A STUDY ON RATIO ANALYSIS

(With reference to COROMANDEL INTERNATIONAL, VISAKHAPATANAM)

A project report submitted to J.N.T. University (Gurujada Vizianagaram) in
fulfillment of therequirements for the award of the degree of
Master of Business Administration
Submitted by
BENDALAM KRISHNAMURALI
Regd.No: 226C1E0001
Under the guidance of

Dr. B. Venkata Rao M.Com., MBA, Ph.D.

Assistant Professor

MIRACLE SCHOOL OF MANAGEMENT

MIRACLE EDUCATIONAL SOCIETY GROUP OF INSTITUTIONS

(Approved by AICTE & Affiliated to JNTU Gurujada Vizianagaram)

BHOGAPURAM,VIZIANAGARAM
2022-24

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 DECLARATION

I hereby declare that this project work entitled “A study on RATIO ANALYSIS
COROMANDEL INTERNATIONAL, VISAKHAPATANAM.
submitted by me to the J.N.T. University, Kakinada in partial fulfillment for the award of
Degree of MBA is entirely based on my own study is being submitted for the first time and it
has not been submitted to any other university or institution for any degree or diploma.

Place: Bhogapuram Signature of the candidate

Date: BENDALAM KRISHNAMURALI

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 MIRACLE EDUCATIONAL SOCIETY GROUP OFINSTITUTIONS
(Approved by AICTE & Affiliated to JNTU, Kakinada)BHOGAPURAM,
VIZIANAGARAM
MIRACLE SCHOOL OF MANAGEMENT

Dr. B. Vankat Rao

CERTIFICATE

This is to certify the project report titled “A study on RATIO ANALYSIS WITH
REFERENCE TO COROMANDEL INTERNATIONAL is being submitted BENDALAM
KRISHNAMURLI in partial fulfillment for the award of the degree of M.B.A has been
carried out by his under my guidance and supervision.

Dr .B. Venkat Rao Dr. B. Venkat Rao

Head of the department (Project guide)

External Examiner

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4`
 ACKNOWLEDGEMENTS

Apart from the efforts of me, the success of this project depends largely on the
encouragement and guidelines of many others. I take this opportunity to express my
gratitude to the concerned that have been instrumental in the successful completion
of this project.

I wish to convey my sincere regards to our beloved Principal Dr. A. Arjun Rao garu
for his inspiration, timely help in the official clearances and valuable suggestions
throughout my course.

I wish to convey my sincere regards to our beloved DEAN Sir Dr .Sreenivas Rao For
his inspiration, timely help in the official clearances and valuable suggestions through
out My course.

I am also thankful to our Head of the Department Dr . B. Venkat Rao and all other
faculty members who helped me directly and indirectly for the successful completion
of my project work.

I extended my heartfelt gratitude to my project guide Dr. B. Vankat Rao, for her
consistent encouragement, benevolent criticism, inseparable suggestions which were
the main reasons to bring the work to present shape

I wish to express my deep gratitude to the management of COROMANDEL

INTERNATIONAL for giving me the opportunity to do the project on “RATIO
ANALYSIS” for the partial fulfillment of Master of Business Administration.

Finally, I would like to express my deep sense of gratitude to my beloved parents

and my family members for their love and blessings to complete the project
successfully.

(BENDALAM KRISHNAMURLI)

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 CONTENTS

SR NO. TITLES OF THE CHAPTERS PG NO.

CHAPTER 1
INTRODUCTION
NEED OF THE STUDY 1-10
1. OBJECTIVE OF THE STUDY
METHODOLOGY
LIMITATIONS OF THE STUDY
CHAPTER 2
2. INDUSTRY PROFILE 11-27
COMPANY PROFILE

CHAPTER 3
3. THEORETICAL FRAMEWORK OF THE 28-52
STUDY

CHAPTER 4
4. DATA ANALYSIS & INTERPRETATION 53-68
OF THE STUDY
CHAPTER 5
SUMMARY
5. FINDINGS 69-78
SUGGESTION
CONCLUSION
BIBLIOGRAPHY

ANNEXURE

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 CHAPTER-1
 INTRODUCTION OF THE STUDY
 NEED FOR STUDY
 OBJECTIVES OF STUDY
 METHODOLOGY
 LIMITATIONS OF THE STUDY

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 1.1 INTRODUCTION
Financial management is that managerial activity which is concerned with the planning and
controlling of the firm’s financial resources. It was a branch of economics till 1890, and as a
separate discipline, it is of recent origin. Still, it has no unique body of knowledge of its own,
and draws heavily on economics for its theoretical concepts even today.

The subject of financial management is of immense interest to both academicians and

practicing managers. It is of great interest to academicians because the subject is still
developing and there are still certain areas where controversies exist for which no unanimous
solutions have been reached as yet. Practicing managers are interested in this subject because
among the most crucial decisions of the firm are those which relate to finance, and an
understanding of the theory of financial management provides them with conceptual and
analytical insights to make those decisions skillfully.

