A STUDY ON

RATIO ANALYSIS AT
AMARARAJA BATTERIES LIMITED (ARBL)
                                            
A PROJECT REPORT
 
 Submitted in partial fulfillment of the
requirement for the award of the degree of
 
MASTER OF BUSINESS ADMINISTRATION
 
                                                   Under the Guidance of
   S.SUJATHA M.B.A., M.Phil
ASSISTANT PROFESSOR OF MANAGEMENT STUDIES
SRM UNIVERSITY 
                                                              
By
SUNEEL.R
(Reg.No.35080623)

 
DEPARTMENT OF BUSINESS ADMINISTRATION
SRM UNIVERSITY
YEAR-2010

 
 
SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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 SRM Nagar, Kattankulathur-603203
Phone: 044-27452270, 27417777, Fax: 044-27453903
E-hod@mba.srmuniv.ac.in, website:www.srmuniv.ac.in
________________________________________________________________________

BONAFIDE CERTIFICATE

Certified that this project report titled “A STUDY ON RATIO ANALYSIS AT

AMARARAJA BATTERIES LIMITED” is the bonafide work of Mr.R.SUNEEL who carried
out the research under my supervision.

Certified further, that to the best of my knowledge the work reported here in does not form
part of any other Project report or dissertation on the basis of which a degree or award was
conferred on an earlier occasion on this or any other candidate.

Signature of the supervisor Signature of the HOD

 
 
 
 
 
 
 
 
                                                   DECLARATION 
 
                 

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   I hereby declare that the Project Report entitled “A STUDY ON RATIO

ANALYSIS AT AMARARAJA BATTERIES LIMITED(ARBL)” is a record of independent

research work submitted by me to SRM University, Chennai, for developing the real time

experience as well as award the degree of Master of Business Administration and has been carried

out during the period of my study at SRM UNIVERSITY, Chennai, Under the guidance of

S.SUJATHA, Department of MBA.

PLACE: Chennai (R.SUNEEL)

 
 
 
 
                                        ACKNOWLEDGEMENT 
 
I would like to express deepest gratitude and thanks to the Dr.JAYASREE SURESH, Head of

the Department for her valuable support in doing this project. She has been a source of

encouragement and guidance in all our endeavors.

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 I would like to sincerely acknowledge thanks to Sri C.Ramachandra raju, Finance

Manager of Amararaja Batteries limited, Mr.C.Ravi Costing Manager of Amararaja Batteries

Limited for their moral support during the research work.

I express our profound thanks to S.SUJATHA project guide, for her consistent

encouragement and invaluable suggestion in completing this project, without his effort the

completion of this project would be practically impossible.

It gives me great pleasure to acknowledge my indebtedness to my family Members for

their substantial moral support and encouragement in my studies.

I would like to extend my sincere thanks to My Dearest Friends and also my classmates

for their unnerving support in the completion of the work.

(R. SUNEEL)
 

 
 
                                        TABLE OF CONTENTS 
 
Chapters  Title and Topics  Page No 

1  INTRODUCTION
• Introduction  
1‐2 
 
  
2  OBJECTIVES & METHODOLOGY   
• Need of study  4 

• Scope of study  5 

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 • Objectives of study  6 

• Review of Literature  7‐19 

• Research Methodology 
20 

• Limitations of study 
21 

3  COMPANY PROFILE
22‐29 
               
4  DATA ANALYSIS AND INTERPRETATION 30‐60 

5  FINDINGS & SUGGESTIONS  

• Findings   62 

• Suggestions  63 

• Conclusion 
64 
 
 
 
6  • Annexure  65‐71 
• BIBLOGRAPHY  72 

 
 
                                              LIST OF TABLES 

SI .NO PARTCULARS PAGE.NO

1 CURRENT RATIO 31

2 QUICK RATIO 33

3 CASH RATIO 35

4 NETWORKING CAPITAL RATIO 36

5 DEBT RATIO 37

6 DEBT EQUITY RATIO 39

7 INTEREST COVERAGE RATIO 41

8 TOTAL LIABILITIES RATIO 42

9 INVENTORY TURNOVER RATIO 43

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 10 DEBTORS TURNOVER RATIO 45

11 FIXED ASSET TURNOVER RATIO 46

12 CURRENT ASSET TURNOVER RATIO 48

13 TOTAL ASSET TURNOVER RATIO 49

14 WORKING CAPITAL TURNOVER RATIO 50

15 NET ASSET TURNOVER RATIO 51

16 CAPITAL TURNOVER RATIO 52

17 CREDITOR TURNOVER RATIO 53

18 GROSS PROFIT 54

19 NET PROFIT 56

20 OPERITING EXPENCES RATIO 57

21 RETURN ON INVESTMENT 59

22 RETURN ON EQUITY SHARE HOLDER FUND 60

 
 
 
 
                                                LIST OF CHARTS 

SI .NO PARTCULARS PAGE.NO

1 CURRENT RATIO 32

2 QUICK RATIO 34

3 CASH RATIO 35

4 NETWORKING CAPITAL RATIO 36

5 DEBT RATIO 38

6 DEBT EQUITY RATIO 40

7 INTEREST COVERAGE RATIO 41

8 TOTAL LIABILITIES RATIO 42

9 INVENTORY TURNOVER RATIO 44

10 DEBTORS TURNOVER RATIO 45

11 FIXED ASSET TURNOVER RATIO 47

12 CURRENT ASSET TURNOVER RATIO 48

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 13 TOTAL ASSET TURNOVER RATIO 49

14 WORKING CAPITAL TURNOVER RATIO 50

15 NET ASSET TURNOVER RATIO 51

16 CAPITAL TURNOVER RATIO 52

17 CREDITOR TURNOVER RATIO 53

18 GROSS PROFIT 55

19 NET PROFIT 56

20 OPERITING EXPENCES RATIO 58

21 RETURN ON INVESTMENT 59

22 RETURN ON EQUITY SHARE HOLDER FUND 60

 
 

                    
 

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• INTRODUCTION
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                  INTRODUCTION 
ABOUT RATIO ANALYSIS 
  The ratio analysis is the most powerful tool of financial analysis. Several ratios calculated
from the accounting data can be grouped into various classes according to financial activity or
function to be evaluated.
• DEFINITION: 
                  “The indicate quotient of two mathematical expressions “and as “The relationship
between two or more things. “It evaluates the financial position and performance of the firm.
As started in the beginning many diverse groups of people are interested in analyzing
financial information to indicate the operating and financial efficiency and growth of firm. These
people use ratios to determine those financial characteristics of firm in which they interested with
the help of ratios one can determine.

• The ability of the firm to meet its current obligations.

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 • The extent to which the firm has used its long-term solvency by borrowing funds.

• The efficiency with which the firm is utilizing its assets in generating the sales revenue.

• The overall operating efficiency and performance of firm.

     The information contained in these statements is used by management, creditors,

investors and others to form judgment about the operating performance and financial
position of firm. Uses of financial statement can get further insight about financial strength
and weakness of the firm if they properly analyze information reported in these statements.
Management should be particularly interested in knowing financial strength of the firm to
make their best use and to be able to spot out financial weaknesses of the firm to take
suitable corrective actions. The further plans firm should be laid down in new of the firm’s
financial strength and weaknesses. Thus financial analysis is the starting point for making
plans before using any sophisticated forecasting and planning procedures. Understanding the
past is a prerequisite for anticipating the future.

 
 
 
 
 
 
 
 
 
 

• Need of study
   

  • Scope of study Page   

• Objectives
 NEED OF THE STUDY

The prevalent educational system providing the placement training at an industry being a
part of the curriculum has helped in comparison of theoretical knowledge with practical system. It
has led to note the convergences and divergence between theory and practice.

The study enables us to have access to various facts of the organization. It helps in
understanding the needs for the importance and advantage of materials in the organization, the
study also helps to exposure our minds to the integrated materials management the various
procedures, methods and technique adopted by the organization. The study provides knowledge
about how the theoretical aspects are put in the organization in terms of described below

X To pay wages and salaries.

X For the purchase of raw materials, spares and components parts.

X To incur day-to-day expenses.

X To meet selling costs such as packing, advertising.

X To provide credit facilities to customers.

X To maintain inventories and raw materials, work-in-progress and finished stock.

 
 
 
 
 
 
 
 
 
 
 
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                                                    Scope of the study 
 

The scope of the study is limited to collecting financial data published in the annual
reports of the company every year. The analysis is done to suggest the possible solutions. The
study is carried out for 4 years (2006– 10).

    Using the ratio analysis, firms past, present and future performance can be analyzed and
this study has been divided as short term analysis and long term analysis. The firm should
generate enough profits not only to meet the expectations of owner, but also to expansion
activities. 

 
 
 
 
   

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                                      OBJECTIVE’S OF STUDY 
 

1. To study and analyze the financial position of the Company through ratio analysis.

2. To suggest measures for improving the financial performance of organization.

3. To analyze the profitability position of the company.

4. To assess the return on investment.

5. To analyze the asset turnover ratio.

6. To determine the solvency position of company.

7. To suggest measures for effective and efficient usage of inventory.

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 REVIEW OF LITERATURE 
 
FINANCIAL ANALYSIS 

Financial analysis is the process of identifying the financial strengths and weakness of the firm.
It is done by establishing relationships between the items of financial statements viz., balance
sheet and profit and loss account. Financial analysis can be undertaken by management of the firm,
viz., owners, creditors, investors and others.
Objectives of the financial analysis 
 
Analysis of financial statements may be made for a particular purpose in view.

1. To find out the financial stability and soundness of the business enterprise.
2. To assess and evaluate the earning capacity of the business
3. To estimate and evaluate the fixed assets, stock etc., of the concern.
4. To estimate and determine the possibilities of future growth of business.
5. To assess and evaluate the firm’s capacity and ability to repay short and long term loans
Parties interested in financial analysis 
The users of financial analysis can be divided into two broad groups.

Internal users 

1. Financial executives
2. Top management
External users 

1. Investors
2. Creditor.
3. Workers
4. Customers
5. Government
6. Public
7. Researchers
 
 

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Significance of financial analysis 

Financial analysis serves the following purpose:

To know the operational efficiency of the business: 

The financial analysis enables the management to find out the overall efficiency of the firm. This will
enable the management to locate the weak Spots of the business and take necessary remedial action.
Helpful in measuring the solvency of the firm: 

The financial analysis helps the decision makers in taking appropriate decisions for strengthening the
short-term as well as long-term solvency of the firm.
 
Comparison of past and present results: 

Financial statements of the previous years can be compared and the trend regarding various
expenses, purchases, sales, gross profit and net profit can be ascertained.
 
 
Helps in measuring the profitability: 

Financial statements show the gross profit, & net profit.

