A STUDY ON THE FINANCIAL PERFORMANCE OF

MITSUBISHI HEAVY INDUSTRIES – INDIAN PRESITION

TOOLS PVT. LTD IN CHENNAI

PROJECT REPORT

(A Report Submitted in Partial Fulfillment of the requirements for the degree of

Master of Business Administration in Anna University)

Submitted By

Ms : DHANASHREE.M
ENROLLMENT NO: 210121631007
MBA : FINANCE

PROJECT SUPERVISOR
S. AMALANATHAN
M.Com. M.Phil., M.B.A., D.C.F.A., P.G.D.C.A., B.G.L.,LL.B., (Hons.)
GUEST FACULTY

DIRECTORATE OF DISTANCE EDUCATION

PONDICHERRY UNIVERSITY
PONDICHERRY-605014
August 2021
 CERTIFICATE OF THE GUIDE

This is to certify that the project entitled “A Study on the Financial

performance of MITSUBISHI HEAVY INDUSTRIES – INDIAN

PRESITION TOOLS PVT. LTD IN CHENNAI” is a bonafide work

of MS.MONISHA.M (Enrollment No: 0219370093) carried out in

partial fulfillment for the award of degree of MBA in Finance of

PONDICHERRY UNIVERSITY under my guidance. This project work

is original and not submitted earlier for the award of any degree /

diploma or associateship of any other University/Institution.

Signature of the Guide

Place: Chennai
Date:
 STUDENT’S DECLARATION

I, MS. Dhanashree.M hereby declare that project work titled “A study

on the Financial Performance of MITSUBISHI HEAVY
INDUSTRIES – INDIAN PRESITION TOOLS PVT. LTD IN
CHENNAI” is the original work done by me and Submitted to the
Pondicherry University in partial Fulfillment of requirements for the
award of Master of Business Administration in FINANCE. This is a
record of original work done by me under the Supervision of S.
AMALANATHAN, M.Com. M.Phil., M.B.A.,
D.C.F.A.,P.G.D.C.A.,B.G.L.,LL.B., (Hons.) GUEST FACULTY.

Enroll No: 210121631007

Date:

Signature of the Student

(MS.DHANASHREE.M)
 ACKNOWLEDGEMENT

I am personally indebted to so many people that a complete

Acknowledgement would be encyclopedic.

I would like to express my sincere thanks to our Coordinator of Loyola

College and Pondicherry University – Twinning Programmer Chennai. It
has been generous in providing all necessary facilities in carrying out
this project.

I express my heartiest gratitude and sincere thanks to S.

AMALANATHAN Project Guide for the invaluable support and
guidance, suggestions, personal interest towards my project, which has
helped me in the successful completion and compilation of this project.

It is a wonderful opportunity to express my heartfelt and special thanks

to "A Study on the Financial performance of MITSUBISHI HEAVY
INDUSTRIES – INDIAN PRESITION TOOLS PVT. LTD IN
CHENNAI”.

I am greatly indebted to my family and friends for their non-stop support,

encouragement and inspiration for successful completion of this project.

DHANASHREE.M
 TABLE OF CONTENTS

CHAPTERS TITLE PAGE. NO.

LIST OF TABLES

LIST OF CHARTS

I Introduction

1.1 Research Background 01

1.2 Industry profile 05

1.3 Company profile 09

1.4 Need for the Study 11

1.5 Objectives of the study 12

1.6 Scope of the study 13

1.7 Limitation of the study 13

II Review of Literature 14

III Research Methodology 24

IV Data Analysis and Interpretation 28

V Findings of the study 55

VI Suggestion And Recommendation 57

VII CONCLUSION 59

VIII BIBLIOGRAPHY 61

IX APPENDICES 63
 LIST OF TABLES

TABLE NO TITLE PAGE NO

4.1 Current Ratio of the company 34

4.2 Liquid Ratio of the company 36

4.3 Capital Turnover Ratio of the company 38

4.4 Fixed Asset Turnover Ratio of the company 40

4.5 Return on Assets of the company 42

4.6 Gross Profit Ratio of the company 44

4.7 Net Profit Ratio of the company 46

4.8 Operating Profit Ratio of the company 48

4.9 Operating Ratio of the company 50

4.10 Debt Equity Ratio of the company 52

 LIST OF CHARTS
TABLE PAGE
TITLE
NO NO

4.1 Current Ratio of the company 35

4.2 Liquid Ratio of the company 37

4.3 Capital Turnover Ratio of the company 39

4.4 Fixed Asset Turnover Ratio of the company 41

4.5 Return on Assets of the company 43

4.6 Gross Profit Ratio of the company 45

4.7 Net Profit Ratio of the company 47

4.8 Operating Profit Ratio of the company 49

4.9 Operating Ratio of the company 51

4.10 Debt Equity Ratio of the company 53

 CHAPTER – I
INTRODUCTION
 INTRODUCTION
1.1 RESEARCH BACKGROUND

A subjective measure of how well a firm can use assets from its
primary mode of business and generate revenues. This term is also used
as a general measure of a firm's overall financial health over a given
period of time, and can be used to compare similar firms across the same
industry or to compare industries or sectors in aggregation.

FINANCIAL PERFORMANCE

The word ‘Performance is derived from the word ‘parfourmen’,

which means ‘to do’, ‘to carry out’ or ‘to render’. It refers the act of
performing; execution, Accomplishment, fulfillment, etc. In border
sense, performance refers to the accomplishment of a given task
measured against preset standards of accuracy, completeness, cost, and
speed. In other words, it refers to the degree to which an achievement is
being or has been accomplished. In the words of FrichKohlar “The
performance is a general term applied to a part or to all the conducts of
activities of an organization over a period of time often with reference to
past or projected cost efficiency, management responsibility or
accountability or the like. Thus, not just the presentation, but the quality
of results achieved refers to the performance. Performance is used to

1
indicate firm’s success, conditions, and compliance. Financial
performance refers to the act of performing financial activity. In broader
sense, financial performance refers to the degree to which financial
objectives being or has been accomplished. It is the process of
measuring the results of a firm's policies and operations in monetary
terms. It is used to measure firm's overall financial health over a given
period of time and can also be used to compare similar firms across the
same industry or to compare Industries or sectors in aggregation.

