversion, & UPS & fuel dispensers for petroleum sector. It enjoys worldwide recognition for the quality of its business integrity & innovative engineering skills. MISSION: To deliver high quality, carefully, engineered products, on time, with in budget, as per the customer specification in a manner profitable to both, our customers & so to us. VISION: To be a global player, recognized for quality & integrity. To be the TOP INDIAN COMPANY as conceived by our customers. To be THE BEST company to work for, as rated by our employees. GOAL: Goal at Aplab is extract ordinary customer service as we provide our customer needs in the personal service industry. CORPORATE MISSION 1] To achieve healthy and profitable growth of the company in the interest of our customers & the shareholders. 2] To encourage teamwork, reward innovation and maintain healthy interpersonal relations within the organization.

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3] To expand knowledge and remain at the leading edge in technology to serve the global market. 4] To understand the customers needs and provide solutions than merely selling products. 5] To create intellectual capital by investing in hardware and embedded software development. VALUES & BELIEFS: Their values & beliefs required that they Treat employees with respect & give them an opportunity for input on how to continuously improve their service goals. Offer opportunities for growth, professional development & recognition. Provide most effective & corrective action, to resolve customer service issues, to ensure customer satisfaction. Foster an open door policy, which encourages interaction, discussion & ideas to improve work environment & increase productivity. Do it right the first time & every time is their team commitment * our way of doing business, it ensures as growth & prosperity. THE 21ST CENTURY SUCCESS APLAB had planned to enter the 21st Century with a program for a fast and healthy growth in the global market based on companys high technology foundation and the reputation of four decades for prompt customer service and as a reliable solution provider. After completing three years in the new era, we can say with pride that we have been delivering our promises to our customers and the shareholders.

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APLAB has entered the field of Professional Services starting with the Banking and the Petroleum Industry. Focus on developing embedded system software has been also enhanced. We believe that professional services sector is poised to grow at a very rapid pace. QUALITY IS OUR WORK CULTURE - ISO 9001:2000 Quality at APLAB is a part of our peoples attitude. Entire organization is committed to create an environment that encourages individual excellence and a personal commitment to quality. In APLAB, Quality is everybodys responsibility and all strive to do it right the first time. It is therefore natural that APLAB Limited is certified for quality with ISO 9001:2000 registration. QUALITY POLICY: Aplab will deliver to its customer products & services that consistently meet or exceed their requirement. Aplab will achieve this by total commitment & involvement of every individual. Aplab will encourage its employees & suppliers to develop quality products prevent defects & make continual improvement in all processes. QUALITY OBJECTIVE: Aplab is an ISO 9001:2000 certifies company. 100% customer satisfaction. On time delivery every time reduction is out going PPM to 10,000 [4 sigma]

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RESEARCH AND DEVELOPMENT Developing innovative products with the latest technology is the core strength of APLAB. The Science & Technology Ministry of the Govt. of India accredits our R&D Laboratories. We have a large team of dedicated, highly qualified skilled engineers who excel in the latest state-of-the-art-technology. APLAB is recognized not only for manufacturing standard products but also in providing solutions and services as per the customer specifications. We spend more than 4% of the company revenue in Research & Development activities. Specific areas in which the company carries out R&D 1. Development of new product especially hi-tech intelligent product & electronic substitution. 3. Development of products to suit exports markets. 4. Customizing the products to the customers specifications & adaptation of imported technology. The company has achieved its position of leadership in the Indian instrumentation industry & continuous to maintain it through its strong grip of technology. Almost all the products manufactured by the company are import substitution items, which are fully developed in house. It has resulted in considerable saving of foreign exchange. With the company, R&D is an ongoing process. The ministry of science & technology, Government of India, recognizes the companys R&D. Through a continuous interaction with production& Quality Assurance Department takes up redesign of existing products. This is done to achieve state of the art in our design & to bring about improvement to get maximum performance / cost ratio. transaction control system. 2. Improvement in the existing products & production processes, import

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FUTURE PLAN OF ACTION Major R&D activity is concentrated around up gradation of product design & re-alignment of production processes to bring about improved quality at lower cost. This will greatly help the company in facing competition in local markets from foreign companies. EXPORT APLAB currently exports over 25% of its production to Western Europe, Canada & USA. Over 30 million U.S. Dollars worth of Power Systems and Test Instruments from APLAB are today operational in UK, Germany, France, Sweden, Belgium, Canada, and USA & Australia.

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APLABS ORGANISATION CHART EXECUTIVE CHAIRMAN

MANAGING DIRECTOR DIRECTOR [TECHNICAL - PE] GENERAL MANAGER MAEKETING DIRECTOR REGIOAL HEAD: MUMBAI NEWDELHI SECUNDARABAD BANGLORE CHENNAI

FINANCE MANAGER

G.M PROD. &

G.M. MARKETING

MATERIAL MANAGER

G.M. ELTRAC PROD.