Inter‐firm comparison: 

The financial analysis makes it easy to make inter-firm comparison. This comparison can also be made for
various time periods.
 
Bankruptcy and Failure: 

Financial statement analysis is significant tool in predicting the bankruptcy and the failure of the business
enterprise. Financial statement analysis accomplishes this through the evaluation of the solvency position.
 
Helps in forecasting: 
 
The financial analysis will help in assessing future development by making forecasts and preparing
budgets.

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METHODS OF ANALYSIS: 

A financial analyst can adopt the following tools for analysis of the financial statements. These are

also termed as methods of financial analysis.

A. Comparative statement analysis

B. Common-size statement analysis

C. Trend analysis

D. Funds flow analysis

E. Ratio analysis

NATURE OF RATIO ANALYSIS 

Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as "the indicated quotient
of mathematical expression" and as "the relationship between two or more things". A ratio is used as
benchmark for evaluating the financial position and performance of the firm. The relationship between
two accounting figures, expressed mathematically, is known as a financial ratio. Ratio helps to
summarizes large quantities of financial data and to make qualitative judgment about the firm's financial
performance.

The persons interested in the analysis of financial statements can be grouped under three head
owners (or) investors who are desired primarily a basis for estimating earning capacity. Creditors who are
concerned primarily with Liquidity and ability to pay interest and redeem loan within a specified period.
Management is interested in evolving analytical tools that will measure costs, efficiency, liquidity and
profitability with a view to make intelligent decisions.

STANDARDS OF COMPARISON 
The ratio analysis involves comparison for an useful interpretation of the financial statements. A
single ratio in itself does not indicate favorable or unfavorable condition. It should be compared with
some standard. Standards of comparison are:
1. Past Ratios
2. Competitor's Ratios
3. Industry Ratios
4. Projected Ratios

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Past Ratios: Ratios calculated from the past financial statements of the same firm.
Competitor's Ratios:  Ratios of some selected firms, especially the most progressive and successful
competitor at the same point in time.  
Industry Ratios: Ratios of the industry to which the firm belongs.  
Projected Ratios: Ratios developed using the projected financial statements of the same firm.  
 

TIME SERIES ANALYSIS 
The easiest way to evaluate the performance of a firm is to compare its present ratios with past
ratios. When financial ratios over a period of time are compared, it is known as the time series analysis or
trend analysis. It gives an indication of the direction of change and reflects whether the firm's financial
performance has improved, deteriorated or remind constant over time.
CROSS SECTIONAL ANALYSIS 
Another way to comparison is to compare ratios of one firm with some selected firms in the
industry at the same point in time. This kind of comparison is known as the cross-sectional analysis. It is
more useful to compare the firm's ratios with ratios of a few carefully selected competitors, who have
similar operations.

INDUSTRY ANALYSIS 
To determine the financial conditions and performance of a firm. Its ratio may be compared with
average ratios of the industry of which the firm is a member. This type of analysis is known as industry
analysis and also it helps to ascertain the financial standing and capability of the firm & other firms in the
industry. Industry ratios are important standards in view of the fact that each industry has its
characteristics which influence the financial and operating relationships.

 
TYPES OF RATIOS 
Management is interested in evaluating every aspect of firm's performance. In view of the requirement of
the various users of ratios, we may classify them into following four important categories:
1. Liquidity Ratio
2. Leverage Ratio
3. Activity Ratio
4. Profitability Ratio
 
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3.1 Liquidity Ratio 
It is essential for a firm to be able to meet its obligations as they become due. Liquidity Ratios
help in establishing a relationship between cast and other current assets to current obligations to provide a
quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity and also that
it does not have excess liquidity. A very high degree of liquidity is also bad, idle assets earn nothing. The
firm's funds will be unnecessarily tied up in current assets. Therefore it is necessary to strike a proper
balance between high liquidity. Liquidity ratios can be divided into three types:
3.1.1 Current Ratio
3.1.2 Quick Ratio
3.1.3 Cash Ratio
3.1.1 Current Ratio 
Current ratio is an acceptable measure of firm’s short-term solvency Current assets includes cash
within a year, such as marketable securities, debtors and inventors. Prepaid expenses are also included in
current assets as they represent the payments that will not made by the firm in future. All obligations
maturing within a year are included in current liabilities. These include creditors, bills payable, accrued
expenses, short-term bank loan, income-tax liability in the current year.
The current ratio is a measure of the firm's short term solvency. It indicated the availability of
current assets in rupees for every one rupee of current liability. A current ratio of 2:1 is considered
satisfactory. The higher the current ratio, the greater the margin of safety; the larger the amount of current
assets in relation to current liabilities, the more the firm's ability to meet its obligations. It is a cured -and
-quick measure of the firm's liquidity.
Current ratio is calculated by dividing current assets and current liabilities.
 
Current Assets
  Current Ratio = ________________
Current Liabilities
 
 
3.1.2 Quick Ratio 
Quick Ratio establishes a relationship between quick or liquid assets and current liabilities. An
asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value.
Cash is the most liquid asset, other assets that are considered to be relatively liquid asset and included in
quick assets are debtors and bills receivables and marketable securities (temporary quoted investments).

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 Inventories are converted to be liquid. Inventories normally require some time for realizing into
cash; their value also has a tendency to fluctuate. The quick ratio is found out by dividing quick assets by
current liabilities.

Current assets - Inventories

  Quick Ratio = _________________________
Current Liabilities
 
 
Generally, a quick ratio of 1:1 is considered to represent a satisfactory current financial condition.
Quick ratio is a more penetrating test of liquidity than the current ratio, yet it should be used cautiously. A
company with a high value of quick ratio can suffer from the shortage of funds if it has slow- paying,
doubtful and long duration outstanding debtors. A low quick ratio may really be prospering and paying its
current obligation in time.

3.1.3 Cash Ratio 
Cash is the most liquid asset; a financial analyst may examine Cash Ratio and its equivalent
current liabilities. Cash and Bank balances and short-term marketable securities are the most liquid assets
of a firm, financial analyst stays look at cash ratio. Trade investment is marketable securities of equivalent
of cash. If the company carries a small amount of cash, there is nothing to be worried about the lack of
cash if the company has reserves borrowing power. Cash Ratio is perhaps the most stringent Measure of
liquidity. Indeed, one can argue that it is overly stringent. Lack of immediate cash may not matter if the
firm stretch its payments or borrow money at short notice.

  Cash and bank balances + Current Investment

  Cash Ratio= --------------------------------------------------------------------
Current Liabilities
 
3.2 LEVERAGE RATIOS  

Financial leverage refers to the use of debt finance while debt capital is a cheaper source of
finance: it is also a riskier source of finance. It helps in assessing the risk arising from the use of debt
capital. Two types of ratios are commonly used to analyze financial leverage.

1. Structural Ratios &

2. Coverage ratios.

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 Structural Ratios are based on the proportions of debt and equity in the financial structure of firm.
Coverage Ratios shows the relationship between Debt Servicing, Commitments and the sources
for meeting these burdens.
The short-term creditors like bankers and suppliers of raw material are more concerned with the
firm's current debt-paying ability. On the other hand, long-term creditors like debenture holders, financial
institutions are more concerned with the firm's long-term financial strength. To judge the long-term
financial position of firm, financial leverage ratios are calculated. These ratios indicated mix of funds
provided by owners and lenders.
There should be an appropriate mix of Debt and owner's equity in financing the firm's assets. The
process of magnifying the shareholder's return through the use of Debt is called "financial leverage" or
"financial gearing" or "trading on equity". Leverage Ratios are calculated to measure the financial risk
and the firm's ability of using Debt to share holder's advantage.

Leverage Ratios can be divided into five types.

3.2.1 Debt equity ratio.

3.2.2 Debt ratio.

3.2.3 Interest coverage ratio

3.2.4 Proprietary ratio.

3.2.5 Capital gearing ratio

3.2.1 Debt equity ratio 
It indicates the relationship describing the lenders contribution for each rupee of the owner's
contribution is called debt-equity ratio. Debt equity ratio is directly computed by dividing total debt by
net worth. Lower the debt-equity ratio, higher the degree of protection. A debt-equity ratio of 2:1 is
considered ideal. The debt consists of all short term as well as long-term and equity consists of net worth
plus preference capital plus Deferred Tax Liability.
 
 
Long term Debts
  Debt Equity Ratio = ----------------------
Share holder funds (Equities)
 

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3.2.2 Debt ratio 
Several debt ratios may used to analyze the long-term solvency of a firm. The firm may be
interested in knowing the proportion of the interest-bearing debt in the capital structure. It may, therefore,
compute debt ratio by dividing total total debt by capital employed on net assets. Total debt will include
short and long-term borrowings from financial institutions, debentures/bonds, deferred payment
arrangements for buying equipments, bank borrowings, public deposits and any other interest-bearing
loan. Capital employed will include total debt net worth.
 
Debt
  Debt Ratio = ----------
Equity
 
3.2.3 Interest Coverage Ratio 
The interest coverage ratio or the time interest earned is used to test the firms’ debt servicing
capacity. The interest coverage ratio is computed by dividing earnings before interest and taxes by interest
charges. The interest coverage ratio shows the number of times the interest charges are covered by funds
that are ordinarily available for their payment. We can calculate the interest average ratio as earnings
before depreciation, interest and taxes divided by interest.
 
EBIT
 
Interest Coverage ratio = ---------------
  Interest

 
3.2.4 Proprietary ratio 
The total shareholder's fund is compared with the total tangible assets of the company. This ratio
indicates the general financial strength of concern. It is a test of the soundness of financial structure of the
concern. The ratio is of great significance to creditors since it enables them to find out the proportion of
share holders funds in the total investment of business.
  
 
Net worth
 
Proprietary Ratio = -------------------------------------- x 100
Total tangible assets
 
 
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3.2.5 Capital gearing ratio: 
This ratio makes an analysis of capital structure of firm. The ratio shows relationship between
equity share capital and the fixed cost bearing i.e., preference share capital and debentures.

  Equity capital
Capital gearing ratio = -----------------------------------------------
  P.S capital +Debentures +Loans

3.3 ACTIVITY RATIOS 

Turnover ratios also referred to as activity ratios or asset management ratios, measure how
efficiently the assets are employed by a firm. These ratios are based on the relationship between the level
of activity, represented by sales or cost of goods sold and levels of various assets. The improvement
turnover ratios are inventory turnover, average collection period, receivable turn over, fixed assets
turnover and total assets turnover.