FINANCIAL PERFORMANCE ANALYSIS

In short, the firm itself as well as various interested groups such as

managers, Shareholders, creditors, tax authorities, and others seeks
answers to the Following important
Questions:
1. What is the financial position of the firm at a given point of time?
2. How is the Financial Performance of the firm over a given period
of time?
These questions can be answered with the help of financial
analysis of a firm. Financial analysis involves the use of financial
statements. A financial statement is an organized collection of data
according to logical and consistent accounting procedures. Its purpose is
to convey an understanding of some financial aspects of a business firm.

2
It may show a position at a moment of time as in the case of a Balance
Sheet, or may reveal a series of activities over a given period of time, as
in the case of an Income Statement. Thus, the term ‘financial statements’
generally refers to two basic statements: the Balance Sheet and the
Income Statement. The Balance Sheet shows the financial position
(condition) of the firm at a given point of time. It provides a snapshot
and may be regarded as a static picture.
“Balance sheet is a summary of a firm’s financial position on a given
date that shows
Total assets = Total liabilities + Owner’s equity.”
The income statement (referred to in India as the profit and loss
statement) reflects the performance of the firm over a period of time.
“Income statement is a summary of a firm’s revenues and expenses over
a specified period, ending with net income or loss for the period.”
However, financial statements do not reveal all the information related
to the financial operations of a firm, but they furnish some extremely
useful information, which highlights two important factors profitability
and financial soundness. Thus analysis of financial statements is an
important aid to financial performance analysis. Financial performance
analysis includes analysis and interpretation of financial statements in
such a way that it undertakes full diagnosis of the profitability and
financial soundness of the business. “The analysis of financial
statements is a process of evaluating the relationship between

3
component parts of financial statements to obtain a better understanding
of the firm’s position and performance.” The financial performance
analysis identifies the financial strengths and weaknesses of the firm by
properly establishing relationships between the items of the balance
sheet and profit and loss account. The first task is to select the
information relevant to the decision under consideration from the total
information contained in the financial statements. The second is to
arrange the information in a way to highlight significant relationships.
The final is interpretation and drawing of inferences and conclusions. In
short, “financial performance analysis is the process of selection,
relation, and evaluation.”

AREAS OF FINANCIAL PERFORMANCE ANALYSIS

Financial analysts often assess firm's production and productivity

performance, profitability performance, liquidity performance, working
capital performance, fixed assets performance, fund flow performance
and social performance. However in the present study financial health of
GSRTC is measured from the following perspectives:
1. Working capital Analysis
2. Financial structure Analysis
3. Activity Analysis
4. Profitability Analysis

4
 Ratio Analysis is an important tool for analyzing financial
statements. The financial executives need certain yardstick to evaluate
the financial position and performance of the business. Ratio analysis is
considered a significant yardstick in this direction. In this technique,
various types of ratios are calculated. With their help, comparisons of
firm’s financial position can be made with other firm’s financial position.
Before discussing different types of ratios, it is necessary to explain
meaning and importance of ratio analysis.

Analysis and interpretation of financial statements with the help of

‘ratios’ is termed as ‘ratio analysis’. Ratio analysis involves the process
of computing, determining and presenting the relationship of items or
groups of items of financial statements.
Ratio analysis was pioneered by Alexander Wall who presented a
system of ratio analysis in the year 1909. Alexander’s contention was
that interpretation of financial statements can be made easier by
establishing quantitative relationships between various items of financial
statements.

1.2 INDUSTRY PROFILE

Heavy Industry in India comprises of the heavy engineering

industry, machine tool industry, heavy electrical industry, industrial
machinery and auto-industry. These industries provide goods and
services for almost all sectors of the economy, including power, rail and

5
road transport. The machine building industry caters the requirements of
equipment for basic industries such as steel, non-ferrous metals,
fertilizers, refineries, petrochemicals, shipping, paper, cement, sugar, etc.

Performance of Industry:

Industrial sector registered a growth of 5.8per cent for the period April-
July 2011-12 as compared to 9.7per cent in the corresponding period of
2010-11.The growth in the manufacturing, mining and electricity sectors
during April-July, 2011-12 over the corresponding period of 2010-11
have been 1.1 per cent, 6.0 per cent and 9.4 per cent respectively, which
moved the overall growth in the General Index to 5.8 per cent

Capital goods sector has registered a growth of 7.6 per cent during
April-July 2011-12 as compared to the growth of 23.1 per cent during
corresponding period of 2010-11.Consumer goods, Basic goods and
intermediate goods recorded growth of 4.6 per cent, 7.9 per cent and
0.8per cent, respectively during April-July 2011-12 as compared to 10.0
per cent 5.2 per cent and 10.1 in same order.

The consumer durables sector recorded a growth of 4.2per cent in April-

July 2011-12 as compared to 18.4 per cent in the corresponding period
of the year 2010-11.The Consumer non-durables sector grew at 4.9 per
cent during 2011-12 as compared to 3.8 per cent in 2010-11.

6
Sub-Sectors of Heavy Industry

Heavy Industry deals with the following 19 Industrial Sub-sector:

(i) Boilers
(ii) Cement Machinery
(iii) Dairy Machinery
(iv) Electrical Furnace
(v) Freight Containers
(vi) Material Handling Equipment
(vii) Metallurgical Machinery
(viii) Mining Machinery
(ix) Machine Tools
(x) Oil Field Equipment
(xi) Printing Machinery
(xii) Pulp an Paper Machinery
(xiii) Rubber Machinery
(xiv) Switchgear and Control Gear
(xv) Shunting Locomotive
(xvi) Sugar Machinery
(xvii) Turbines & Generator Set
(xviii) Transformers
(xix) Textile Machinery

7
Heavy Electrical Industry is an important manufacturing sector, catering
to the need of energy sector & other industrial sectors. Major
equipments like boilers, turbo generators, turbines, transformers,
condensers, switch gears and relays and related accessories are
manufactured by Heavy Electrical Equipment manufacturers. The
performance of this Industry is closely linked to the power program of
the country. The Government of India has an ambitious mission of
‘Power for all by 2012’ and planned power capacity addition of 78,577
MW in the 11th five year plan (2007-12).

There is a strong manufacturing base for the manufacture of Heavy

Electrical equipments in the country. Manufacturers of Heavy Electrical
equipment have absorbed latest technology available in the world up to a
unit capacity of 660 MW and gearing up for adopting super-critical
technology for unit size of 800 MW and above for thermal sets.