G.M. DESIGN & DESIGN

DEVLOPMENT

OFFICERS STAFF

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WORKERS

PRODUCTS OF APLAB: a. TEST & MEASUREMENT INSTRUMENTS b. HIGH POWER AC SYSTEMS (UPS, Frequency Converter, Inverter, Isolation Transformer) c. HIGH POWER DC SYSTEMS (DC Power Supply, DC Uninterruptible Power Supply) d. ATM INSTACASH e. POWER SUPPLIES, AC-DC POWER SUPPLY, STABILIZER, DC/DC LINE CONVERTERS, SMPS, INVERTERS,

CONDITIONER, ISOLATION TRANSFORMER ATM INSTACASH The Banking Automation Division of APLAB was launched in 1993, when we introduced INSTACASHIndias first indigenously manufactured ATM INSTACASH demonstrated APLABs skills in design, hardware manufacturing and software integrations. Our in house R&D group is constantly striving to scan the rapidly changing technology and offer suitable end to end solutions. We are into Self Service Delivery Systems, MICR Cheque Processing and Smart Card based solutions. The latest is IMAGEENABLED Cheque Processing solution- QUICKCLEAR.

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APLAB LIMITED
BALANCE SHEET AS AT 31ST MARCH 2002 (RS.000) AS AT 31ST 2002 AS AT 31ST 2002 SOURCES OF FUNDS SHAREHOLDERS FUND Share capital Reserves and surplus LOANS Secured Unsecured DEFFERED TAX LIABILITY (NET) TOTAL APPLICATION OF FUNDS FIXED ASSETS Gross block Less: depreciation Net block Capital work in progress INVESTMENT CURRENT ASSESTS, LOANS & ADVANCES Inventories Sundary debtors Cash & bank balances Loan & advances CURRENT LIABLITIES & PROVISIONS Current liabilities Provisions NET CURRENT ASSESTS MISCELLANEOUS EXPENDITURE Total

5,00,00 16,29,69 21,29,69 12,13,48 3,67,99 15,81,47 1,06,85 38,18,01

15,90,33 10,32,96 5,57,37 54,36 6,11,73 1,22,32

19,09,77 18,49,35 3,31,32 5,80,36 46,70,80

15,36,09 57,57 15,93,66 30,77,14 6,84 3818,01

PROFIT & LOSS ACCOUNT FOR THE ENDED 31ST MARCH 2002

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(RS.000) AS AT 31-3- 2002 AS AT 31-3-2002 INCOME: Sales and operating earnings Other income Variation in stock EXPENCES: Materials consumed Purchase of trading goods Payments to & provision for employees Manufacturing expenses Excise duty Other expenses Interest & finance charges Depreciation Less: transferred to revaluation PROFIT BEFORE TAX PRIOR YEAR ADJUSTMENT (NET) PROVISION FOR TAXATION Current tax Deferred tax liability / (Assets) PROFIT AFTER TAX Balance brought forward from previous year Balance available for appropriation Appropriations: General reserve Surplus / (loss) carried to B/S Proposed dividend Tax on proposed dividend Basic earning per share (rupee) 0.41 0.41 48,19,19 80,50 1,31,07 50,30,76 18,97,28 8,61,75 9,95,04 2,21,37 65,05 5,76,71 2,60,22 1,05,37 1,15 1,04,22 49,81,64 49,12

24,42 4,02 20,68 1 20,69

20,68 1

20,69

BALANCE SHEET AS AT 31ST MARCH 2003 RATIO ANALYSIS Page 10

(RS.000) AS AT 31-3- 2003 AS AT 31-3- 2003 SOURCES OF FUNDS SHAREHOLDERS FUND Share capital Reserves and surplus LOANS Secured Unsecured DEFFERED TAX LIABILITY (NET) TOTAL APPLICATION OF FUNDS FIXED ASSETS Gross block Less: depreciation Net block Capital work in progress INVESTMENT CURRENT ASSESTS, LOANS & ADVANCES Inventories Sundary debtors Cash & bank balances Loan & advances CURRENT LIABLITIES & PROVISIONS Current liabilities Provisions NET CURRENT ASSESTS MISCELLANEOUS EXPENDITURE TOTAL

5,00,00 16,55,19 21,55,19 10,27,55 4,53,16 14,80,71 87,21 37,23,11

17,40,97 11,40,93 6,00,04 29,74 6,29,78 1,47,26

19,02,79 19,05,76 3,95,25 8,98,62 51,02,42

20,41,56 1,20,76 21,62,32 29,40,10 5,97 37,23,11

PROFIT & LOSS ACCOUNT FOR THE ENDED 31ST MARCH 2003 (RS.000)