Activity ratios are employed to evaluate the efficiency with which the firm manages and utilize its assets.
These ratios are also called turnover ratios because they indicate the speed with which assets are being
converted or turned over into sales. Activity ratios thus involve a relationship between sales and assets. A
proper balance between sales and assets generally reflects that asset utilization.
Activity ratios are divided into four types: 
3.3.1 Total capital turnover ratio
3.3.2 Working capital turnover ratio
3.3.3 Fixed assets turnover ratio
3.3.4 Stock turnover ratio
3.3.1 Total capital turnover ratio: This ratio expresses relationship between the amounts invested
in this assets and the resulting in terms of sales. This is calculated by dividing the net sales by total sales.
The higher ratio means better utilization and vice-versa. 
Some analysts like to compute the total assets turnover in addition to or instead of net assets
turnover. This ratio shows the firm's ability in generating sales from all financial resources committed to
total assets.
  Sales
Total assets turnover = ----------------------------
  Capital employed.

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3.3.2  Working  capital  turnover  ratio:  This ratio measures the relationship between working
capital and sales. The ratio shows the number of times the working capital results in sales. Working
capital as usual is the excess of current assets over current liabilities. The following formula is used to
measure the ratio: 
Sales
  Working capital turnover ratio = -------------------------------
  Working capital
 
3.3.3 Fixed asset turnover ratio:  The firm may which to know its efficiency of utilizing fixed
assets and current assets separately. The use of depreciated value of fixed assets in computing the fixed
assets turnover may render comparison of firm's performance over period or with other firms.
The ratio is supposed to measure the efficiency with which fixed assets employed a high ratio
indicates a high degree of efficiency in asset utilization and a low ratio reflects inefficient use of assets.
However, in interpreting this ratio, one caution should be borne in mind, when the fixed assets of firm are
old and substantially depreciated, the fixed assets turnover ratio tends to be high because the denominator
of ratio is very low
Net sales
 
Fixed asset turnover ratio = -------------------------
  Fixed assets

3.3.4 Stock turnover ratio 

Stock turnover ratio indicates the efficiency of firm in producing and selling its product. It is
calculated by dividing the cost of goods sold by the average stock. It measures how fast the inventory is
moving through the firm and generating sales.
The stock turnover ratio reflects the efficiency of inventory management. The higher the ratio,
the more efficient the management of inventories and vice versa .However, this may not always be true.
A high inventory turnover may be caused by a low level of inventory which may result if frequent stock
outs and loss of sales and customer goodwill.
 
  Cost of goods sold
  Stock turnover ratio = ------------------------------
  Average stock
 
 
 
Opening stock + Closing stock
 
Average stock = --------------------------------------------
  2
 
 

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3.4 PROFITABILITY RATIOS 

A company should earn profits to survive and grow over a long period of time. Profits are
essential but it would be wrong to assume that every action initiated by management of a company should
be aimed at maximizing profits. Profit is the difference between revenues and expenses over a period of
time.
Profit is the ultimate 'output' of a company and it will have no future if it fails to make sufficient
profits. The financial manager should continuously evaluate the efficiency of company in terms of profits.
The profitability ratios are calculated to measure the operating efficiency of company. Creditors want to
get interest and repayment of principal regularly. Owners want to get a required rate of return on their
investment.
Generally, two major types of profitability ratios are calculated:
• Profitability in relation to sales
• Profitability in relation to investment
 

Profitability Ratios can be divided into six types: 

3.4.1 Gross profit ratio

3.4.2 Operating profit ratio
3.4.3 Net profit ratio
3.4.4 Return on investment
3.4.5 Earns per share
3.4.6 Operating expenses ratio
3.4.1 Gross profit ratio   

First profitability ratio in relation to sales is the gross profit margin the gross profit margin
reflects.
The efficiency with which management produces each unit of product. This ratio indicates the
average spread between the cost of goods sold and the sales revenue. A high gross profit margin is a sign
of good management. A gross margin ratio may increase due to any of following factors: higher sales
prices cost of goods sold remaining constant, lower cost of goods sold, sales prices remaining constant. A
low gross profit margin may reflect higher cost of goods sold due to firm's inability to purchase raw
materials at favorable terms, inefficient utilization of plant and machinery resulting in higher cost of
production or due to fall in prices in market.

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 This ratio shows the margin left after meeting manufacturing costs. It measures the efficiency of
production as well as pricing. To analyze the factors underlying the variation in gross profit margin, the
proportion of various elements of cost (Labor, materials and manufacturing overheads) to sale may
studied in detail.
   Gross profit
  Gross profit ratio = ------------------------x 100
  Net sales

 
3.4.2 Operating profit ratio 
            This ratio expresses the relationship between operating profit and sales. It is worked out by
dividing operating profit by net sales. With the help of this ratio, one can judge the managerial efficiency
which may not be reflected in the net profit ratio. 
 
Operating profit
  Operating profit ratio = ---------------------------x 100
Net sales

 
3.4.3 Net profit ratio       
Net profit is obtained when operating expenses, interest and taxes are subtracted from the gross
profit. Net profit margin ratio established a relationship between net profit and sales and indicates
management's efficiency in manufacturing, administering and selling products. 
This ratio also indicates the firm's capacity to withstand adverse economic conditions. A firm with
a high net margin ratio would be in an advantageous position to survive in the face of falling selling
prices, rising costs of production or declining demand for product
This ratio shows the earning left for share holders as a percentage of net sales. It measures
overall efficiency of production, administration, selling, financing. Pricing and tax management. Jointly
considered, the gross and net profit margin ratios provide a valuable understanding of the cost and profit
structure of the firm and enable the analyst to identify the sources of business efficiency / inefficiency.

 
Net Profit
Net Profit Ratio = --------------------------- x 100
  Net sales

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3.4.4 Return on investment:  This is one of the most important profitability ratios. It indicates the
relation of net profit with capital employed in business. Net profit for calculating return of investment
will mean the net profit before interest, tax, and dividend. Capital employed means long term funds. 
 
E.B.I.T
 
Return on investment = ---------------------------------------- x 100
  Capital employed

3.4.5 Earnings per share 

This ratio is computed by earning available to equity share holders by the total amount of equity
share outstanding. It reveals the amount of period earnings after taxes which occur to each equity share.
This ratio is an important index because it indicates whether the wealth of each share holder on a per
share basis as changed over the period.
 
 
Net profit
 
Earnings per share = ------------------------------------ x 100
 
Number of equity shares
 
 
3.4.6 Operating expenses ratio 

It explains the changes in the profit margin ratio. A higher operating expenses ratio is unfavorable
since it will leave a small amount of operating income to meet interest, dividends. Operating expenses
ratio is a yardstick of operating efficiency, but it should be used cautiously. It is affected by a number of
factors such as external uncontrollable factors, internal factors. This ratio is computed by dividing
operating expenses by sales. Operating expenses equal cost of goods sold plus selling expenses and
general administrative expenses by sales.
 
 
Operating expenses  
Operating expenses ratio = ----------------------------- x 100
Sales

  Page   
                                                 Research Methodology 

Research Design 
In view of the objects of the study listed above an exploratory research design has been
adopted. Exploratory research is one which is largely interprets and already available information
and it lays particular emphasis on analysis and interpretation of the existing and available
information.
• To know the financial status of the company.
• To know the credit worthiness of the company.
• To offer suggestions based on research finding.

Data Collection Methods 

Primary Data  
Information collected from internal guide and finance manager. Primary data is first hand
information.

Secondary Data 
Company balance sheet and profit and loss account. secondary data is second hand
information.
Data Collection Tools 
To analyze the data acquire from the secondary sources “Ratio Analysis”The scope of the
study is defined below in terms of concepts adopted and period under focus.
First the study of Ratio Analysis is confined only to the Amarraja Batteries Limited.
Secondly the study is based on the annual reports of the company for a period of 4 years
from 2006-07 to 2009-10 the reason for restricting the study to this period is due time constraint.

LIMITATIONS 

  Page   
 • The study was limited to only four years Financial Data.

• The study is purely based on secondary data which were taken primarily from
Published annual reports of Amararaja batteries Ltd.,

• There is no set industry standard for comparison and hence the inference is made
on general standards.

• The ratio is calculated from past financial statements and these are not indicators of
future.

• The study is based on only on the past records.

• Non availability of required data to analysis the performance.

• The short span of the time provided also one of limitations.

   

  Page   
 

• Company profile

  Page   
                          COMPANY PROFILE 

Amara Raja Batteries (ARBL) incorporated under the companies Act, 1956 in 13th
February 1985, and converted into public Limited Company on 6th September 1990.
The chairman and Managing Director of the company is “Sri Gala Ramachandra Naidu”,
ARBL is a first company in India, which manufactures Values regulated Lead Acid (VRLA)
Batteries. The main objectives of the company are a manufacturing of good quality of “Sealed
Maintenance Free” (SMF) acid batteries. The company is setting up to Rs.1, 920 lakhs plant is in
185 acres in Karakambadi village, Renigunta Mandal. The project site is notified under “B”
category.
The company has the clear-cut policy of direct selling without any intermediate. So they
have set up six branches and are operated by corporate operations office located in Chennai. The
company has virtual monopoly in higher A.H.(Amp Hour) rating Market its product VRLA . It is
also having the facility for industrial and automotive batteries.
Amara Raja is 5 ‘S ’Company and its aim are to improve the work place environment by
using 5‘S techniques which is A systematic and rational approach to workplace organization and
methodical house keeping with a sense of purpose, consisting of the following five elements

CULTURE AND ENVIRONMENT

¬ Amara Raja is putting a number of HRD initiatives to foster a spirit of togetherness and a
culture of meritocracy. Involving employees at all levels in building organizational
support plans and in evolving our vision for the organization.

¬ ARBL encourages initiative and growth of young talent allows the organization to develop
innovation solution and ideas.

¬ Benchmark pollution control measures, energy conversation measures, waste reduction

schemes, massive green belt development programs, employee health monitoring and
industrial safety programs have helped ARBL to take further environment management
program.

¬ Amara Raja has now targeted to secure the ISO 14001 certification.

  Page   
QUALITY POLICY

ARBL’s main aim is to achieve customer satisfaction through the collective

commitment of employees in design; manufacture and marketing of reliable power systems,
batteries, allied products and services.

To accomplish above, ARBL focus on

¬ Establishing superior specifications for our products and processes.

¬ Employing state-of-the-art technologies and robust design principles.
¬ Striving for continuous improvements in process and product quality.
¬ Implementing methods and techniques to monitor quality levels.
¬ Providing prompt after sales service.

RESEARCH & DEVELOPMENT

Specific areas in which the company carries out R&D are;
¬ New product development.
¬ Process technology up gradation.
¬ Application engineering for new market place.
¬ Quality improvement.
Benefits derived as a result of above R&D,
¬ Developed 4v/200 AH batteries.
¬ Design optimization of higher AH batteries for DOT application.
¬ Design optimization of batteries 92v/1285 AH for TL/AC-Railway application.
¬ Formation cycle optimization results in reduced duration and rejection.
¬ Chemist curing cycle optimization.
¬ Manufacture of automobile battery for four-wheeler vehicles.