Industry is augmenting its installed capacity to meet the ambitious 11th

Plan target and future growth of installation of nuclear reactors in the
country. Gas turbines up to 260 MW Unit capacity and Transmission
and Distribution equipment up to higher voltage class of 765 KV are
also being manufactured by Indian Industry.

8
1.3 COMPANY PROFILE

S.R.P Tools Limited was started in the year of 1965. It started first
factory at Chennai. S.R.P Tools Limited's second factory was started at
Ranipet in the year of 1974. It signed an agreement with Mitsubishi
Heavy Industries, Ltd-Japan for the technical collaboration to
manufacture gear cutting tools and broaches in the year of 1972. S.R.P
Tools Limited obtained ISO 9001-1987 certification in 1994 and India's
first unit to obtain ISO 9000 certification for Gear Cutting Tools and
Broaches. In 2005, S.R.P Tools Limited was acquired by Mitsubishi
Heavy Industries, Ltd-Japan. After acquiring SRP Tools Limited, MHI-
IPT expanded its plant capacity in 2007-08 by adding many CNC
machines and conventional machines, to make more than double its
production capacity to cater to the needs of its customers.

PRODUCT PROFILE:

Hobs:

1. Module, dp and cp series hobs are supplied by MHI-IPT.

2. Various forms of hobs such as non-topping, semi-topping, topping,

finishing, roughing, pre-shaving or pre-grinding, with or without
protuberance, tip relief, full fillet radius etc. , are manufactured.

3. Multi start hobs, multi gash hobs and dry cut hobs are also supplied.
9
4. Designing & production of spline hobs-both in volute and parallel
sided, sprocket hobs, worm wheel hobs, serration hobs, timing belt
pulley hobs and ratchet hobs are done at MHI-IPT. They are either
custom-made or to suit international standards.

5. Both bore type and shank type hobs are made.

Shaping Cutters:

1. Module, dp and cp series shaper cutters are supplied by MHI-IPT.

2. Various forms of shaper cutters such as non-topping, semi-topping,

topping, finishing, roughing, pre-shaving or pre-grinding, with or
without protuberance, etc., are manufactured

3. Both spur type and helical type gear shaping cutters are made.

Swaging Cutters:

These cutters are used to produce taper flanks in external spines or

internal spines. Most of the synchromesh gear boxes require taper spines
which are formed by this process.

Chamfering Cutters:

These cutters are used to produce chamfers along involute profile of

gears at end faces. Normally, it is used after gear cutting by hobbing or
shaping process. Cutters are supplied in pairs and to suit gear profile.

10
Rotary Cutter:

This cutter is used on Gleason machine model 104cutters are supplied in

pairs. At present, we supply cutters made out of high speed steels of
grade m2 (conventional) or asp 2023 (powder material).These cutters
have 9" diameter, 4.5" bore and 0. 5" thickness.

BROACHING:

Broaching is a machining process that uses a toothed tool, called a

broach, to remove material. There are two main types of broaching:
linear and rotary. In linear broaching, which is the more common
process, the broach is run linearly against a surface of the work piece to
effect the cut. Linear broaches are used in a broaching machine, which is
also sometimes shortened to broach. In rotary broaching, the broach is
rotated and pressed into the work piece to cut an axis symmetric shape.
A rotary broach is used in a lathe or screw machine. In both processes
the cut is performed in one pass of the broach, which makes it very
efficient.

1.4 NEED FOR THE STUDY

Ratio analysis guides the board and management to pursue

objectives that are in the interests of the company and shareholders and
facilitates effective monitoring there by promoting optimal user of
financial reserves more efficiently.

11
 The Study is also beneficial to employees and offers motivation by
sharing how they are contributing for the company growth. The
investors also benefited. It is also beneficial to top management by
providing relevant information regarding important aspects like liquidity,
leverage and profitability.

1.5 OBJECTIVE OF THE STUDY

The following are the objective of the study

• To Know the financial performance of the company.

• To know about the financial position and stability of the firm.
• To know about the operational efficiency and solvency of the firm.
• To examine the profitability of the company.
• To study the liquidity position to meet the short term liabilities.
• To Identify the problems faced by the company in financial
management.
• To recommend the solution to solve the problems in financial
management.

12
1.6 SCOPE OF THE STUDY

The present study is an analysis of financial statements of MHI-

PTL. The financial statements collected from the company are used to
calculate the ratios of profitability, liquidity, and leverage can make use
of these ratios for taking appropriate decision for effective running of the
company.

1.7 LIMITATIONS OF THE STUDY

The following are the limitations of the study

• Comparison not possible if different firms adopt different

accounting policies.

• Ratio analysis becomes less effective due to price level changes.

• Ratio may be misleading the absence of absolute data.

• Limited use of a single data.

• Lack of proper standards.

• False accounting gives false ratio.

13
 CHAPTER – II
REVIEW OF LITERATURE

14
 REVIEW OF LITERATURE

As part of study, reviews of early year studies have been carried out to
identify the research gap. The following are the important reviews.

Subramanian and Swami (1994) in their paper, Comparative

performance of public sector banks in India” Prjanan, Vol. XXII, have
analyzed and compared the efficiency in six public sector banks, four
private sector and three foreign banks for the year 1996-97. Operational
efficiency is calculated in terms of total business and salary expenditure
per employee. The analysis revealed that higher per employee salary
level need not result in poor efficiency and business per employee
efficiency co-efficient was also calculated. Among the PSBs, Bank of
Baroda registered the high efficiency and operating profit per employee.
Among the private sector banks Indus Bank followed by Citibank
Registered highest and second highest operating profit per employee
respectively. However, among the Nationalized Banks there existed
wide variations in efficiency. Frequent changes are order of the day for
the topics of this nature. Therefore, one should rely on latest information.
Some organizations like, RBI, IBA, SBI and ICRA have carried out
several research studies on various issues relating to banking and
exclusive banking journals/periodicals like Bank Quest, The Bankers,

15
RBI occasional papers, RBI bulletins and general magazines like
Business Today, Business India, Finance India, have been publishing
papers on various aspects like NPAs, capital adequacy, branch
expansion, credit dispensation, deposit mobilization, service quality,
technology, performance evaluation, etc. Same studies and papers
suitable to this study are being reviewed here.