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AS AT 31-3- 2003 AS AT 31-3- 2003 INCOME: Sales and operating earnings Other income Variation in stock EXPENCES: Materials consumed Purchase of trading goods Payments to & provision for Employees Manufacturing expenses Excise duty Other expenses Interest & finance charges Depreciation Less: transferred to revaluation PROFIT BEFORE TAX PRIOR YEAR ADJUSTMENT (NET) PROVISION FOR TAXATION Current tax Deferred tax liability / (Assets) PROFIT AFTER TAX Balance brought forward from previous year Balance available for appropriation Appropriations: General reserve Surplus / (loss) carried to B/S Proposed dividend Tax on proposed dividend Basic earning per share (rupee) 59,62,22 15,04 (59,27) 59,17,99 22,41,60 10,37,52 10,63,96 2,69,99 72,69 7,62,23 2,36,57 1,07,97 1,03 1,06,94 57,91,50 1,26,49

63,19 (19,64) 82,94 1 82,95

26,50 4 50,00 6,41 82,95 1.66

BALANCE SHEET AS AT 31ST MARCH 2004 (RS.000) AS AT 31-3- 2004 AS AT 31-3- 2004 SOURCES OF FUNDS RATIO ANALYSIS Page 12

SHAREHOLDERS FUND Share capital Reserves and surplus LOANS Secured Unsecured DEFFERED TAX LIABILITY (NET) TOTAL APPLICATION OF FUNDS FIXED ASSETS Gross block Less: depreciation Net block Capital work in progress INVESTMENT CURRENT ASSESTS, LOANS & ADVANCES Inventories Sundary debtors Cash & bank balances Loan & advances CURRENT LIABLITIES & PROVISIONS Current liabilities Provisions NET CURRENT ASSESTS TOTAL

5,00,00 17,42,59 22,42,59 11,38,86 5,58,29 16,97.15 95,33 40,35,07

18,41,58 12,40,03 6,01,55 15,29 6,16,84 1,48,34

21,46,20 19,51,56 4,49,74 850,58 53,98,08

18,16,17 3,12,02 21,28,19 32,69,89 40,35,07

PROFIT & LOSS ACCOUNT FOR THE ENDED 31ST MARCH 2004 (RS.000) AS AT 31-3- 2004 AS AT 31-3-2004 INCOME: RATIO ANALYSIS Page 13

Sales and operating earnings Other income Variation in stock EXPENCES: Materials consumed Purchase of trading goods Payments to & provision for employees Manufacturing expenses Excise duty Other expenses Interest & finance charges Depreciation Less: transferred to revaluation PROFIT BEFORE TAX PRIOR YEAR ADJUSTMENT (NET) PROVISION FOR TAXATION Current tax Deferred tax liability / (Assets) PROFIT AFTER TAX Balance brought forward from previous year Balance available for appropriation Appropriations: General reserve Surplus / (loss) carried to B/S Proposed dividend Tax on proposed divident Basic earning per share (rupee) BALANCE SHEET AS AT 31ST MARCH 2005

73,90,47 31,39 53,99 74,75,85 28,51,40 14,03,33 12,94,47 3,07,51 70,08 9,17,94 2,46,30 1,10,89 93 1,09,96 72,00,99 2,74,86 25,71 1,19,50 8,13 17294 4 1,72,98

88,30 7 75,00 9,61 1,72,98 3.46

(RS.000) AS AT 31-3- 2005 AS AT 31-3- 2005 SOURCES OF FUNDS SHAREHOLDERS FUND Share capital Reserves and surplus RATIO ANALYSIS

5,00,00 19,14,91 Page 14

24,14,91 LOANS Secured Unsecured DEFFERED TAX LIABILITY (NET) TOTAL APPLICATION OF FUNDS FIXED ASSETS Gross block Less: depreciation Net block Capital work in progress INVESTMENT CURRENT ASSESTS, LOANS & ADVANCES Inventories Sundary debtors Cash & bank balances Loan & advances CURRENT LIABLITIES & PROVISIONS Current liabilities Provisions NET CURRENT ASSESTS TOTAL 17,23,12 5,36,89 22,60,01 92,02 47,66,94

21,64,89 13,43,05 8,21,84 8,21,84 2,32,91

19,32,88 23,06,67 6,04,64 10,04,02 58,48,21

16,55,15 4,80,87 21,36,02 37,12,19 47,66,19

PROFIT & LOSS ACCOUNT FOR THE ENDED 31ST MARCH 2005 (RS.000) AS AT 31-3- 2005 AS AT 31-3 2005 INCOME: Sales and operating earnings Other income Variation in stock EXPENCES: RATIO ANALYSIS Page 15 74,20,31 41,69 (38,45) 74,23,55

Materials consumed Purchase of trading goods Payments to & provision for employees Manufacturing expenses Excise duty Other expenses Interest & finance charges Depreciation Less: transferred to revaluation PROFIT BEFORE TAX PRIOR YEAR ADJUSTMENT (NET) PROVISION FOR TAXATION Current tax Deferred tax liability / (Assets) PROFIT AFTER TAX Balance brought forward from previous year Balance available for appropriation Appropriations: General reserve Surplus / (loss) carried to B/S Proposed dividend Basic earning per share (rupee)