RATIO ANALYSIS:
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated
quotient of two mathematical expressions and relationship between two or more things. In
financial analysis a ratio is used as an index for evaluating the financial position and
performance of the firm. The absolute accounting figures reported in the financial statements
do not provide a meaningful understanding of the performance and financial position of a
firm. An accounting figure coveys meaning when it is related to some other relevant
information.

REAL AND FINANCIAL ASSETS:

A firm requires real assets to carry on its business. Tangible real assets include plant,
machinery, office & factory furniture and buildings. Intangible real assets include technical
know-how, technological collaboration, patents and copyrights. Financial assets like equity
shares, preference shares, bonds and debentures. Firms issue securities to investors in the
primary capital markets to raise necessary funds. The securities issued by firms are traded
bought and sold by investors in the secondary capital market, referred to as stock exchanges.

Financial assets also include lease obligations and borrowing from banks, financial
institutions and other sources. In a lease, the lessee obtains a right to use the lesson’s asset for
an agreed terms and conditions on rental basis over the period of lease. Funds applied to

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assets by firm expect to receive return on investment and might distribute return (or profit) as
dividends to investors.

FINANCE AND OTHER MANAGEMENT FUNCTIONS:

There exists an inseparable relationship between finance and other functions like production,
marketing etc. Almost all business activities, directly or indirectly, involve the acquisition
and use of funds. For example, recruitment and promotion of employee in production is
clearly a responsibility of the production department, but it requires payment of salaries and
other benefits, and thus, involves finance. Similarly, buying a new machine or replacing an
old machine for the purpose of increasing production capacity affects the flow of funds. Sales
promotion policies come within the purview require outlays of cash and therefore, affect
financial resources.

FINANCE FUNCTIONS:
It may be difficult to separate the finance function from production, marketing and other
functions but the functions themselves can be readily identified. The functions of raising
funds, investing them in assets and distributing returns earned from assets to shareholders are
respectively known as financing decision, investment decision and dividend decision.
A firm attempts to balance cash inflows and outflows while performing these functions this is
called liquidity decision, and we may add it to the list of important finance decisions or
functions. Thus finance functions include:
 Long-term asset-mix or investment decision
 Capital-mix or financing decision
 Profit allocation or dividend decision
 Short-term asset-mix or liquidity decision
A firm performs finance functions simultaneously and continuously in the normal course of
the business. They do not necessarily occur in a sequence. Finance functions call for skillful
planning, control and execution of a firm’s activities.

INVESTMENT DECISION:
A firm’s investment decisions involve capital expenditures. They are therefore, referred to as
capital budgeting decisions. A Capital budgeting decision involves the decision of allocation
of capital or commitment of funds to long-term assets that would yield benefits in the future.
Two important aspects of investment decision are:

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The evaluation of the prospective profitability of new investment. The measurement
of a cut-off rate against that the prospective return of new investment could be compared.
Future benefits on investments are difficult to measure and cannot be predicted with
certainty. Risk in investment arises because of the uncertain returns. Investment proposals
should therefore, be evaluated in terms of both expected return and risk. Besides the decision
to commit funds in new investment proposals, capital budgeting also involves replacement
decisions that is, decision of recommitting funds when an asset becomes less productive or
non- profitable.
There is no broad agreement has reached yet that the correct cut-off rate or the required rate
of return on investments is the opportunity cost of capital. The opportunity cost of capital is
the expected return on financial assets of equivalent risk.

FINANCING DECISION:
Financing decision is the second important function to be performed by the financial
manager. Broadly, he or she must decide when, where, from whom and how to acquire funds
to meet the firm’s investment needs. The central issue before him or her is to determine the
appropriate proportion of equity and debt. The mix of debt and equity is known as the firm’s
capital structure.
Financial manager must strive hard to obtain the best financing mix or the optimum capital
structure for his or her firm. The firm’s capital structure is considered optimum when the
market value of share is maximized.

DIVIDEND DECISION:
Dividend decision is the third major financial decision. The financial manager must decide
whether the firm should distribute all profits, or retain the balance. The proportion of profit
distributed as dividend is called the dividend-payout ratio and like the debt policy, the
dividend policy, should be determined in terms of its impact on the shareholder’s wealth.

LIQUIDITY DECISION:
Investment in current assets affects the firm’s profitability and liquidity. Current Assets
management that affects a firm’s liquidity is yet another important finance function. Current
Assets should be managed efficiently for safeguarding the firm against the risk of illiquidity.
Lack of liquidity in extreme situations can cause the firm’s insolvency. A conflict exists
between profitability and liquidity while managing current assets. If the firm does not invest

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sufficient funds in the current assets, it may become illiquid and therefore risky. But it would
lose profitability as idle current assets would not earn anything.

SCOPE OF FINANCE:
What is finance? What are the firm’s financial activities? How are they related to the firm’s
other activities? Firms create manufacturing capacities for production of goods, some provide
services to customers. They sell their goods or services to earn profit. They raise funds to
acquire manufacturing and other facilities. Thus, the three most important activities of a
business firm are:
 Production
 Marketing
 Finance
A firm secures whatever capital it needs and employs it (finance activity) in activities, which
generate returns on invested capital (production and marketing activities).