In a paper published in the Financial Express in 2004, titled

“India’s Best Banks” has been doing for several years through its annual
exercise to evaluate and rate Indian banks. They claim that this survey is
a comprehensive one, which evaluates the performance of private, public,
Indian, and foreign Banks operating in India. With the objective of
making the comparison more meaningful, Banks were categorized into
Public Sector Banks, New Private Sector Banks and Foreign Banks.
Financial information for the year ending March 31st, 2002 and March
31, 2003 relating to each of the banks falling into the aforesaid
categories was collected from the data available from RBI. Five major
criteria were identified against which the banks were ranked. 'These
criteria are (1) Strength and soundness (ii) Growth, (iii) Profitability, (iv)
Efficiency/Productivity, and (v) Credit quality. Considering the current
banking, industrial and over-all economic scenario, pertinent weights
were assigned to each of the major criteria. In the first category of
"State-Run" 37or Public Sector Banks, State Bank of Patiala and Andhra
Bank is the top two.

16
 In the category of best old private sector banks, the magazine ranks
the Jammu and Kashmir Bank and KarurVysya Bank as the first best
and second best. In the category of 'New' Private Banks, HDFC as
number one and ICICI Bank at number two. Finally, in the category of
Foreign Banks, the magazine ranks Standard Chartered Bank and Citi
Bank at the top two slots.

Zacharias Thomas(1997)Ph D Thesis, ‘Performance effectiveness

of Nationalized Bank- A Case Study of Syndicate Bank’, submitted to
Kochin University (1997), Thesis studied the performance effectiveness
of Nationalized Bank by taking Syndicate Bank as case study in his
Ph.Dthesis.Thomas has examined various aspects like growth and
development of banking industry, achievements of Syndicate Bank in
relation to capital adequacy, quality of assets, Profitability, Social
Banking, Growth, Productivity, Customer Service and also made a
comparative analysis of 'the performance 34effectiveness of Syndicate
Bank in relation to Nationalized bank. A period of ten years from 1984
to 1993-94 is taken for the study. This study is undertaken to review and
analyze the performance effectiveness of Syndicate Bank and other
Nationalized banks in India using an Economic Managerial Efficiency
Evaluation Model (EMEE Model) developed by researcher. Thomas in
this study found that Syndicate Bank got 5th Position in Capital
adequacy and quality of assets, 15th in Profitability, 14th Position in
Social Banking, 8th in Growth, 7th in Productivity and 15th position in

17
Customer Service among the nationalized banks. Further, he found that
five nationalized banks showed low health performance, seven low
priority performance and eleven low efficiency performance in
comparison with Syndicate Bank.

Das, Abhiman (1999), Profitability in public sector banks – A

Decomposition model, have tried to make all attempt to compare the
interbank performance of public sector banks during the reforms:, period.
This 41study was carried out for a period of three years, i.e. 1992, 1995
and 1998. Das in his paper found a certain convergence-taking place in
the performance of the public sector banks during the years of study. He
further found that there is growing emphasis on other income and a
peculiar tendency to go for risk-free rather than risky loans.

PrashantaAthma (2000), in his Ph D research submitted at

Usmania University Hyderabad, “Performance of Public Sector Banks –
A Case Study of State Bank of Hyderabad, made an attempt to evaluate
the performance of Public Sector Commercial Banks with special
emphasis on State Bank of Hyderabad. The period of the study for
evaluation of performance is from 1980 to 1993-94, a little more than a
decade. In this study, Athma outlined the Growth and Progress of
Commercial Banking in India and. analyzed the trends in deposits,
various components of profits of SBH, examined the trends in Asset

18
structure, evaluated the level of customer satisfaction and compared the
performance of SBH with other PSBs, Associate Banks of SBI and SBI.

Statistical techniques like Ratios, Percentages, Compound Annual rate

of growth and averages are computed for the purpose of meaningful
comparison and analysis. The major findings of this study are that since
nationalization, the progress of banking in India has been very
impressive. All three types of Deposits have continuously grown during
the study period, though the rate of growth was highest in fixed deposits.
A comparison of SBH performance in respect of resource mobilization
with other banks showed that the average growth of deposits of SBH is
higher than any other bank group. Profits of SBH showed an increasing
trend indicating a more than proportionate increase in spread than in
burden. Finally, majority of the customers have given a very positive
opinion about the various statements relating to counter service offered
by SBH.

Wahab (2001) has analyzed the performance of the commercial

banks under reforms. He also highlighted the major issues need to be
considered for further improvement. He concluded that reforms have
produced favorable 42effects on performance of commercial banks in
general but still there are some distortions like low priority sector
advances, low profitability etc. that needs to be reformed again.

19
 Das and UdaykumarLal (2002), in his book Banking Reforms in
Lead Bank Scheme, (Deep and Deep Publication, new Delhi) was the
critical evaluation of the lead bank scheme in 35the light of banking
sector reforms. Das in this book observed that high level of NPAs, large
number of un-remunerative branches, low productivity, overstaff and
archaic methods of operations have affected the profitability of public
sector banks. Das sincerely felt that the whole banking sector in India is
to be revolutionized to cope with the changing dimensions of the
satellite one world. Further, he felt that the backward areas should be
given more funds for investment in priority sectors and more and more
people should be brought under its coverage and the procedures of
extending credit should be simplified and there should be least hassle
cost.

Singh R (2003), in his paper Profitability management in banks

under deregulate environment, IBA bulletin, No25, has analyzed
profitability management of banks under the deregulated environment
with some financial parameters of the major four bank groups i.e. public
sector banks, old private sector banks, new private sector banks and
foreign banks, profitability has declined in the deregulated environment.
He emphasized to make the banking sector competitive in the
deregulated environment. They should prefer noninterest income sources.

20
 Ram Mohan TT(2003) , in his paper ‘Long run performance of
public and private sector bank stocks” Vol 37, has made an attempt to
compare the three categories of banks-Public, Private and Foreign-using
Physical quantities of inputs and outputs, and comparing the revenue
maximization efficiency of banks during 1992-2000. The findings show
that PSBs performed significantly better than private sector banks but
not differently from foreign banks. The conclusion points to a
convergence in performance between public and private sector banks in
the post-reform era, using financial measures of performance.

Singh (2003) analyzed profitability management of banks underthe

deregulated environment with some financial parameters of the major
four bank groups i.e. public sector banks, old private sector banks, new
private sector banks and foreign banks, profitability has declined in the
deregulated environment. He emphasized to make the banking sector
competitive in the deregulated environment. They should prefer non-
interest income sources.