25,91,83 15,21,00 13,54,15 2,71,41 75,41 8,44,78 2,15,82 1,26,68 84 1,25,84 70,00,24 4,23,31

1,50,84 (3,31) 2,75,78 7 2,75,85

1,73,20 3 90,00 2,75,85 5.52

CALCULATIONS AND INTERPRETATION OF RATIOS 1] CURRENT RATIO:


Formula: Current assets Current ratio = Current liabilities YEAR 2001-2002 2002-2003 2003-2004 2004 -2005

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Current assets Current liabilities Current ratio COMMENTS:

46,70,80 15,93,66 2.93

51,08,39 21,62,32 2.36

53,98,08 21,28,19 2.53

58,28,21 21,36,02 2.72

In Aplab company the current ratio is 2.72:1 in 2004-2005. it means that for one rupee of current liabilities, the current assets are 2.72 rupee are available to the them. In other words the current assets are 2.72 times the current liabilities. Almost 4 years current ratio is same but current ratio in 2004-2005 is bit higher, which makes company more sound. The consistency increase in the value of current assets will increase the ability of the company to meets its obligations & therefore from the point of view of creditors the company is less risky. The available working capital with the company is in increasing order. 2001-2002 - 30,77,14 2002-2003 - 29,46,07 2003-2004 - 32,69,89 2004-2005 - 36,92,19 The company has sufficient working capital to meets its urgency/ obligations. A company has a high percentage of its current assets in the form of working capital, cash that would be more liquid in the sense of being able to meet obligations as & when they become due. From this working capital, the company meets its day-to-day financial obligations. Thus, the current ratio throws light on the companys ability to pay its current liabilities out of its current assets. The Aplab Companys has a very good liquidity position of company.

2] LIQUID RATIO:
Formula: Quick assets Liquid ratio = Quick liabilities

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YEAR Quick assets Quick liabilities Liquid ratio COMMENTS:

2001-2002 21,80,67 15,93,66 1.36

2002-2003 23,01,01 21,62,32 1.06

2003-2004 24,01,30 21,28,19 1.12

2004 -2005 29,11,31 21,36,02 1.36

The liquid or quick ratio indicates the liquid financial position of an enterprise. Almost in all 4 years the liquid ratio is same, which is better for the company to meet the urgency. The liquid ratio of the Aplab Company has increased from 1.12 to 1.36 in 2004-2005. Day to day solvency is more sound for company in 2004-2005 over the year 2003-2004. This indicates that the dependence on the short-term liabilities & creditors are less & the company is following a conservative working capital policy. Liquid ratio of Company is favorable because the quick assets of the company are more than the quick liabilities. The liquid ratio shows the companys ability to meet its immediate obligations promptly.

3] PROPRIETORY RATIO:
Formula: Proprietary fund Proprietary ratio = Total fund Shareholders fund Proprietary ratio = Fixed assets + current liabilities OR

YEAR Proprietary fund Total fund Proprietary ratio

2001-2002 21,29,69 52,82,53 40

2002-2003 21,55,19 57,38,17 37.55

2003-2004 22,42,59 66,14,92 33.90

2004 -2005 24,14,91 66,70,05 36.20

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COMMENTS: The Proprietary ratio of the company is 36.20% in the year 2004-2005. It means that the for every one rupee of total assets contribution of 36 paise has come from owners fund & remaining balance 66 paise is contributed by the outside creditors. This shows that the contribution by outside to total assets is more than the owners fund. This Proprietary ratio of the Company shows a downward trend for the last 4 years. As the Proprietary ratio is not favorable the Companys long-term solvency position is not sound.

4] STOCK WORKING CAPITAL RATIO:


Formula: Stock Stock working capital ratio = Working Capital YEAR Stock Working Capital Stock working capital ratio COMMENTS: This ratio shows that extend of funds blocked in stock. The amount of stock is increasing from the year 2001-2002 to 2003-2004. However in the year 2004-2005 it has declined to 52%. In the year 2004-2005 the sale is increased which affects decrease in stock that effected in increase in working capital in 2004-2005. It shows that the solvency position of the company is sound. 2001-2002 19,09,77 30,77,14 62.06 2002-2003 19,02,79 29,46,07 64.58 2003-2004 21,46,20 32,69,89 65.63 2004 -2005 19,32,88 37,12,19 52.06

5] CAPITAL GEARING RATIO:


Formula: Preference capital+ secured loan

Capital gearing ratio =


Equity capital & reserve & surplus

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YEAR Secured loan Equity capital & reserves & surplus Capital gearing ratio COMMENTS:

2001-2002 12,13,48 21,29,69 56.97

2002-2003 10,27,56 21,55,19 47.67

2003-2004 11,38,86 22,42,59 50.78

2004 -2005 1,72,312 2,41,491 71

Gearing means the process of increasing the equity shareholders return through the use of debt. Capital gearing ratio is a leverage ratio, which indicates the proportion of debt & equity in the financing of assets of a company. For the last 3 years [i.e.2001-2002 TO 2003-2004] Capital gearing ratio is all most same which indicates, near about 50% of the fund covering the secured loan position. But in the year 2004-2005 the Capital-gearing ratio is 71%. It means that during the year 2004-2005 company has borrowed more secured loans for the companys expansion.