  Page   
FUTURE PLAN OF ACTION

¬ Commercialization of motorcycle batteries.

¬ Development of new range high integrity VRLA cell design.

¬ Establishment of product for new application segment.

¬ Studies on paste additives to enhance the battery performance.

¬ In-depth evaluation of metal surface treatment chemical to reduce the process cycle time.

¬ Validating alternative grades of propylene to conserve energy and to improve productivity.

MILE STONES
YEAR Mile stone
1997 100 crores turnover
1997 ISO-9001 Accreditation
1999 S-9000 Accreditation
2002 SO-14001 Certification

AWARDS

¬ “The spirit of Excellence”- Awarded by academy of fine arts, Tirupati.

¬ “Best Entrepreneur of the year 1998”-awarded by Hyderabad Management

Association.

¬ “Industrial Economist Business Excellence Award – 1991”- Awarded by the industrial

Economist, Chennai.

¬ “Excellence Award”-by institution of economic studies (ES), New Delhi.

¬ “Udyog Rattan Award”- by institution of economic studies, New Delhi.

¬ “QI CERTIFICATE” –2002 - By FORD Company

  Page   
 AMARA RAJA GROUP OF COMPANIES
¬ AMARA RAJA POWER SYSTEMS PRIVATE Ltd. (ARPSL), Karakambadi,
Tirupati.
¬ MANGAL PRECISION PRODUCTS PRIVATE Ltd1. (MPPL1), Karakambadi,
Tirupati.
¬ MANGAL PRECISION PRODUCTS PRIVATE Ltd2. (MPPL2), Petamitta, Chittoor.
¬ AMARA RAJA ELECTRONICS PRIVATE LIMITED (AREPL), Dighavamgham,
Chittoor.
¬ GALLA FOODS PRIVATE LIMITED (GFPL), Puthalapattu Mandal, Chittoor.
This ratio is calculated by dividing sales in to current assets. This ratio expressed the
number of times current assets are being turn over in stated period. This ratio shows how well
the current assets are being used in business. The higher ratio is showing that better utilization
of the current assets another a low ratio indicated that current assets are not being efficiently
utilized.
INDUSTRIAL BATTERY DIVISION (IBD)
Amara Raja has become the benchmark in the manufacturer of industrial batteries. India is
one of the largest and fastest growth markets for industrial batteries in the world. Amara Raja is
leading in the front, with an 80% market share is stand by VRAL batteries point of view. It is also
having the facility for production plastic components.
ARBL id the first company in India to manufacture VRLA (SMF) Batteries. The initial
investment of the company has Rs.1920 lakhs; the total land is around 18 acres in Karambadi
village, Renigunta Mandal. The project site is notified under ‘B’ category.
Capacity
The capacity per the year 2005-2006 of IBD is 3, 70,000 cells per annum.
Products
Amara Raja being the first entrant in this industry and has the privilege of pioneering VRLA
technology in India.
Amara Raja has established itself as a reliable supplier of high quality products to major
segments like Telecom, Railways and power.

2. PLATE PREPARATION
Using lead oxide production in earlier stage positive and negative paste is prepared with
addition of sulphuric acid and water. These pastes are applied to respective grids using industrial
fasting machines.
  Page   
3. CALL ASSEMBLY
Here positive and negative grids are separated by a sheet of fibreglass mat bush bars are
welded and as assembled into a jar or container to form battery cells. Then these cells are
assembled according to the customer’s specification into battery sets or systems.
4. FORMATION
In this process cells are filled with the electrolyte (surphuric acid) and then the set is
charged and discharged repeatedly, after final charging the battery comes out ready to be used.
Competitors
The Major competitors for Amara Raja Batteries are “Exude industries Ltd, and GNB”.
AUTOMOTIVE BATTERY DIVISION (ABD)
ARBL has inaugurated its new automotive plant at Karakambadi in Tirupati on September
24th, 2001. This plan is a part of the most completely integrated battery manufacturing facility in
India with all critical components, including plastics sourced in-house from existing facilities on
site. In this project, Amara Raja’s strategic alliance partners Johnson Control Inc., of USA have
closely worked technology and plant engineering. It is also having the facility for producing
plastic components required for automotive batteries.
Capacity
With an existing production capacity of 5 lakhs units of automotive batteries, the new
Greenfield plant will now be able to produce 1 million batteries per annum. This is the first phase
in the enhancement of Amara Raja’s production capacity, for this the company has invested Rs.45
crores and the next phase, at an additional cost of Rs.25 crores, for this the production capacity
will be increase to 2 million units and the company has estimated to complete around 3 years,
after that ARBL will become the single largest battery of manufacturer in Asia. The fiscal year
2005-2006’s capacity Of ABD is 2.2 million numbers of batteries per year.

Products
The products of ABD are
Ü Amaron Hi-way
Ü Amaron Harvest
Ü Amaron shield
Ü Amaron Highlife
The plastic products of ABD are”jars” and “jar covers”.

  Page   
Customers
ARBL has prestigious OEM (Original Equipment Manufacture) clients like FORD,
GENERAL MOTORS, DAEWOO MOTORS, MERCEDES BENZ, DAIMLER CHRYSLER,
MARUTI UDYOG LTD., premier Auto Ltd., and recent acquired a preference supplier alliance
with ASHOK LEYLAND, HINDUSTAN MOTORS, TELCO, MAHINDRA & MAHINDRA and
SWARAJ MAZDA.
COMPETITORS
¬ EXIDE

¬ PRESTOLITE

¬ AMCO.

MAJOR USERS

1. RAILWAYS
Train lighting air conditioning, diesel engine starting, signaling systems, control
systems, emergency breaking systems, and telecommunications.
2. TELECOMMUNICATION
Central office power plants, microwave repeaters station, RAX in public building,
emergency lighting system at airports, fire alarm system etc.,
3. POWER SYSTEMS
Switch gear control systems, powerhouse control systems, rural street lighting etc.
4. UPS SYSTEM
Back up power to computers in progress control systems in industry etc.
5. TRACTION
Forklift trucks, earth moving machinery, mining locomotives and road vehicles etc.

6. PETROCHEMICALS
Off—share and no—shore oil exploration lighting systems, security systems etc.
7. DEFENCE
Defence communication, aircraft and helicopter ground starting, stationary and mobile
diesel engine starting etc.

  Page   
 PRODUCTION PROCESS
The process for the production of lead acid batteries consists essentially of five operations
described below
1. GRID CASTING
In the process grids to hold the active materials are made. Battery grids are produced using
microprocessor-casting machines with patented alloys. Different sizes of moulds are used to get
the required size of grids.
2. PLATE PREPARATION
Using lead oxide production in earlier stage positive and negative paste is prepared with
addition of sulphuric acid and water. These pastes are applied to respective grids using industrial
fasting machines.
3. CALL ASSEMBLY
Here positive and negative grids are separated by a sheet of fibreglass mat bush bars are
welded and as assembled into a jar or container to form battery cells. Then these cells are
assembled according to the customer’s specification into battery sets or systems.
4. FORMATION
In this process cells are filled with the electrolyte (surphuric acid) and then the set is
charged and discharged repeatedly, after final charging the battery comes out ready to be used.
5. TESTING & INSPECTION
Testing the battery is discharged to the customer it is tested for quality specifications.

  Page   
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

• Data analysis &

Interpretation

  Page   
 DATA ANALYSIS AND INTERPRETATIONS 
 
4.1 LIQUIDITY RATIO’S 
 
4.1.1 CURRENT RATIO
  The ratio between all current assets and all current liabilities; another way of expressing
liquidity. It is a measure of the firm’s short-term solvency. It indicates the availability of current
assets in rupees for every one rupee of current liability. A ratio of greater than one means that the
firm has more current assets than current claims against them.
 
 
Current Assets
  Current ratio = -----------------------------------------
 
Current Liabilities

 
 
                                                             Table 4.1.1 Current ratio 
 

S.No  Year 
CURRENT 
CURRENT ASSETS  CURRENT RATIO 
  LIABILITIES 
2006‐07  1,612,642,497     638,958,266  2.52 
1.   
 
2007‐08  2,280,704,176  1,181,003,846               1.93  
2. 
 
2008‐09  3,500,193,294  1,312,272,610           2.67              
3. 
 
      2009‐10  5,975,961,025  2,020,744,952            2.96 
4.   
 
 
 
 
 
 

  Page   
                                                                    Graph 4.1.1 C
Current ratio
o 

2.96
3
2
2.67
2.5
52
2.5
5

1.93
2

1.5
5

0.5
5

0
2006
6‐07 2007‐08 200
08‐09 2009‐10

 
 
Interpre
etation: 
The standarrd norm forr current rattio is 2:1. During the yeear 2006 the ratio is 2.52 and it haas
decreassed to 1.93 during
d the year
y 2007 annd increased to 2.67 inn 2008 and iit is increassed to 2.67 in
i
the yearr 2009 and it has increeased to 2.96 in the yeaar 2010. Thhe ratio aboove was stan
ndard exceppt
in the year
y 2008. So
S the ratio was satisfaactory.
 
 
 
 
 
 
 
 

  Pagee   
 
 
 
4.1.2. Quick ratio 
 
Quick ratio establishes a relationship between quick, or liquid, assets and current liabilities. An
asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value.

   
                                                                       
 
Current Assets – Inventories
 
Quick Ratio = _______________
 
Current liabilities
 
 
 
Table 4.1.2 Quick Ratio 
 
 
   
S.NO  Year 
QUICK ASSETS  CURRENT LIABILITIES  QUICK RATIO 
   
 
1  2006‐07  1,171,683,584     638,958,266  1.83 
   
1 1,708,741,955  1,181,003,846          1.45  
2  2007‐08 
   
2008‐09  2,578,479,879  1,312,272,610  1.96 
3. 
 
 
 
4,032,625,321  2,020,744,952  1.99 
4.  2009‐10 

                  
                 
 
 
 
 
 

  Page   
  
 
 
 
 
Graaph 4.1.2 Qu
uick Ratio 
     

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2006‐07 2007‐0
08 200
08‐09 2009‐10

 
 
etation:  
Interpre

           The
T standardd norm for the quick ratio
r is 1:1. Quick ratiio is decreaased in the year
y 2007 to
t
1.83 froom 2.45. Then,
T it decrreased to 1..45 in the year
y 2008. And
A it has increased to
o 1.96 in thhe
year 20009 and theen it increaased to 1.999 in the yeaar 2010. However tthe ratio waas above thhe
standardd norm so thhe ratio wass satisfactorry. 