Sheeba Kapil’s (2007) paper is to review and analyze the current

financial health of the Indian Public Sector Commercial Banks in the
light of banking reforms and predict the future and scope of the same.
The viability of the 27 public sector banks has been analyzed on the
basis of offsite supervisory exam model i.e., CAMEL Model (C for
capital adequacy, A for Asset quality, E for Earnings and L for
Liquidity). These four components of each bank have been analyzed and
21
rated on a scale to judge the composite rating of the same. The paper
finds that the off-site supervisory exam model

(CAMEL) has' rated majority of PSBs as non-viable and they require

immediate attention and government support. After 19 years of
economic and banking reforms, the Indian Banking Sector has still miles
to go. Low Profitability, Liquidity, Capital adequacy and high none'-
performing assets will definitely make the majority of Indian PSBs a bad
bargain in near future.

Singla (2008) examines that how financial management plays a

crucial role industrialists growth of banking. It is concerned with
examining the profitability position of the selected sixteen banks of
banker index for a period of six years (2001-06). The study reveals that
the profitability position was reasonable during the period of study when
compared with the previous years. Strong capital position and balance
sheet place. Banks are in better position to deal with and absorb the
economic constant over a period of time.

Monika Singhania’s (2010) study is primary objective is to isolate

the company characteristics that determine capital structure, in the
context of Indian companies. The sample consists of 963 companies that
are listed on BSE for the period 2004-08. There is a positive correlation
between the size of the company and the debt ratio while the
significance of the dummy variable suggest a significant difference of

22
capital structure between companies with more than 50% debt level than
those with less than that. These findings are consistent with the
theoretical framework propounded over the years.

CHAPTER – III
RESEARCH
METHODOLOGY

23
 RESEARCH METHODOLOGY

Business research as an organized, systematic, data based, critical,

objective, scientific inquiry or investigation into a specific problem,
undertaken with the purpose of finding answers or solutions to it. In
essence, research provides the needed information that guides managers
to make informed decisions to successfully deal with problems. The
information provided could be the result of a careful analysis of data
gathered firsthand or of data that are already available (in the company,
industry, archives, etc,). Data can be quantitative (as generally gathered
through structured questions) or qualitative.

SOURCES OF DATA

Primary sources of data

Apart from the individuals who provide information when

interviewed, administered questionnaires, or observed discussed at
length under Data Collection Methods in this chapter other rich sources
of primary data is focus groups.

24
Primary data is the firsthand information that is collected during the
period of research. Primary data has been collected through discussions
held with the staffs to the accounts department. Some types of
information were gathered through oral conversations with the cashier,
taxation officer etc.

Secondary source of data

Secondary data studies whole company records and company’s

balance sheet in which the project work has been done. In addition, a
number of reference books, journals and reports were also used to
formulate the theoretical model for the study. And some information was
also drawn from the websites.

THE PERIOD OF STUDY

In the study secondary data have been used analyzed financial

performance of MHI-PTL. For this purpose the financial stamen for the
period five years that is 2007-2012 are collected and use in the analysis.

Tools used for the study:

⮚ Ratio analysis.

Other tools used:

● Bar chart.

25
● Tables.

CHAPTER – IV
DATA ANALYSIS AND
INTERPRETATION

26
 ✔ LIQUIDITY RATIO:

This ratio shows the ability of the business to pay the amount due to
stakeholders as and when it is due is known as liquidity. They are
essentially short term in nature.

● Current Ratio

● Liquid Ratio

Current Ratio:
The current ratio measures the ability of the firm to meet its current
liabilities. The current assets get converted into cash into the operational
cycle of the firm and provide the fund needed to pay current liabilities.
Current Ratio = Current Assets / Current Liabilities

Liquid Ratio:
The liquid ratio is also termed as ‘test ratio’ or ‘quick ratio’. Liquid ratio
is ascertained by using the liquid assets to current liabilities. Liquid ratio
is much more exact measure than the Current Ratio. By excluding
inventories, it concentrates on the really liquid assets, with value that is
fairly certain.
Liquid Ratio = Liquid Assets / Current Liabilities

27
 ✔ ACTIVITY RATIO:

Activity ratio indicates the performance of the business. The

performance of a business is judged with its sales (turnover) or cost of
goods sold. These ratios are thus referred to as Turnover ratio.

● Capital Turnover Ratio

● Fixed Assets Turnover Ratio

Capital Turnover Ratio:

The ratio shows the number of times the capital has been rotated in
the process of carrying on business. Efficient utilization of capital would
lead to higher profitability. The relationship between Sales and Capital
employed is Capital Turnover Ratio. The ratio indicates how much a
company could grow its current capital investment level. A high ratio
indicates that the company is using its capital well, while a low ratio
indicates the opposite. It is also called equity turnover.

Capital Turnover Ratio = Sales / Capital Employed

Fixed Assets Turnover Ratio:

28
 This shows how best the fixed assets are being utilized in the
business concern. Generally speaking, the higher the ratio, the better,
because a high ratio indicates the business has less money tied up in
fixed assets for each unit of currency of sales revenue. A declining ratio
may indicate that the business is over-invested in plant, equipment, or
other fixed assets.

Fixed Assets Turnover Ratio = Sales / Fixed Assets

PROFITABILITY RATIO:

A class of financial metrics that are used to assess a business's ability to

generate earnings as compared to its expenses and other relevant costs
incurred during a specific period of time. For most of these ratios,
having a higher value relative to a competitor's ratio or the same ratio
from a previous period is indicative that the company is doing well.

● Return On Assets Ratio

● Gross Profit Ratio

● Net Profit Ratio

● Operating Profit Ratio

● Operating Ratio

Return On Assets:
29
 This ratio measures the operating efficacy of the company without
regards to financial structure. This number tells you what the company
can do with what it has, i.e. how many rupees of earnings they derive
from each rupee of assets they control. It's a useful number for
comparing competing companies in the same industry. The number will
vary widely across different industries. Return on assets gives an
indication of the capital intensity of the company, which will depend on
the industry; companies that require large initial investments will
generally have lower return on assets.