6] DEBT EQUITY RATIO:


Formula: Total long term debt Debt equity ratio = Total shareholders fund YEAR Long term debt 2001-2002 15,81,47 2002-2003 14,80,70 21,55,19 0.68 2003-2004 16,97,15 22,42,59 0.75 2004 -2005 22,60,01 24,14,91 0.93

Shareholders 21,29,69 fund Debt Equity Ratio 0.74 COMMENTS:

The debt equity ratio is important tool of financial analysis to appraise the financial structure of the company. It expresses the relation between the RATIO ANALYSIS Page 20

external equities & internal equities. This ratio is very important from the point of view of creditors & owners. The rate of debt equity ratio is increased from 0.74 to 0.93 during the year 2001-2002 to 2004-2005. This shows that with the increase in debt, the shareholders fund also increased. This shows long-term capital structure. The lower ratio viewed as favorable from long term creditors point of view.

7] GROSS PROFIT RATIO:


Formula: Gross profit Gross profit ratio = Net sales * 100

YEAR Gross profit Net sales Gross profit Ratio

2001-2002 24,54,48 43,45,46 56.48

2002-2003 37,65,90 51,02,37 73.80

2003-2004 45,57,45 68,76,89 66.27

2004 -2005 42,37,52 68,09,78 62.22

Gross profit Ratio 80 60 40 20 0 20012002 20022003 20032004 2004 2005 Gross profit Ratio

COMMENTS: RATIO ANALYSIS Page 21

The gross profit is the profit made on sale of goods. It is the profit on turnover. In the year 2001-2002 the gross profit ratio is 56.48%. It has increased to 73.80% in the year 2002-2003 due to increase in sales without corresponding increase in cost of goods sold. However the gross profit ratio decreased to 66.27% in the year 2003-2004. It is further declined to 62.22% in the year 2004-2005, due to high cost of purchases & overheads. Although the gross profit ratio is declined during the year 2002-2003 to 2004-2005. The net sales and gross profit is continuously increasing from the year 2001-2002 to 2004-2005.

8] OPERATING RATIO:
Formula: COGS+ operating expenses

Operating ratio =
Net sales YEAR COGS + Operating expenses Net sales Operating ratio 2001-2002 18,90,98 + 2,21,37 + 5,76,71 43,45,46 61.88% 2002-2003 21,96,32 + 2,69,98 + 7,62,23 51,02,37 63.27%

*100
2003-2004 28,33,02 + 3,07,51 + 9,17,94 68,76,89 59% 2004 -2005 2,57,226+ 27,141+ 84,478 6,80,978 54.16%

COMMENTS: The operating ratio shows the relationship between costs of activities & net sales. Operating ratio over a period of 4 years when compared that indicate the change in the operational efficiency of the company. The operating ratio of the company has decreased in all 4 year. This is due to increase in the cost of goods sold, which in 2001-2002 was 61.88%, in 2002-2003 was 63.27%, in 2003-2004 was 59% & in 2004-2005 it is 54.16%. though the cost has increased in 2002-2003 as compared to 2001-2002, it is reducing continuously over the next two years, indicate downward trend in cost but upward / positive trend in operational performance. RATIO ANALYSIS Page 22

9] EXPENSE RATIO: The ratio of each item of expense or each group of expense to net sales is known as Expense ratio. The expense ratio brings out the relationship between various elements of operating cost & net sales. Expense ratio analyzes each individual item of expense or group of expense& expresses them as a percentage in relation to net sales. A] MANUFACTURING EXPENSES: Formula: Manufacturing expenses Manufacturing expense ratio = Net sales YEAR Manufacturing expenses Net sales Manufacturing expenses ratio 2001-2002 2,21,37 43,45,46 5% 2002-2003 2,69,98 51,02,37 5.29% 2003-2004 3,07,51 68,76,89 4.47% 2004 -2005 2,71,41 68,09,78 3.98% *100

COMMENTS: The manufacturing expense is shows the downward trend. During the year 20012002 to 2002-2003 the manufacturing expense increased because there is increase in the charges like labour, rent , power & electricity, repair to plant & machinery & miscellaneous works expenses. The manufacturing expense during the year 2001-2002 to 2004-2005 is decreased from 5% to 3.96%. This indicates that the company has control over the manufacturing expense. B] OTHER EXPENSES: Formula:

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Other expenses Other expense ratio = Net sales YEAR Other expenses Net sales Other expenses ratio 2001-2002 5,76,71 43,45,46 13.2% 2002-2003 7,62,23 51,02,37 14.93% 2003-2004 9,17,94 68,76,89 13.34% 2004 -2005 8,44,78 68,09,78 12.40% *100

COMMENTS: The other expense of company is increased during the 2001-2002 to 20032004, because increase in the charges of rent of office, equipment lease rental, printing & stationary, advertisement & publicity, transport outward & other charges. But during the year 2004-2005 the other expenses is decrease from 13.34% to 12.40%. Because decrease in equipment lease rental, advertisement & publicity, transport charges, commission & discount, sales tax & purchase tax . This indicates that the company also controlling the other expenses.