 
 
 
 
 
 

  Pagee   
 
4.1.3. C
Cash ratio
o:  The ratio between caash plus maarketable seccurities andd current liabbilities.  
 
  Cassh & Bank balances
b
Cash Ratio
R = _____ ________ _____
  Cuurrent liabilitiies
 
                                                                             Table 4.1.3 Cash
h Ratio 
   
S.NNO  Year  CASH H&BANK CUURRENT
CAS
SH RATIO
    BAL LANCES LIA
ABILITIES
S
 
1
1  2006‐07  169,121,,827 638,958,266 0.26
   
1 205,212,,363 1,181,0033,846 0.17
2 
2 2007‐08 
   
2008‐09  256,000,,280 1,312,2722,610 0.20
3. 
3
 
 
 
511,453,,739 2,020,7444,952 0.25
0
4
4.  2009‐10 

                  
                                                                               Graaph 4.1.3 Cash Ratio 

0.3

0.25

0.2

0.15

0.1

0.05

0
2006‐07 2007‐08 2008‐09 2009‐10

 
Interpre etation:  
           Inn all the above years thhe absolutee quick ratioo is very low
w. The stanndard norm for absolutte
quick ratio
r is 1:22 the comppany is failled in keep
ping sufficiient Cash & Bank Balances
B annd
Marketaable Securitties.

  Pagee   
4.1.4 NET WOR
RKING CA
APITAL RA
ATIO: The difference between
b cuurrent assetss and currennt
liabilitiees excluding short-term
m bank borrrowing is caalled net woorking capitaal or net currrent assets..

 
Net workin
ng capital
 
Net woorking capittal ratio = _____
_____________
 
Neet assets
 
                                                          
                                                        Table 4.1.4 Neet working caapital ratio 
S.NO  Year  NET WOR RKING  NETT WORKINGG 
    CAPITTAL CAPITAL RATIO
O 
1  2006‐07     973,68 84,231  1,935,207,7
1 14  0.50 

2  2007‐08  1,099,70
00,330  2,191,397,0
2 06  0.50 
   
3  2008‐09  2,187,92
20,684  3,817,892,8
3 62  0.57 
   
3,955,216
6,073  6,501,134,460
0          0.61 
4  2009‐10 
 
 
                                                              Graph 4.1.4
4 Net workin
ng capital rattio
 

0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2006‐07 2007‐08 2008‐09 2009‐10
 
             
Interpre
etation:  
Nett Working Capital
C ratioo is 0.45 in 2006
2 but inccreased to 00.50 in the next
n year i.ee.,
2007. From
F that year
y the ratioo increasedd to 0.50 in 2008 and foollowed in 22009 also and
a increaseed
to 0.61iin 2010 but condition of
o business working
w cap
pital is not shortage.
s
                                                   

  Pagee   
                                                4.2 LEVERAGE RATIO’S 

4.2.1 Debt Ratio
If the firm may be Interested in knowing the proportion of the interest bearing debt
in the capital structure.
 

Total Debt  
Debt ratio = -----------------------------------------
Total Debt + Net Worth  
 
 
 
                                                              Table 4.2.1 Debt ratio 
 
S.No  Year  TOTAL
TOTAL DEBT DEBT + NET DEBT RATIO
 
WORTH
2006‐07  233,058,880 2,039,907,551 0.11
1. 
 
2007‐08  378,672,427 2,391,525,347 0.16
2. 
 
2008‐09  1,407,083,880 3,843,741,557 0.37
3. 
 
      2009‐10  3,162,620,560 3,493,635,030 1.10
4.   
 
 
 
 
 
 

  Page   
 Graaph 4.2.1 De
ebt ratio 

1.2 1.1
1

0.8

0.6
0.37
7
4
0.4
0.16
0.2 0.11

0
2006‐07 2007‐0
08 2008‐‐09 2009
9‐10

 
 
Interpre
etation: 

Thhis ratio givves results relating to the capital structure of a firm. D

Debt ratio is 0.08 in thhe
year 20006 it increeased to 0.11 & 0.16 in the corrrespondingg years 20007 & 2008. Again it is
i
increaseed to 0.37 & 1.10 in the
t year 20009& 2010. From the above in flluctuating trend
t we caan
concludde that the company’s dependennce on deb
bt is increaasing. It is not betterr position in
i
collection of debt.

 
 

  Pagee   
4.2.2 Debt equity ratio 
   
Debt equity ratio indicates the relationship describing the lenders contribution for each
rupee of the owner’s contribution is called debt- equity ratio. Debt equity ratio is computed by
dividing Long term Liabilities divided by Equity. Lower debt – equity ratio higher the degree of
protection. A debt-equity ratio of 2:1 is considered ideal.
 
 
LONG TERM   LIABILITIES
Debt equity ratio = -----------------------------------------
 
EQUITY
 
 
 
Table 4.2.2 Debt equity ratio 
 
S.No  Year 
TOTAL DEBT 
  NET WORTH  D.E.RATIO 
2006‐07     233,058,880  1,806,848,671  0.13 
1. 
 
2007‐08     378,672,427  2,012,852,920  0.19 
2. 
 
2008‐09  1,407,083,880  2,436,657,677  0.58 
3. 
 
      2009‐10  3,162,620,560  3,331,014,470  0.95 
4.   
 
 
 
 
 
 
 
 

  Page   
 Graph 4.2.2 Debt equity ratio
o 
 
 
 
 
 
 
0.95
1  
0.9
 
0.8
 
0.7
0.6
0.58  
0.5  
0.4  
0.3
0.19  
0.2 0.13
 
0.1
0
 
2006‐07 2007‐08 2
2008‐09 2009‐10  
 
 
 
 
Interpre
etation: 

         Th
he ratio givees results reelating to th
he capital sttructure of  a firm. Deb
bt equity ratio is 0.09 iin 
d to 0.13 & 0.19 in the year 2007 and 2008. In the year 2
the year 2006 and it increased 2009 & 201
10 
the ratio has increased to 0.5
58 & 0.95. W ny depends on the deb
We can conclude that tthe compan bt 
fund is increasing. 

  Pagee   
4.2.3 IN
NTEREST CO
OVERAGE R
RATIO: The ratio showss the numbeer of times the interestt charges arre
coveredd by funds thhat are ordiinarily availlable for theeir payment.

                              
  E
EBIT
Interest coverage ratio =  _______________________
Intterest
 
                                                                     Table 4.2.3 Interest coverage raatio 
S.NO O  Yeear 
   
EBBIT  INTEREEST  I.C.RATIO 
137,259,58
83    1
1,448,427  94.76 
1  200
06‐07 
   
386,899,738  13
3,435,515  28.80 
2  200
07‐08 
   
742,908,74
41  30
0,924,293  24.02 
3  200
08‐09 
   
1
1,588,690,29
99  129,308,874 12.29 
4  200
09‐10 

                                 
 
                                                                        Graph
h 4.2.3 Intere
est Coveragee ratio 
100

80

60

40

20

0
2006‐0
07 2007‐08 2008‐09 2009‐10
2
        
 
etation:   Intterest coverrage ratio iss 07.56 in th
Interpre he year 20006. It is inccreased auto
omatically to
t
94.76 inn the year 2007.
2 But, itt is decreaseed to 28.80 in the year 2008 and ddecreased to
o 24.02 in thhe
year 20009 and it again
a decreased to 12.229 in the year
y 2010. In
I this posittion outsidee investors is
i
mpany. 
interested to investt the moneyy in this com

4.2.4 TO
OTAL LIABILLITIES RATIO 
  Pagee   
 Formuula: Total Liabilities
Total Assets

T
Total liabilitties: Currennt liabilities + Secured & Unsecureed
Loans.

          To
otal Assetss     :  Fixed assets + In
nvestmentss + Curren
nt assets 
                                                  Table 4.2.4: Total Liabilities raatio 
 
S.NO O  Year  TOTALL 
    TO
OTAL ASSETS 
LIABILITTIES  T.L. RATTIO 
1  20
006‐07     872,017
7,146  2,8
809,793,132
2  0.3 
   
2  1,559,676
6,273  3,6
692,541,508
8  0.4 
20
007‐08 
 
3  20
008‐09  2,719,356
6,490  5,2
292,107,128
8  0.5 
   
20
009‐10  5,183,,365
5,512  8,6
683,886,037
7  0.6 
4 

 
                                                        Graph 4.2 o                                                                  
2.4: Total Liaabilities ratio
 

0.6

0.5

0.4

0.3

0.2

0.1

 
7‐08      2008‐09    2009‐10 
                                                                                   2006‐07    2007
 
etation:  In the
Interpre t years, 2006 & 20077 the total liiabilities is 0.2&0.3
0 butt in the yearr 2008 the
total liaabilities incrreased to 0.44 and the raatio increaseed to 0.5 & 0.6 in the correspondin
ng years of
2009 &2010.
&
 
 
 
 
 
 
 
 
 
 
 
 
 
 

4.3 ACT
TIVITY RATIO’S
R

  Pagee   
 
4.3.1 Inventory turnover ratio 
It indicates the firm efficiency of the firm in producing and selling its product. It is calculated
by dividing the cost of goods sold by the average inventory.
 
 
  Cost of goods sold
  Inventory turnover ratio =_____________________
  Average inventory
                                                                 
 
                                              
  Cost of goods sold = Raw materials consumed +payments &benefits to employees +mfr, selling
&admin expenses +duties & taxes
 
 
                                                                 Table 4.3.1:  Inventory turnover ratio 
 
 
S.NO  Year 
    COST OF GOODS 
AVG INVENTORY  I.T.RATIO 
SOLD 

1  2006‐07  2,228,549,828  374,102,223  5.96 

   
2  2007‐08  3,499,805,230  506,460,567  6.91 
   
O 
2008‐09  5,324,665,192  746,837,818  7.13 
3 
 

4 
2009‐10  9,782,463,974  1,432,524,559  6.83 

 
 
 
 
 
 
 
 
 
 

  Page   
  
 
Graph 4.3.1:  Inventorry turnover rratio 
   
      

0
200
06‐07 2007‐08 2008‐09 20
009‐10

 
    
 
Interpre
etation: 
I
Inventory tuurnover ratiio is 5.57 tiimes in the year 2006. But, it is iincreased to 5.96 in thhe
year 20007. Then, it
i is increased to 6.91 in the yearr 2008 and again increased to 7.13
3 in the yeaar
2009. But,
B it is deccreased to 6.83
6 in the year
y 2010. Inventory tuurn over rattio increased
d for year by
b
year thaat is companny production is also inncreased. Su
ubsequentlyy sales are aalso increaseed.
 