Return On Assets = Earnings Before Interest and Taxes / Net Assets

Gross Profit Ratio:

Gross profit ratio may be indicated to what extent the selling prices
of goods per unit may be reduced without incurring losses on operations.
It reflects efficiency with which a firm produces its products. As the
gross profit is found by deducting cost of goods sold from net sales,
higher the gross profit better it is. There is no standard GP ratio for
evaluation. It may vary from business to business. However, the gross
profit earned should be sufficient to recover all operating expenses and
to build up reserves after paying all fixed interest charges and dividends.

Gross Profit Ratio = Gross Profit / Sales

Net Profit Ratio:

30
 NP ratio is used to measure the overall profitability and hence it is
very useful to proprietors. The ratio is very useful as if the net profit is
not sufficient, the firm shall not be able to achieve a satisfactory return
on its investment.

This ratio also indicates the firm's capacity to face adverse

economic conditions such as price competition, low demand, etc.
Obviously, higher the ratio the better is the profitability. But while
interpreting the ratio it should be kept in mind that the performance of
profits also be seen in relation to investments or capital of the firm and
not only in relation to sales.

Net Profit Ratio = Net Profit / Sales

Operating Profit Ratio:

This ratio helps in determining the ability of the management in
running the business.
Operating Profit Ratio = Operating Profit / Sales x 100

Operating Ratio;

The ratio determines the operating efficiency of the business concern.

Operating ratio measures the amount of expenditure incurred in
production, sales and distribution of output.

Operating Ratio = 100 – Operating Profit Ratio

31
SOLVENCY RATIO:

One of many ratios used to measure a company's ability to meet long-

term obligations. The solvency ratio measures the size of a company's
after-tax income, excluding non-cash depreciation expenses, as
compared to the firm's total debt obligations. It provides a measurement
of how likely a company will be to continue meeting its debt obligations.

● Debt Equity Ratio

Debt Equity Ratio

This ratio helps to ascertain the soundness of the long term

financial position of the concern. It indicates the proportion between
total long term debt and shareholder’s funds. This also indicates the
extent to which the firm depends upon outsiders for its existence.

Debt equity ratio = Total Long Term Debt / Shareholders Funds

32
 DATA ANALYSIS AND INTERPRETATIONS
CURRENT CURRENT
YEAR RATIOS
ASSET LIABILITY

2007-2008 40,28,56,380 8,74,57,364 4.60

2008-2009 51,05,72,970 30,93,15,873 1.65

2009-2010 52,68,74,683 20,13,63,531 2.61

2010-2011 53,47,12,657 12,49,70,267 4.27

SOURCE: Secondary Data

INFERENCE:

The above table shows the firms ability to meet its current
oblications which seems highly sound in the year 2007-08 to 4.6. In the
year 2008-09 it came down highly to 1.65. In the next two financial year
it has increased its current ratio to 2.6 and 4.27 respectively. But inthe
financial year 2011-12 it again came down to 3.61. It shows that the
current ratio keeps fluctuating every year. The idle standard for current
ratio is 2:1. The company is having more than the satisfactory position.
Therefore the company should reduce its current assets to avoid idle
funds.

33
Fig 4.1 Showing Current Ratio of the company

34
LIQUID RATIO

LIQUID CURRENT
YEAR RATIOS
ASSETS LIABILITY
2007-
31,76,79,783 8,74,57,364 3.63
2008
2008-
42,69,01,111 30,93,15,873 1.38
2009
2009-
46,01,54,377 20,13,63,531 2.28
2010
2010-
44,56,04,119 12,49,70,267 3.56
2011
2011-
60,95,76,897 19,25,39,751 3.16
2012

Table 4.2 Showing Liquid Ratio of the company (Rupees)

SOURCE: Secondary Data

INFERENCE:

The above table shows the liquid position of the company. The
firm’s ability to meet its short term liquidity is in a better position but
when it is compared to previous year 2010-11 the ratio came down

35
slightly i.e. 3.16. The idle standard is 1:1. In every financial year it has
more than the idle standard. Therefore the company’s has the ability to
repay its commitments.

Fig 4.2 Showing Liquid Ratio of the company

36
CAPITAL TURNOVER RATIO:

CAPITAL
YEAR NET SALES RATIOS
EMPLOYED

2007-2008 36,02,62,859 83,35,35,977 0.432

2008-2009 39,01,23,836 89,23,73,827 0.437

2009-2010 33,64,42,214 85,81,50,008 0.392

2010-2011 34,96,57,387 85,86,13,787 0.407

2011-2012 53,03,51,730 90,76,72,425 0.584

Table 4.3 Showing Capital Turnover Ratio of the company

(Rupees)

SOURCE: Secondary Data

INFERENCE:

The table shows the capital turnover ratio of the accounting period
from 2007-08 to 2011-12. In the financial year 2007-08 and 2008-09 the
ratio was 0.432 and 0.437 in next financial year 2009-10 it reduced to
0.392. This means that ineffective utilization of capital. In the financial

37
year 2011-12 the ratio was 0.584 high than in any other financial year. It
indicates that the net sales of the company are less than the capital
employed. The usage of capital is low. So the company should raise its
sales out of capital.

Fig 4.3 Showing Capital Turnover Ratio of the company

38
FIXED ASSETS TURNOVER RATIO:

YEAR SALES FIXED ASSETS RATIOS

2007-2008 36,02,62,859 18,25,18,399 1.974

2008-2009 39,01,23,836 57,64,98,279 0.677

2009-2010 33,64,42,214 54,14,17,076 0.621

2010-2011 34,96,57,387 44,87,46,737 0.779

2011-2012 53,03,51,730 40,55,38,113 1.308

Table 4.4 Showing Fixed Asset Turnover Ratio of the company

(Rupees)

SOURCE: Secondary Data

INFERENCE:

The table shows the fixed assets turnover ratio of the company. In
the year 2007-08 the fixed asset ratio was 1.97 times. In the next two
financial years it was decreasing like 0.67 and 0.62 respectively. Again
it was gradually increasing in next two financial years 0.77 and 1.3
correspondingly. It is indicating that the company has not utilized its
fixed assets efficiently in the financial years 2008-11.