10) NET PROFIT RATIO


Formula: NPAT Net profit ratio = Net sales YEAR NPAT Net sales Net profit ratio 2001-2002 20,98 434546 0.48 2002-2003 82,94 51,02,37 1.6 2003-2004 1,72,94 68,76,89 2.5 2004 -2005 2,75,78 68,09,78 4.04 * 100

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NET PROFIT
5 4 3 2 1 0 2001-2002 2002-2003 2003-2004 2004-2005

COMMENTS: The net profit ratio of the company is low in all year but the net profit is increasing order from this ratio of 4 year it has been observe that the from 2001-2002 to 2004-2005 the net profit is increased i.e. in 2003 it is increased by 1.12 in 2003-2004 by 0.9 & in 2004-2005 by 1.54. Profitability ratio of company shows considerable increase. Companys sales have increased in all 4 years & at the same time company has been successful in controlling the expenses i.e. manufacturing & other expenses. It is a clear index of cost control, managerial efficiency & sales promotion.

11] STOCK TURNOVER RATIO:


Formula: COGS Stock Turnover Ratio = Average stock YEAR COGS Average stock Stock Turnover Ratio 2001-2002 18,90,98 5,49,90 3.4 2002-2003 21,96,32 5,97,58 3.6 2003-2004 28,33,02 6,73,11 4.20 2004 -2005 25,72,26 6,89,30 3.73

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COMMENTS: Stock turnover ratio shows the relationship between the sales & stock it means how stock is being turned over into sales. The stock turnover ratio is 2001-2002 was 3.4 times which indicate that the stock is being turned into sales 3.4 times during the year. The inventory cycle makes 3.4 round during the year. It helps to work out the stock holding period, it means the stock turnover ratio is 3.4 times then the stock holding period is 3.5 months [12/3.4=3.5months]. This indicates that it takes 3.5 months for stock to be sold out after it is produced. For the last 4 years stock turnover ratio is lower than the standard but it is in increasing order. In the year 2001-2002 to 2004-2005 the stock turnover ratio has improved from 3.4 to 3.73 times, it means with lower inventory the company has achieved greater sales. Thus, the stock of the company is moving fast in the market.

12] RETURN ON CAPITAL EMPLOYED:


Formula: NPAT

Return on capital employed =


YEAR NPAT Capital employed Return on capital employed COMMENTS: 2001-2002 20,68 38,18,01 0.54

*100
Capital employed 2002-2003 2003-2004 82,94 1,72,94 37,23,11 40,35,07 2.23 4.28 2004 -2005 2,75,78 47,66,93 5.79

The return on capital employed shows the relationship between profit & investment. Its purpose is to measure the overall profitability from the total funds made available by the owner & lenders.

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The return on capital employed of Rs.5 indicate that net return of Rs.5 is earned on a capital employed of Rs.100. this amount of Rs.5 is available to take care of interest, tax,& appropriation. The return on capital employed is show-increasing trend, i.e. from 0.54 to 5.79. All of sudden in 2001-2002 the return on capital employed increased from 0.54 to 5.79. This indicates a very high profitability on each rupee of investment & has a great scope to attract large amount of fresh fund.

13] EARNING PER SHARE:


Formula: NPAT

Earning per share =


Number of equity share YEAR NPAT No.ofequity share Earning per share COMMENTS: Earning per share is calculated to find out overall profitability of the company. Earning per share represents the earning of the company whether or not dividends are declared. The Earning per share is 5.52 means shareholder gets Rs. 5.52 for each share of Rs. 10/-. In other words the shareholder earned Rs. 5.52 per share. The net profit after tax of the company is increasing in all years. Therefore the shareholders earning per share is increased continuously from 2001-2002 to 2004-2005 by 0.41 to 05.52. This shows it is continuous capital appreciation per unit share by 0.41 to 05.52. 2001-2002 20,98,000 50,00,000 0.41 2002-2003 82,94,000 50,00,000 1.66 2003-2004 1,72,94,000 50,00,000 3.46 2004 -2005 2,75,78,000 50,00,000 5.52

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The above diagram shows the Earning per share and Dividend per share is increasing rapidly. It is beneficial to the shareholders and prospective investor to invest the money in this company.

14] DIVIDEND PAYOUT RATIO:


Formula: Dividend per share

Dividend Pay out ratio =


Earning per share YEAR Dividend per share Earning per share Dividend payout ratio COMMENTS: 2001-2002 0.41 2002-2003 1 1.66 60.24

* 100
2003-2004 1.50 3.46 43.35 2004 -2005 1.80 5.52 32.60

In the year 2002-2003 and 2003-2004 the Dividend pay out ratio is 60.24 and 43.35 respectively. In the year 2002-2003 the company has declared the dividend 60.24 and the balance 39.76 is retained with them for the expansion.