 
 
 
 
 
 

  Pagee   
4.3.2 D
Debtors tu
urnover raatio:  It is found
fo out by
y dividing thhe credit salles by averaage debtors..
Debtor’’s turnover indicates
i o times debtor’s turnovver each yeaar. 
thhe number of

 
Sales
S
 
Debtorss turnover ratio
r = ________
_________
 
Average Debtoors
 
Sales = Gross Salees
                                                               Table 4.3.2
2: Debtors tu
urnover ratio
o 
S.NO  Year  AVERAGEE 
    SALEES 
DEBTORS 
D.T.RATIO 

1  2006‐07  2,685,43
36,096    560,689,88
81  4.79 
   

2  2007‐08  4,458,29
95,779    753,113,33
38  5.92 
   

3  2008‐09  7,451,03
32,998  1,158,032,7
1 67  6.43 
   
13,499,86
67,499 1,862,113,4
1 98  7.25 
4  2009‐10 

 
                                                                Graph 4.3.2: Debtors tturnover ratio
 

8
7
6
5
4
3
2
1
0
2006‐07 2007‐08 2008‐09 2009‐10
 
 
Interpre
etation:   Deebtor’s turnnover ratio is
i 4.31 timees in the yeaar 2006 andd it is increaased to 4.779
times inn the year 2007 and inccreased to 5.92
5 times in
n the year 2008
2 and it increased to
o 6.43 timees
&7.25 times
t in the years 20099 &2010. 

 
  Pagee   
4.3.3 Fixed asset turnover ratio 
 
The ratio is supposed to measure the efficiency with which fixed assets are employed a high ratio
indicates a high degree of efficiency in asset utilization and a low ratio reflects inefficient use of assets.
However, in interpreting this ratio, one caution should be borne in mind. When the fixed assets of the
firm are old and substantially depreciated, the fixed assets turnover ratio tends to be high because the
denominator of the ratio is very low.

 
 
Net Sales
 
Fixed Asset Turnover Ratio = __________
 
Net Fixed Asset
 

Sales = Gross Sales

Net fixed assets:  Net block 
 
Table 4.3.3: Fixed asset turnover ratio 
 
 
S.NO  Year 
    NET FIXED 
SALES  F.A.T.RATIO 
ASSETS 

2,685,436,096     948,631,374  2.83 

1  2006‐07 
   
4,458,295,779  1,043,547,559  4.27 
2 
2007‐08 
 
3  7,451,032,998  1,568,304,581  4.75 
2008‐09 
 
 
 
13,499,867,499  1,888,508,475  7.15 
4  2009‐10 

 
 
 
 
 
 
  Page   
 
 
 
 
Graph 4.3.3
3: Fixed asse
et turnover ratio 
                                                                 
 
 

   
0 
                                                    2006‐2007                 2007‐08                  2008‐09                  2009‐10
 
 
 
etation:  
Interpre
Fixed assets
a turn over
o ratio is 2.01 in the year 2006 and
a it is inccreased to 2.83 in the year
y 2007. In
I
the yearr 2008 the ratio
r is 4.27 and it continued up to 4.75 and too 7.15 in thhe years 200
09&2010.
 
 
 
 
 
 
 
 
 
 

 
 
 
 

  Pagee   
4.3.4 C
Current assset turnovver ratio

 
  Sales

  Curren
nt asset turnover ratioo = __
________________

  Cu
urrent assetss

                                                
                                                               Table 4.3.4
4:  Current assset turnoveer ratio 
S.NO  Year  CURRENT
    SALE ES
ASSSETS
C.A.T
T. RATIO

1  2006‐07  2,685,4366,096 1,612,642,4977 1.67

   

2  2007‐08  4,458,2995,779 2,280,704,1766 1.95

   

3  2008‐09  7,451,0332,998 3,500,193,2944 2.12

   
13,499,8667,499 5,975,961,025 2.26
4  2009‐10 

 
                                                       Graaph 4.3.4 Cu
urrent assets turnover ratio
 

2..5

1..5

0..5

0
2006‐0
07 2007‐‐08 2008
8‐09 200
09‐10
 
Interpre
etation:  
Current assets
a turnovver ratio is 1.68 in th
he year 20066 and it is ddecreased to
o 1.67 in thhe
year 20007. But, in the year 20008 the ratioo is increased to 1.95 and
a it continnuously inccreased up to
t
2.26 inn the year 2010. Froom above we can co
onclude thaat current aassets turno
over ratio is
i
increasiing.

  Pagee   
4.3.5 TTotal assetts turnove
er ratio 
                  This ratiio ensures whether
w the capital
c emplo
oyed has beeen effectivelyy used or no
ot. This is alsso
test of managerial
m efficiency and
a businesss performancce. Higher total
t capital turnover raatio is alwayys
mpany. 
requiredd in the intereest of the com

  Sales
  =
Total asset turnoover ratio ____
______________
  Ca
apital emplooyed
Total asssets: Fixedd assets + Current
C assetts + Investm
ments 
 
                                                                  Table 4.3
3.5: Total asset turnover ratio 
S.NO  Year  SALEES  TOTAL ASSE
T ETS  T.A
A.T. RATIO 
1  2006‐07  2,685,43
36,096  2,809,793,1
2 32  0.96 

2  2007‐08  4,458,29
95,779  3,692,541,5
3 08  1.21 

3  2008‐09  7,451,03
32,998  5,292,107,1
5 28  1.41 

4  2009‐10  13,499,86
67,499 8,683,886,0
8 37  1.55 

 
                                                Graph 4.3.5: Total assets turno
over ratio
 

1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
200
06‐07 20
007‐08 2
2008‐09 2009‐10
 
Interpre
etation:  
Totaal assets rattio is 0.83 in the year 2006
2 and it gradually increased
i yeear by year and reacheed
to 1.55 in the year 2010.It meaans Total Assets
A is incrreased in evvery year.

  Pagee   
4.3.6 Working ca
W apital turnover ratio
o  
              A firm maay also like to relate neet current assets or net working
w cappital to saless. Working
capital turnover
t inddicates for one
o rupee of
o sales the company
c neeeds how m
many net currrent assets.
This rattio indicatess whether orr not workinng capital has
h been effe
fectively utillized markeet sales.
 
  
S
Sales
                              
W
Working cap
pital turnovver ratio = _______________________
  Workin ng capital
 
                                                         Taable 4.3.6:  W
Working capiital turnoverr ratio 
S.NO O  Yeear  NET CURRENT
    SALES W
W.C.T. RATIO
ASSETS
A
1  200 06‐07  2
2,685,436,09 96 9773,684,231 2.76
   
2  200 07‐08  4
4,458,295,77 79 1,0999,700,330 4.05
   
3  200 08‐09  7
7,451,032,99 98 2,1887,920,684 3.41
   
133,499,867,4499 3,9555,216,073 3.41
4  200 09‐10 
                                  
                                                            G
Graph 4.3.6:: Working caapital turnovver ratio 
5

0
2006‐0
07 2007‐08 2008‐09 2009‐10
2
               
 
etation:  
Interpre
 
Worrking capitaal turnover ratio is 2.441 in the yeaar 2006 andd it is increased to 2.76
6 in the yeaar
2007. Inn the year 2008
2 increassed to 4.05 . Again it decreased
d too 3.41 in thee year 2009&2010. Thhe
higher the
t workingg capital turnnover the more
m favorab
ble for the company.
c

4.3.7 N
Net asset tturnover rratio 

  Pagee   
  
Saless
 
Net Asset Turnoverr Ratio = ___________
 
Neet Asset
 
Net Asssets: Net Fiixed Assets + Net Currrent Assets
 
Table 4.3..7:  Net assett turnover raatio 
S.NO O  Year 
SALESS  NETT ASSETS  N.A.T. RATTIO 
   
1  20
006‐07  2,685,436
6,096  1,9
935,207,714
4  1.39 
   
2  20
007‐08  4,458,295
5,779  2,1
191,397,006
6  2.03 
 
3  20
008‐09  7,451,032
2,998  3,8
817,892,862
2  1.95 
   
4  20
009‐10  13,499,867
7,499  6,5
501,134,460
0  2.08 

 
                                                        Graph 4.3
3.7:  Net assset turnoverr ratio 
                                                                 
 

2.5

1.5

0.5

            2006‐2007         2007‐08           2008‐09            2009‐10 
etation:  
Interpre
Net Asseets turnoverr ratio is 1.111 in the yeear 2006 andd it is increeased to 1.39 in the yeaar
2007 annd it is increeased to 2.003 in the yeaar 2008. An
nd, it decreaased to 1.955 in the yearr 2009 and it
slightlyy inccreased to 2.08 in the year 20100.
 
 
 
 
 
 

4.3.8 C
Capital turrnover ratiio 
  Pagee   
                   The rattio obtains by
b dividing sales with the
t capital employed.
e  
                              
  S
Sales
C
Capital turn
nover ratio =  ________________________
Capitall Employed
 
 
 Table 4.3.8:  capital turnover rattio 
 
S.NO O  Year 
Y
SALES   CAPITTAL EMPLOY
YED C.T. RATTIO 
   
1  200
06‐07  2
2,685,436,0
096  2,1
170,834,866
6  1.24 
   
2  20007‐08  4
4,458,295,7
779  2,5
511,537,662
2  1.78 
   
3  20008‐09  7
7,451,032,9
998  3,9
979,834,518
8  1.87 
   
13,499,867,4
499 6,6
663,141,085
5  2.03 
4  200
09‐10 
                                 
 
                                                              Graph 4.3.8
8: capital turrnover ratio
 

2.5

1.5

0.5

0
2006‐07 2007‐08 2008‐09 2009‐10
             
 
etation:  
Interpre
Capiital turnoveer ratio is 0.98 in the year
y 2006 and it is incrreased 1.244 in the yeaar
2007 annd it is increeased to 1.778 in the yeaar 2008 and
d again it is increased tto 1.87 in th
he year 20009
. Then, it increasedd to 2.03 in the year 2010.
 
Creditor’s tturnover rratio 
4.3.9 C

  Pagee   
 The raatio obtaineed by dividing the annuual credit pu
urchases witth average aaccounts paayable.

 
P
Purchases
  
C
Creditor’s tu
urnover rattio = _____ __________________
                            
Avge.C   
Creditors
 
                                                           TTable 4.3.9: C
Creditors turrnover ratio
S.NO O  Yeear  AVERAGE 
A
    PURCHASEES 
CR
REDITORS 
C.T. RATIO 

1  200
06‐07  422,358,585
1,4 5     192,242,196 7.4 
   
2  200
07‐08  2
2,244,170,172  44
41,904,975 5.1 
   
3  200
08‐09  086,818,721 
4,0 591,059,052 6.9 
   
8,1
125,662,265
5  7,0
081,427,12 11.47 
4  200
09‐10 

                                  
                                                             Graph 4.3.9
9: Creditors turnover ratio 
 

12

10

0
2006‐07 2007‐08 2008‐09 2009‐10
              
 
etation:  
Interpre
Creditoors’ turnoverr ratio is 6.1 in the yeaar 2006. It is increased to 7.4 in th
he year 20007
and it is
i suddenly decreased to 5.1 in thhe year 2008
8 and it sudddenly increeased to 6.9
9 in the yeaar
2009 buut increasedd in the nextt year 2010 to 11.47.