39
Fig 4.4 Showing Fixed Asset Turnover Ratio of the company

40
RETURN ON ASSETS:

YEAR EBIT NET ASSETS RATIOS

2007-2008 10,33,32,632 31,53,99,016 0.328

2008-2009 7,42,59,972 20,12,57,097 0.370

2009-2010 87,08,766 32,55,11,152 0.027

2010-2011 4,49,72,337 40,97,42,390 0.110

2011-2012 14,64,64,691 50,44,47,747 0.290

Table 4.5 Showing Return on Assets of the company (Rupees)

SOURCE: Secondary Data

INFERENCE:

The above table shows that return on asset of the company. The
company’s return on assets was 0.37 in the year 2008-09. But in the year
2011-12 it has been reduced to 0.29. When we compare with previous
year i.e. 2009-10 and 2010-11 it has been increased. The higher the
return indicates that more efficient management is in utilizing the asset

41
base. Here the company has nearly 30 percent of return on assets. This is
likely positive in the company.

Fig 4.5 Showing Return on Assets of the company

42
GROSS PROFIT RATIO:

GROSS
YEAR NET SALES PERCENTAGE
PROFIT

2007-2008 22,39,05,033 36,02,62,859 62.15

2008-2009 24,54,56,035 39,01,23,836 62.91

2009-2010 20,21,20,137 33,64,42,214 60.07

2010-2011 21,29,25,234 34,96,57,387 60.89

2011-2012 33,04,65,500 53,03,51,730 62.31

Table 4.6 Showing Gross Profit Ratio of the company

(Rupees)

SOURCE: Secondary Data

INFERENCE:

The above table shows that gross profit margin of the company
during the financial year 2007-08 to 2011-12. It reveals that the gross
profit ratio keeps fluctuating year by year. In the year of 2007-08 the
gross profit ratio was 62.15 percent and again in next financial year
2008-09 it raised to 62.91 percent. In next financial years it came down
to 60.07 percent. In next financial years it again stared increasing like

43
60.89, and 62.31 percent respectively. There is no much fluctuation in
the ratio. It indicates the company’s gross profit was reasonably better in
position.

Fig 4.6 Showing Gross Profit Ratio of the company

44
NET PROFIT RATIO:

Table 4.7 Showing Net Profit Ratio of the company (Rupees)

YEAR NET PROFIT NET SALES RATIO

2007-2008 7,31,93,832 36,02,62,859 20.3

2008-2009 4,22,60,672 39,01,23,836 10.8

2009-2010 89,80,766 33,64,42,214 2.6

2010-2011 2,70,56,244 34,96,57,387 7.7

2011-2012 10,01,79,116 53,03,51,730 18.8

SOURCE: Secondary Data

INFERENCE:

The above table shows the overall efficiency of the business of the
financial year 2007-08 to 2011-12. In the financial year 2007-08 the net
profit ratio was at peak by 20.3 percent. In the year 2008-09it showing
diminishing profit margin. In the year 2011-12 the company has high
profit margin i.e. 18.8. It was more than the double when compared
previous financial years. The company has good profit margin but it
should have control over the fluctuation in the profit margin.

45
Fig 4.7 Showing Net Profit Ratio of the company

46
OPERATING PROFIT RATIO:
OPERATING
YEAR SALES RATIOS
PROFIT

2007-2008 31,95,81,253 36,02,62,859 88.7

2008-2009 36,66,91,359 39,01,23,836 94

2009-2010 31,48,45,823 33,64,42,214 93.5

2010-2011 33,36,69,996 34,96,57,387 95.4

2011-2012 51,21,05,327 53,03,51,730 96.5

Table 4.8 Showing Operating Profit Ratio of the company

(Rupees)

SOURCE: Secondary Data.

INFERENCE:

The table shows the operating profit ratio of the company. In the
year 2007-08 the ratio was around 89%. In the financial year 2008-09 it
raised to 94%. By the year of 2009-10 the ratio came down slightly to
93.5. I.e. by0.5% less. In the year of 2010-11 it again raised to 95.4%
and in the year 2011-12 the ratio was 96.5%. It indicates that the

47
company has good cost control and the sales are increased faster than the
cost. Which is the optimal situation for the company.

Fig 4.8 Showing Operating Profit Ratio of the company

48
OPERATING RATIO:

OPERATING
YEAR PERCENTAGE RATIOS
PROFIT RATIO

2007-2008 100 88.7 11.3

2008-2009 100 94 6

2009-2010 100 93.5 6.5

2010-2011 100 95.4 4.6

2011-2012 100 96.5 3.5

Table 4.9 Showing Operating Ratio of the company

(Percentage)

SOURCE: Secondary Data.

INFERENCE:

The above table shows the operating ratio of the company. In the
year 2007-08 the ratio was 11.3% in the next financial year 2008-09 it
reduced by half i.e. 6%. In the year 2009-10 it slightly increased to 6.5%
and in next financial years it has been further reduced like 4.6 and 3.5
respectively. There is a decline in operating ratio, which indicates that
the company has greater ability to generate profit when revenue
decreases.

49
Fig 4.9 Showing Operating Ratio of the company

50
DEBT EQUITY RATIO:

YEAR DEBT EQUITY RATIOS

2007-2008 6,41,99,020 76,93,36,957 0.083

2008-2009 8,70,00,231 80,53,73,596 0.108

2009-2010 5,02,46,985 80,79,03,023 0.062

2010-2011 2,34,83,500 82,51,30,287 0.028

2011-2012 2,34,83,500 90,76,72,425 0.026

Table 4.10 Showing Debt Equity Ratio of the company

(Rupees)

SOURCE: Secondary Data

INFERENCE:
The above table shows the debt equity ratio of the company. In the
year 2007-08 the ratio was 0.08. In the next financial year 2008-09 it
raised to 0.10. But in next consecutive financial year it was declining i.e.
0.06, 0.028, and 0.026 respectively. The lower the ratio indicates the
lower the risk. Therefore the company has much encouraging debt
equity ratio, means that the company has less risk.

51
Fig 4.10 Showing Debt Equity Ratio of the company

52
 Chapter – v
Findings of the study

53
 FINDINGS OF THE STUDY
The following are summary of findings

⮚ The company is having current ratio, which is more than the idle
standard i.e. more than 2:1.

⮚ The liquid ratio of the company is also more than the 1:1 idle
standard.

⮚ The company’s net sale is less than the capital employed. This is
giving the less capital turnover for the company.

⮚ The company has low percentage in fixed assets turnover.

⮚ The company has increased its return on assets and it is high. It

means that the efficient management is in utilizing the asset base.

⮚ The gross profit of the company is standard, and it means that the
trading activities are better in position.

⮚ The company has good profit margin. But the profit margin is
getting fluctuated rapidly in every financial year.