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The company has not earned more profit in the year 2001-2002 hence the company has not declared dividend in the year 2001-2002. However the company has declared more dividends in the year 2002-2003 as the company has sufficient profit. In the year 2004 the company has declared 1.50 dividends per share hence the earning per share has doubled. From this one can say that the company is more conservative for expansion.

15] COST OF GOODS SOLD:


Formula: COGS Cost of goods sold Ratio = Net sales YEAR COGS Net sales Cost of goods sold ratio COMMENTS: This ratio shows the rate of consumption of raw material in the process of production. In the year 2001-2002 the cost of goods sold ratio is 43.51% so the gross profit is 56.49%. it indicates that in 2001-2002, the 43% of raw material is consumed in the process of production. During the last 4 years the rate of cost of goods sold ratio is continuously decreasing however the gross profit & sales is increased during the same period. 2001-2002 18,90,98 43,45,46 43.51 2002-2003 21,96,32 51,02,37 43.04 2003-2004 28,33,02 68,76,89 41.19 2004 -2005 25,72,26 68,09,78 37.77 * 100

16] CASH RATIO:


Formula: Cash + Bank + Marketable securities

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Cash ratio

= Total current liabilities

YEAR Cash + Bank + Marketable securities Total current liabilities Cash ratio COMMENTS:

2001-2002 3,31,32 15,93,66 0.20

2002-2003 3,95,25 21,62,32 0.18

2003-2004 4,49,74 21,28,19 0.21

2004 -2005 6,04,64 21,36,02 0.28

This ratio is called as super quick ratio or absolute liquidity ratio. In the year 2001-2002 the cash ratio is 0.20 & then it is decreased to 0.18 in the year 2002-2003. Then again it is increased to 0.21 in the year 2003-2004 & 0.28 in the year 2004-2005. This shows that the company has sufficient cash, bank balance, & marketable securities to meet any contingency.

17] RETURN ON PROPRIETORS FUND:


Formula: NPAT Return on proprietors fund = Proprietors fund YEAR NPAT Proprietors fund Return on proprietors fund 2001-2002 20,68 21,29,69 0.97 2002-2003 82,94 21,55,19 3.84 2003-2004 1,72,94 22,42,59 7.71 2004 -2005 2,75,78 24,14,91 11.41 * 100

COMMENTS: Return on proprietors fund shows the relationship between profits & investments by proprietors in the company. In the year 2002-2003 the return on

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proprietors fund is 3.84% it means the net return of Rs. 3 approximately is earned on the each Rs. 100 of funds contributed by the owners. During the last 4 years the rate of return on proprietors fund is in increasing order. The return on proprietors fund during the year 2001-2002 to 2004-2005 is increased from 0.97% to 11.41%. It shows that the company has a very large returns available to take care of high dividends, large transfers to reserve etc. & has a great scope to attract large amount of fresh fund from owners.

18] RETURN ON EQUITY:


Formula: NPAT Return on equity share capital = No. of equity share YEAR NPAT No. of equity share Return on equity share capital COMMENTS: This ratio shows the relationship between profit & equity shareholders fund in the company. It is used by the present / prospective investor for deciding whether to purchase, keep or sell the equity shares. In the year 2002-2003 the return on proprietors fund is 16.5%, which means the net return of Rs. 16, is earned on the each Rs.100 of the funds contributed by the equity shareholders. The rate of return on equity share capital is increased from4.13% to 55% during the year 2001-2002 to 2004-2005. This shows that the company has a very large returns available to take care of high equity dividend, large transfers to reserve, & also company has a great scope to attract large amount to fresh funds by issue of equity share & also company has a very good price for equity shares in the BSE. RATIO ANALYSIS Page 31 2001-2002 20,68 50,000 4.13 2002-2003 82,94 50,000 16.5 2003-2004 1,72,94 50,000 34.58 2004 -2005 2,75,78 50,000 55 * 100

19] OPERATING PROFIT RATIO:


Formula: Operating profit Operating profit ratio = Net sales COMMENTS: Operating profit ratio shows the relationship between operating profit & the sales. The operating profit is equal to gross profit minus all operating expenses or sales less cost of goods sold and operating expenses. The operating profit ratio of 7.11% indicates that average operating margin of Rs.7 is earned on sale of Rs. 100. this amount of Rs. 7 is available for meeting non operating expenses. In the other words operating profit ratio 7.11% means that 7.11% of net sales remains as operating profit after meeting all operating expenses. During the last 4 years the operating profit ratio is increased from 7.11% to 9.38%. It indicates that the company has great efficiency in managing all its operations of production, purchase, inventory, selling and distribution and also has control over the direct and indirect costs. Thus, company has a large margin is available to meet non-operating expenses and earn net profit. *100