                                                             4.4 P
PROFITABILITY RATIIOS 

  Pagee   
 
4.4.1 Gross profit ratio 
                    This ratio shows that the margin left after meeting manufacturing costs. It measures the
efficiency of production as well as pricing.

 
  Gross profit
  Gross profit margin Ratio = ____________ X100
Net sales
 

Gross profit= Net sales-Cost of goods sold

Cost of goods sold= Opening stock+ material consumed+ mfg .exp- closing stock
 
 
Table 4.4.1: Gross profit ratio 
 
 
S.NO  Year 
    GROSS PROFIT  SALES  G.P. RATIO (%) 

1  2006‐07  456,886,268  2,685,436,096   17 

   
2  2007‐08  958,490,549  4,458,295,779       21.5 
   

3  2008‐09  2,126,367,806  7,451,032,998       28.5 

   
3,717,403,516  13,499,867,499  27.5 
4  2009‐10 

 
 
 
 
 
 
 
 
 
 

  Page   
  
Graph 4.4.1: Grosss profit ratio
 
 
30
0

25
5
R
Ratio

   

20
0
                                
                                                                                       
15
5
                                
 
10
0
 
 
5
 
  0
  2006‐‐07 2
2007‐08 2008‐09 2009
9‐10

 
 
 
 

 
 
Interpre
etation:  
F
From the aboove we cann say that grross profit ratio is 16.2%
% in the yeear 2006 butt it increaseed
to 17 % &21.5% in 2007& 2008
2 and again
a it incrreased to 28.5%
2 in thhe year 200
09 and it is
i
decreassed to 27.5% in the year
y 2010. The comp
pany is maaintaining pproper contrrol on tradde
activitiees.

 
 
 
  Pagee   
4.4.2 N
Net profiit ratio: Thhis ratio alsoo indicates thhe firm's cappacity to withh stand adveerse economiic
conditioons. A firm with
w a high net margin ratio would be in an addvantageous position to survive
s in thhe
face fallling selling prices,
p rising costs of production or declining
d mand for the product. 
dem
 
Net proofit
 
Net proofit ratio= _________ X I00
 
Net salles
 
 
                                                                               Taable 4.4.2: Ne
et profit ratio
o 
S.NO  Yeaar  PROFIT AFTTER  NET PROFIT 
    SALES 
TAX  MARGIN (%) 
1  2006
6‐07    86,900,56
63  2,6
685,436,096
6  3.2 
3
   
2  2007
7‐08  238,465,730  4,4
458,295,779
9  5.3 
5
   
3  2008
8‐09  470,434,575  7,4
451,032,998
8  6.3 
6
   
4  2009
9‐10  9,436,315,,11  13,4
499,867,499
9  6.99 
6

 
                                                                  Graph 4.4
4.2: Net proffit ratio 
8
6
4
2
0
‐2
‐4
‐6
‐8
200
06‐07 2007‐08 2008‐09 2009‐10
                
 
Interpre
etation:  
 
During the year 20006 the net profit marggin is 0.7 itt suddenly increased
i too 3.2% in th
he year 20007
becausee of decreassed in adminnistration annd selling expenses. Inn the next yeear, it again
n increased to
t
5.3 in thhe year 20008 and it agaain increased to 6.3 in 2009
2 and too 6.99 in thee year 2010..

4.4.3 O
Operating expenses ratio
  Pagee   
 
The Operating expenses ratio explains the changes in the profit margin ratio. A higher operating
expense is unfavorable since it will leave a small amount of operating income to meet interest, dividends.

 
  
  Operating expenses X 100
  Operating expenses ratio= __________________
  Sales
 
 
Operating expenses =Admin expenses+ Selling expenses
 
 
 
 
Table 4.4.3:  Operating expenses ratio 
 
S.NO  Year 
    OPERATING 
SALES  O.E. RATIO 
EXPENSES 
I 
2006‐07  376,620,609  2,685,436,096       14.02 
1 
 
2  2007‐08  550,626,756  4,458,295,779       12.35 
   
3  2008‐09  767,790,197  7,451,032,998       10.30 
   
4  1,388,735,777  13,499,867,499        10.30 
2009‐10 

 
 
 
 
 
 
 
 
 
 
                                                            Graph  4.4.3: Operating expenses ratio 
 
  Page   

16
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interpretation:  

Operating expenses ratio is 17.86%of sales in the year 2006 it decreased to 14.02% in
the year 2007 and decreased in 2008 to12.35% and again it decreased in the next year 2009 to
10.30% and continued the same way. Then, it reached 10.30% in the year 2010.

 
 
 

 
 
4.4.4 Return on Investment 
              The conventional approach of calculated ROI is to divide PAT by investment.
 
EBIT
  Return on investment(ROI)= _________________ Page   

Capital Employed
 
 
 
 
                                                             Table 4.4.4: Return on investment 
S.NO  Year  EBIT  CAPITAL  R.O.I. RATIO 
    EMPLOYED
1  2006‐07  137,259,583  2,170,834,866  0.06 
2  2007‐08  386,899,738  2,511,537,662  0.15 
3  2008‐09  742,908,741  3,979,834,518  0.19 
4  2009‐10  1,588,690,299  6,663,141,085  0.24 
 
                                                                          
                                                                     Graph 4.4.4:  Return on Investment
 

 
 
 
 
  0.25
 
  0.2

 
0.15
 
  0.1
 
  0.05
 
  0

  2006‐07 2007‐08 2008‐09 2009‐10

 
 
 
Interpretation:  
Return on Investment is very low in all years. But, in the year 2006, it reached to
6.51 due to less earnings.

 
 
4.4.6 Return on equity share holders’ fund 
                   The return on equity share holders fund explains about the return of share holders with they
get on their investment. 

  Page   
  Net profit
  Return on equity share holders fund= _________________
  Equity share holder’s fund
 
                                                        Table 4.4.6: Return on equity share holder's fund 
S.NO  Year  PROFIT AFTER 
    NET WORTH  R.O.E.RATIO (%) 
TAX 
1  2006‐07    86,900,563  1,806,848,671  4.8 
2  2007‐08  238,465,730  2,012,852,920  11.8 

3  2008‐09  470,434,575  2,436,657,677  19.3 

   
4  2009‐10  943,631,511  3,331,014,470  28.33 

 
 
                                                     Graph 4.4.7: Return on equity share holder's fund
 

 
30

  25
 
20
 
15
 
10
 
  5

  0
2006‐07 2007‐08 2008‐09 2009‐10
 
 
Interpretation:  

Return on equity in the year 2006 is 0.8 and it increased suddenly to 4.8 in the year 2007
and again it increased to 11.8 in the year 2008. Return on Equity of the company is at
satisfactory level and then it increased to 19.3 in 2009 and again increased to 28.33 in 2010 .

 
 
 

  Page   
 
 
 
 
 

CHAPTER-5
• Finding’s

• Suggestions

• Conclusion

  Page   
 FINDINGS 

Ü Except in the year 2008, the company is maintaining current ratio as 2 and more, standard
which indicates the ability of the firm to meet its current obligations is more. It shows
that the company is strong in working funds management.
Ü The company is maintaining of quick assets more than quick ratio. As the company
having high value of quick ratio. Quick assets would meet all its quick liabilities with out
any difficulty.
Ü The company is failed in keeping sufficient cash & bank balances and marketable
securities.
¬ In above all current assets and liabilities ratios are better that also it is double the
normal position. Observe the absolute & super quick ratio the company cash
performance is down position.

Ü In the year 2006 debt equity ratio is 0.08 (8%) but it is increased to 0.11 (11%) &
0.16(16%) in 2007 and 2008 increased every year. It shows that the company is losing
its condition.
Ü Net working capital ratio is 0.45 in 2006 but also 0.50 in 2007. It is increased very high
but condition of business working capital is not shortage .
Ü Debt Equity ratio is increasing every year. It indicates the company depends on the debt
fund increasing.
Ü Total liabilities ratio is also increasing year by year.
Ü In the year 2006, the interest coverage ratio 7.56 which increased to 94.76 in the year
2007 and high fluctuations in the followed years. In this position, outside investors are
interested to invest their money in this company.
Ü The company is declining of its coverage ratio to serve long term debts.
Ü Inventory turnover also increased for year by year that is company production is also
increased. Subsequently sales are also increased.
Ü The net profit ratio of the company increasing over the study period. Hence the
organization having the good control over the operating expenses.

  Page   
  
 
SUGGESTIONS 

Ü The company has to increase the profit maximization and has to decrease the operating
expenses.
Ü By considering the profit maximization in the company the earning per share, investment
and working capital also increases. Hence, the outsiders are also interested to invest.
Ü The company should maintain sufficient cash and bank balances; they should invest the
idle cash in marketable securities or short term investments in shares, debentures, bonds
and other securities.
Ü The company must reduce its debtors collection period from 83 & 84 days to 40 days be
adopting credit policy by providing discounts to the debtors.
Ü Return on investment is fluctuates every year. The company has to make efforts in
increasing return on investments by reducing its administration, selling and other
expenses.
Ü The company should increase its interest coverage ratio to serve long term debts.
Ü The net profit of the company is increasing over the study period. Hence the organization
maintaining good control on all trees of expenses.
Ü The dividend per share has observed as raising trend over the study period, hence it may
be suggested Amara Raja Batteries Limited should take key interest to maximize the
share holder wealth by increasing dividend pay out.
 
 
 
 
 
 
 
 
 
 
 

  Page   
  
 
 
                                                                                      Conclusion 
 
Ü Liquidity ratios, both current ratio and quick ratio are showing effectiveness in
liquidity as in all the years current ratio is greater than the standard 2:1 and quick ratio is
greater than the standard 1:1 ratio.

Ü The firm is maintaining a low cash balance and marketable securities which means they
done cash payments.

Ü Debt equity ratio, solvency ratio and interest coverage ratio are showing an average
increase in the long term solvency of the firm.

Ü The proprietary ratio is showing an average increase which means, the shareholders have
contribute more funds to the total assets.

Ü Average payment period of the firm is showing the credit worthiness of the firm to its
suppliers.

Ü Fixed assets turnover ratio is showing that the firm needs lesser investment in fixed assets
to generate sales.

Ü The increasing trend of current assets turnover ratio indicates that the firm needs more
investment in current assets for generating sales.

Ü The gross profit ratio, net profit ratio is showing the increasing trends. The profitability
of the firm the increasing
 

Ü Operating ratio of the company has observed decreasing trend, hence it may be good
control over the operating expenses.