⮚ The operating profit ratio of the company showing that, it has good
cost control and sales are increased faster than the cost.

⮚ There is a decline in operating ratio, which is favorable meaning

that the greater ability to generate profit by reducing the revenue.

54
 ⮚ The debt equity ratio is indicating that the company has less risk on
debts.

CHAPTER – VI
Suggestion & Recommendation

55
 SUGGESTIONS AND RECOMMENDATION

The following are the important suggestions

⮚ The company has more current assets, so it has to reduce its

current assets by making investments. It should reduce its current
assets to reduce the current ratio to the idle fund.

⮚ The liquid ratio of the company is also in the same condition as

like current ratio. So it has to reduce its sundry debtors and other
current assets to reduce the liquid ratio to the idle standard.

⮚ Sales must be increased and capital should be used to increase the

capital turnover ratio of the company.

⮚ The fixed assets should be utilized effectively to make changes in

fixed assets turnover ratio.

⮚ The fluctuation in return on assets must be controlled.

⮚ Higher fluctuation in the net profit ratio is not safe for company.
So it must be restricted.

56
CHAPTER – VII
CONCLUSIONS

57
 CONCLUSIONS

The study is made on the financial performance with five years data in
Mitsubishi Heavy Industries Indian Precision Tools Pvt. Ltd. The
liquidity of the company is more than the standard. The profitability of
the company is good. The activity or turnover position of the company is
also satisfactory. The performance judged with the sales is also in the
sound position. The firm’s ability to meet its long term debts is also in
good position.

It is concluded that the financial performance of the company is proved

that it is financially sound.

58
CHAPTER –VIII
BIBILIOGRAPHY

59
 BIBLOGRAPHY

REFERENCE BOOK
M Y Khan & P K Jain, Management Accounting – 2010 Fifth Edition,
Tata McGraw Hill Education pvt ltd.

I M Pandey, Financial Management – 2010 Tenth Edition, Vikas

Publishing House.

T.S. Reddy, Y. Hari Prasad Reddy, Management accounting 2006 Third

Edition, Margham Publications.

R.K. Sharma, Shashi k Gupta, Management Accounting and Business

Finance, 2008 Sixteenth Edition. S Chand Publications.

WEBSITES

www.investopedia.com

www.businessdictionary.com

www.mhi-ipt.in

http://en.wikipedia.o

60
CHAPTER - IX
APPENDICES

61
MITSUBISHI HEAVY INDUSTRY- INDIAN PRECITION TOOLS PVT.
LTD.

Balance Sheet as on 31st March 2012

Liabilities Amount Assets Amount Amount

Share holders Fixed Assets
funds Gross Block 1,01,65,18,083
Capital 6,97,00,000 Less: Depreciation 61,09,79,970
Reserves & 40,55,38,113
Surplus 83,79,72,425 Current Assets,
90,76,72,425 Loans and
Defered Tax Advances
Liability (Net) 28,66,035 Inventories 8,74,10,601
Sundry debtors 1,30,64,20,83
Cash & Bank
balance 31,19,37,426
Interest receivable 50,63,748
Loans & advances 16,19,33,640
69,69,87,498
Less: Current
Liabilities &
Provisions 19,25,39,751
Net current assets 50,44,47,747
Miscellaneous
_________ Expenditure 5,52,600
91,05,38,460 91,05,38,460

62
MITSUBISHI HEAVY INDUSTRY- INDIAN PRECITION TOOLS PVT.
LTD.

Balance Sheet as on 31st March 2011

Liabilities Amount Assets Amount Amount

Share holders Fixed Assets

funds Gross Block 98,06,17,107
Capital 6,97,00,000 Less: Depreciation 53,18,70,370
Reserves & 44,87,46,737
Surplus 75,54,30,287 Current Assets,
82,51,30,287 Loans and Advances
Loan funds: Inventories
Unsecured 2,34,83,500 Sundry debtors 8,91,08,538
Defered Tax Cash & Bank 10,31,62,951
Liability (Net) 1,22,30,460 balance
Interest receivable 23,10,22,122
Loans & advances 37,80,016
10,66,39,030
Less: Current 53,47,12,657
Liabilities &
Provisions
Net current assets 12,49,70,267
Miscellaneous 40,97,42,390
Expenditure
__________ 23,55,120
86,08,44,247 86,08,44,247

63
 MITSUBISHI HEAVY INDUSTRY- INDIAN PRECITION TOOLS PVT.
LTD.

Balance Sheet as on 31st March 2010

Liabilities Amount Assets Amount Amount

Share holders Fixed Assets
funds Gross Block 97,85,56,664
Capital 6,97,00,000 Less: Depreciation 43,71,39,588
Reserves & 54,14,17,076
Surplus 73,82,03,023 Capital WIP 90,95,623
80,79,03,023 Current Assets,
Loan funds: Loans and
Unsecured 5,02,46,985 Advances
Defered Tax Inventories 6,67,20,306
Liability (Net) 2,24,11,283 Sundry debtors 5,69,68,855
Cash & Bank
balance 30,04,73,103
Interest receivable 53,60,702
Loans & advances 9,73,51,717
52,68,74,683
Less: Current
Liabilities &
Provisions 20,13,63,531
Net current assets 32,55,11,152
Miscellaneous
__________ Expenditure 45,37,440
88,05,61,291 88,05,61,291

64
 MITSUBISHI HEAVY INDUSTRY- INDIAN PRECITION TOOLS PVT.
LTD.

Balance Sheet as on 31st March 2009

Liabilities Amount Assets Amount Amount

Share holders Fixed Assets
funds Gross Block 93,74,16,244
Capital 6,97,00,000 Less: Depreciation 36,09,17,965
Reserves & 57,64,98,279
Surplus 73,56,73,596 Capital WIP 1,11,45,740
80,53,73,596 Investment 12,76,16,234
Loan funds: Current Assets,
Unsecured 8,70,00,231 Loans and
Defered Tax Advances
Liability (Net) 3,08,63,283 Inventories 8,36,71,859
Sundry debtors 10,88,96,219
Cash & Bank
balance 17,89,62,392
Interest receivable 59,97,893
Loans & advances 13,30,44,607
51,05,72,970
Less: Current
Liabilities &
Provisions 30,93,15,873
Net current assets 20,12,57,097
Miscellaneous
__________ Expenditure 67,19,760
92,32,37,110 92,32,37,110

65