20] CREDITORS TURNOVER RATIO:


Formula: Net credit purchase Credit turnover ratio = Average creditors

Months in a year Average age of accounts payable = Credit turnover ratio

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YEAR Net credit purchase Average creditors Credit turnover ratio Average age of accounts payable COMMENTS:

2001-2002 21,21,43 5,88,42 3.6 times 3.3 months

2002-2003 22,71,80 7,91,21 3.6 times 3.3 months

2003-2004 29,08,61 6,96,86 4 times 3 months

2004 -2005 25,29,04 7,80,39 3 times 4 months

The creditors turnover ratio shows the relationship between the credit purchase and average trade creditors. It shows the speed with which the payments are made to the suppliers for the purchase made from them. The credit turnover ratio of 4, indicate that the creditors are being turned over 4times during the year. It indicates the number of rounds taken by the credit cycle of payables during the year. There is no standard ratio in absolute term. The creditors ratio for the year 2001-2002 and 2002-2003 as good as the same, but it is increased by 3.6 to 4 in 2003-2004.this means the company has settled the creditors dues very fastly than the previous year. DEBTORS TURNOVER RATIO: Formula: Credit sales Debtors turnover ratio = Average debtors Days in a year Debt collection period = Debtors turnover YEAR Credit sales Average debtors Debtors turnover 2001-2002 47,77,48 18,49,35 2.5 times 2002-2003 55,21,33 19,05,76 2.8 times 2003-2004 74,87,36 19,51,56 3.8 times 2004 -2005 68,09,78 23,06,67 2.9 times

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ratio Debt collection period COMMENTS:

146 days

130 days

96 days

125 days

Debtors turnover ratio is alternative known as Accounts Receivable Turnover Ratio. This ratio measures the collectibility of debtors & other accounts receivable, it means the rate at which the trade debts are being collected. The Debtors turnover ratio of 2.5 indicates that the debtors are being turned over 2.5 times during the year. It means that the credit cycle of debtors makes 2.5 rounds during the year. It helps to workout the debt collection period i.e. 146 days [365/ 2.5 = 146]. This indicates that it take146 days on an average for the debtors to be settled. Debt collection period indicates the duration of the credit cycle of the debtors. The Debtors turnover ratio is almost same during the year 2001-2002 to 2004-2005, which indicates that the debts are being collected at a fast speed during the year. The operating cycle of the debtors is short. In other words the debts collection period is short which result into less chance of bad debts.

SUMMARY OF FINANCIAL POSITION OF APLAB LIMITED


After going through the various ratios, I would like to state that:

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The short-term solvency of the company is quite satisfactory. Immediate solvency position of the company is also quite satisfactory. The company can meet its urgent obligations immediately. Credit policies are effective. Over all profitability position of the company is quite satisfactory. Stock turnover rate is satisfactory. Stock of the company is moving fast in the market. The company is paying promptly to the suppliers. The return on capital employed is satisfactory.

The management should take care of inventory management and speed up the movement of stock. Effective selling technique or product modification may be adopted to face the competitors and to improve the financial position of the company by taking appropriate decisions.

CONCLUSION:

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The focus of financial analysis is on key figures contained in the financial statements and the significant relationship that exits. The reliability and significance attach to the ratios will largely on hinge upon the quality of data on which they are best. They are as good for as bad as the data it self. Financial ratios are a useful by product of financial statement and provide standardized measures of firms financial position, profitability and riskiness. It is an important and powerful tool in the hands of financial analyst. By calculating one or other ratio or group of ratios he can analyze the performance of a firm from the different point of view. The ratio analysis can help in understanding the liquidity and short-term solvency of the firm, particularly for the trade creditors and banks. Long-term solvency position as measured by different debt ratios can help a debt investor or financial institutions to evaluate the degree of financial risk. The operational efficiency of the firm in utilizing its assets to generate profits can be assessed on the basis of different turnover ratios. The profitability of the firm can be analyzed with the help of profitability ratios. However the ratio analyses suffer from different limitations also. The ratios need not be taken for granted and accepted at face values. These ratios are numerous and there are wide spread variations in the same measure. Ratios generally do the work of diagnosing a problem only and failed to provide the solution to the problem.

BIBLIOGRAPHY
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REFERENCE BOOKS FINANCIAL MANAGEMENT Theory, Concepts & problems R.P.RUSTAGI FINANCIAL MANAGEMENT Text and problems M.Y. KHAN AND P. K. JAIN MANAGEMENT ACCOUNTING AINAPURE FINANCIAL MANAGEMENT L.N. CHOPDE D.N. CHOUDHARI S.L. CHOPDE ANAUAL REPORTS OF APLAB LIMITED 2001-2002 2002-2003 2003-2004 2004-2005

WEBSIDES www.bizd.ac.uk/compfact/ratio www.cecunc.org.com/business/financial www.zeromillion.com.business/financial

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