Ü The interest that has to be paid is very less when compared to the sales. The firm is not
utilizing the debt conservatively.

Ü The firm is retaining much of the earnings (based on dividend payout ratio) .

Ü The company financial performance is very good and also they will increase their
business year by year by expanding their branches.
 

  Page   
 CHAPTER-6
 

• Annexure
 

• Bibliography
 

  Page   
  

                                    BALANCE SHEET AS AT 31st MARCH 2007 

Schedule
Particulars No. As at 31.03.2007 As at 31.03.2006
Rupees Rupees Rupees Rupees
SOURCES OF FUNDS
Shareholders Funds
Share Capital 1 113,875,000 113,875,000
Reserves & Surplus 2 1,692,973,671 1,632,042,302
1,806,848,671 1,745,917,302
Loan Funds
Secured Loans 3 73,665,914 44,945,252
Unsecured Loans 4 159,392,966 103,853,138
233,058,880 148,798,390
Deferred Tax liability 5 130,927,315 145,000,360
Total 2,170,834,866 2,039,716,052

APPLICATION OF FUNDS
Fixed Assets 6
Gross Block 1,672,298,054 1,583,508,897
Less: Depreciation 723,666,680 591,622,548
Net Block 948,631,374 991,886,349
Capital Work-in-Progress 12,892,109 9,514,644
961,523,483 1,001,400,993
Investments 7 235,627,152 208,778,082
Current Assets, Loans &
Advances
Inventories 8 440,958,913 307,245,534
Sundry Debtors 9 649,706,121 471,673,642
Cash & Bank Balances 10 169,121,827 152,292,556
Loans, Advances & Deposits 11 342,929,588 251,402,682
Other Current Assets 12 9,926,048 7,622,683
1,612,642,497 1,190,237,097
Less: Current Liabilities &
Provisions 13
Liabilities 345,042,817 162,283,498
Provisions 293,915,449 198,416,622
638,958,266 360,700,120
Net Current Assets 973,684,231 829,536,977

Misc. Expenditure 14 -- --

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Total 2,170,834,866 2,039,716,052

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2007

Schedule Year Ended on 31.03.07 Year Ended on 31.03.06

Particulars No. Rupees Rupees
INCOME
Sales 2,368,057,275 1,759,017,304
Other Income 15 63,043,449 41,581,593
Increase / (Decrease) in stocks 16 71,015,819 11,120,770
Total 2,502,116,543 1,811,719,667
Expenditure
Raw Material Consumed 17 1,382,962,610 831,843,012
Payments & Benefits to Employees 18 170,091,901 157,730,759
Mfg., Selling Admn., & Other
19 494,265,237 561,985,559
Expenses
Taxes & Licenses 20 181,230,080 123,834,416
Interest 21 1,448,427 1,754,335
Depreciation 136,307,132 123,052,249
Total 2,366,305,387 1,800,200,330
Profit Before Taxation 135,811,156 11,519,337
Add: Excess provision of Income Tax -- 4,954,943
Less: Tax Provision for earlier years 14,073,045 30,473,038
Provision for Income Tax 59,500,000 33,000,000
Provision for Wealth Tax 3,440,615 --
Add: Excess provision for Dividend
43,023
Tax Written Back 49,721
Profit After Taxation 86,900,563 13,897,597
Profit brought forward 512,460,202
518,882,390
Year from Previous
Profit available for appropriation 599,360,765 532,779,987
Less: Transfer to General Reserve 6,517,542 1,050,000
Proposed Dividend 22,775,000 17,081,250
Dividend Tax 3,194,194 2,188,535
Balance carried to Balance Sheet 566,874,029 512,460,202
Basic Earnings per equity share 7.63 1.22

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 BALANCE SHEET AS AT 31 MARCH 2009

Schedule
Particulars No. As at 31.03.2009 As at 31.03.2008
Rupees Rupees Rupees Rupees
SOURCES OF FUNDS
Shareholders Funds
Share Capital 1 113,875,000 113,875,000
Reserves & Surplus 2 2,322,782,677 1,898,977,921
2,436,657,677 2,012,852,921
Loan Funds
Secured Loans 3 1,074,874,049 189,001,189
Unsecured Loans 4 332,209,831 216,407,580
1,407,083,880 405,408,769
Deferred Tax liability 5 136,092,961 120,012,315
Total 3,979,834,518 2,538,274,005

APPLICATION OF FUNDS
Fixed Assets 6
Gross Block 2,577,786,073 1,907,116,068
Less: Depreciation 1,009,481,492 863.568,510
Net Block 1,568,304,581 1,043,547,558
Capital Work-in-Progress 61,667,597 48,149,118
1,629,972,178 1,091,696,676
Investments 7 161,941,656 320,140,656
Current Assets, Loans &
Advances
Inventories 8 921,713,415 571,962,221
Sundry Debtors 9 1,459,544,977 856,520,556
Cash & Bank Balances 10 256,000,280 205,212,363
Loans, Advances & Deposits 11 859,824,054 634,750,549
Other Current Assets 12 3,110,568 12,035,439
3,500,193,294 2,280,481,128
Less: Current Liabilities &
Provisions 13
Liabilities 735,304,583 673,895,907

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Provisions 576,968,027 480,148,548
1,312,272,610 1,154,044,455
Net Current Assets 2,187,920,684 1,126,436,673

Misc. Expenditure 14 -- --
Total 3,979,834,518 2,538,274,005

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2009

Schedule Year Ended on 31.03.09 Year Ended on 31.03.08

Particulars No. Rupees Rupees
INCOME
Sales 5,958,016,404 3,636,709,293
Other Income 15 97,738,804 72,509,746
Increase / (Decrease) in stocks 16 181,845,189 41,637,449
Total 6,237,600,397 3,750,856,488
Expenditure
Purchase Of Finished Goods 1,190,212 4,353,496
Raw Material Consumed 17 3,937,812,454 2,229,601,146
Payments & Benefits to Employees 18 265,997,094 207,269,383
Mfg., Selling Admn., & Other
19 1,093,657,443 760,841,717
Expenses
Taxes & Licenses 20 26,007,989 14,881,894
Interest 21 30,924,293 13,435,515
Depreciation 170,026,464 147,009,114
Total 5,525,615,949 3,377,392,265
Profit Before Taxation 711,984,448 373,464,223
Add: Excess provision of Income Tax -- 10,915,000
Less :Tax Provision for -Current Tax
Including Deferred tax, Earlier
Tax, Wealth tax, Fringe 241,549,873 145,913,493
benefits tax

Profit After Taxation 470,434,575 238,465,730

Profit brought forward
749,031,694 566,874,029
Year from Previous
Profit available for appropriation 1,219,466,269 805,339,759
Less: Transfer to General Reserve 47,043,458 23,846,573
Proposed Dividend 39,856,250 28,468,750
Dividend Tax 6,773,570 3,992,742
Balance carried to Balance Sheet 1,125,792,991 749,031,694

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 Basic Earnings per equity share 41.31 20.94

BALANCE SHEET AS AT 31 MARCH 2010

Schedule
Particulars No. As at 31.03.2009 As at 31.03.2010
Rupees Rupees Rupees Rupees
SOURCES OF FUNDS
Shareholders Funds
Share Capital 1 113,875,000 113,875,000
Reserves & Surplus 2 2,322,782,677 3,217,139,470
2,436,657,677 3,331,014,470
Loan Funds

Secured Loans 3 1,074,874,049 2,266,545,502

Unsecured Loans 4 332,209,831 896,075,058

1,407,083,880 3,162,620,560
Deferred Tax liability 5 136,092,961 169,506055
Total 3,979,834,518 6,663,141,085

APPLICATION OF FUNDS
Fixed Assets 6
Gross Block 2,577,786,073 3,105,843,108

Less: Depreciation 1,009,481,492 1,217,334,633

Net Block 1,568,304,581 1,888,508,475

Capital Work-in-Progress 61,667,597 657,409,912

1,629,972,178 2,545,918,387
Investments 7 161,941,656 162,006,625
Current Assets, Loans &
Advances

Inventories 8 921,713,415 1,943,335,704

Sundry Debtors 9 1,459,544,977 2,264,682,019

Cash & Bank Balances 10 256,000,280 511,453,739
Loans, Advances & Deposits 11 859,824,054

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 1,248,478,477
Other Current Assets 12 3,110,568 8,011,086
3,500,193,294 5,975,961,025
Less: Current Liabilities &
Provisions 13
Liabilities 735,304,583 1,027,373,819
Provisions 576,968,027 99,371,133
1,312,272,610 2,020,744,952
Net Current Assets 2,187,920,684 3,955,216,073

Misc. Expenditure 14 -- --
Total 3,979,834,518 6,663,141,085

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2010

Schedule Year Ended on 31.03.09 Year Ended on 31.03.10

Particulars No. Rupees Rupees
INCOME
Sales 5,958,016,404 10,833,256,904
Other Income 15 97,738,804 256,100,643
Increase / (Decrease) in stocks 16 181,845,189 582,065,982
Total 6,237,600,397 11,671,423,529
Expenditure
Purchase Of Finished Goods 1,190,212 6,378,425
Raw Material Consumed 17 3,937,812,454 7,794,794,675
Payments & Benefits to Employees 18 265,997,094 408,078,078
Mfg., Selling Admn., & Other
19 1,093,657,443 1,579,591,221
Expenses
Taxes & Licenses 20 26,007,989 49,538,561
Interest 21 30,924,293 129,308,874
Depreciation 170,026,464 244,452,070
Total 5,525,615,949 10,212,042,104
Profit Before Taxation 711,984,448 1,459,381,425
Add: Excess provision of Income Tax --
Less :Tax Provision for -Current Tax
Including Deferred tax, Earlier
Tax, Wealth tax, Fringe 241,549,873 523,262,294
benefits tax

Profit After Taxation 470,434,575 943,631,511

Profit brought forward
749,031,694 1,125,792,991
Year from Previous
Profit available for appropriation 1,219,466,269 2,069,424,502

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Less: Transfer to General Reserve 47,043,458 94,363,151
Proposed Dividend 39,856,250 39,856,250
Dividend Tax 6,773,570 6,773,570
Balance carried to Balance Sheet 1,125,792,991 1,928,431,531
Basic Earnings per equity share 41.31 82.87

 
 
 
 
 
 
 
 
 
 
 
 
                                          BIBLOGRAPHY 
 
1. I.M.Pandey : Financial Management
2. M.Y.Khan & P.K.Jai : Financial Management
3. S.P. Jain & K.L. Narang : Cost & Management accounting
4. K.Rajeswara rao & G. Prasad : Accounting & Finance
5. P.Kulakarni : Financial Management

Web-sites:
www.google.com
www.amaron.co.in

 
   

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