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 1.2 NEED FOR THE STUDY
 Ratio analysis is based on line items in financial statements like the balance sheet,
income statements and cash flow statement, the ratio of one item -or a combination of
items-to another item –to another item or combination are then calculated.
 Ratio analysis is used to evaluate various aspects of a company operating and
financial performance such as its efficiency, liquidity, profitability and solvency. The
trend of these ratios over time is studied to check whether they are improving or
deteriorating.
 Ratios are also compared across different companies in the same sector to see how
they stack up, and to get an idea of comparative valuation. Ratio analysis is a corner
stone of fundamental analysis.
 Ratio analysis can provide an early warning of a potential improvement or
deteriorating in a company financial situations or performance. Analysis engages in
extensive number crunching of the financial data in a company’s quarterly financial
report for such hints.
 For a specific ratio, most companies have values that fall within a certain range. A
company whose ratio falls outside the range may be regarded as grossly undervalued,
depending on the ratio.

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 1.3 OBJECTIVES OF THE STUDY
The present study has been undertaken with the following objectives:

 To study, understand and evaluate the financial position of Coromandel Fertilizers.

 To analyze and examine the financial statements in order to understand the
o financial performance of the company.
 To study the existing capital structure and allocation of funds to assets.
 To calculate the important financial ratios, compare them with the ideal ratios and
 Study the cause for deviations if any, as a part of the financial analysis
 To offer suggestions based on my study, understanding, observations and perceptions
 drawn through interviews held with the concerned officials of our esteemed
organization to improve the financial performance of the company.

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 1.4 METHODOLOGY OF THE STUDY
The data required for the analysis and interpretation of the financial performance of”
Coromandel Fertilizers Ltd.”, is collected from the following sources:
 Primary
 Secondary
The primary data is collected from the continuous interaction with employees, accountants in
the accounting department.

The secondary data has been collected through

 Balance sheets
 Records of the company
 Previous annual reports of the company.

In my project entitled “a study on financial performance of the COROMANDAL

FERTILIZERS”, the required data has been collected from the income statements and
balance sheets for the year 2018 to 2023 of the company.

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 1.5 LIMITATIONS OF THE STUDY
The study has been conducted with the following limitations:
 The study mainly has been carried out based on the secondary data i.e., financial
statements.
 The study has been conducted for only 45 days during which it may not be possible to
have a detailed study and thereby draw accurate conclusion.
 The study is mostly based on the secondary data, which may involve certain amount
of bias. The reasons drawn may not be accurate in certain cases.
 The study is based on the annual reports of the company for last 5 years.
 Analysis is confined to ratio analysis, which is only one of the tools of financial
analysis.

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CHAPTER-II
INDUSTRY PROFILE
AND
COMPANY PROFILE

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 2.1 INDUSTRY PROFILE
INTRODUCTION TO FERTILIZERS INDUSTRY
Fertilizers refer to any materials which supplies nutrients to plants UN fields which can be
readily absorbed by them. Since the essential physiological attribute of seeds is their ability to
convert a great duel of nutrients into grain. The spread of this variety lead for greater
consumption of fertilizers simultaneously with increasing demographic pressure on the
agricultural productivity has assumed more importance. This is also contributed to the rising
demand for fertilizers. The fertilizers which are most widely used are classified as under
basing the nutrients available. The most widely nutrients are nitrogen, phosphorus and
potash.

 Straight nitrogenous fertilizers(Urea,A.S,CAN)

 Straight phosphoric fertilizers(SSP,ROCK,PHO)
 NP fertilizers (DAP,20.20.0,28.28.9)
 Straight potash fertilizers(MOP,SOP)
 NPK fertilizers (NPK.17.17.17 etc.,)
 Other fertilizers(ZS etc)

Consequently fertilizers have become a key agricultural input so that the existence of a
domestic fertilizers industry; in crucial to ensure the regular supply of fertilizers and attain
goals self sufficiency and food security. Accordingly government policy is also encouraged
the industry by giving several benefits. India has made great studies in the development of
fertilizers industry and ranks as the fourth largest producer in the world during 1991-92.

Consumption of fertilizers has gone up marginally to 12 million tons in 1991-1992. On the

recommendations of joint parliamentary committee on fertilizer pricing and potassic
fertilizers withdrawn.

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Need of fertilizers:
The primary sector agriculture plays a dominant role in our Indian economy. Nearly 70.6% of
population depends on agriculture for their livelihood. The agriculture sector contributes 30%
of national income and 10% of the earth’s surface area is used to grow agricultural crops
now. This is in past nearly all that can be utilized for the purpose while the planets population
is increasing continually and even greater quantities of food is required to feed obviously
since the cultivates area cannot be expanded to any considerate degree the only way to supply
the needed nutrition is to raise soil fertility.

Fertilizers are mined commercial by products which contain one or more essential plant
nutrients from a material to the quantity of fertilizers it should contain nutrients in
appreciable amount and in readily.
In addition, a fertilizer which is toxic to the soil plants or human being above permissible
limits. Many countries including India have laws as to what can or cannot be labeled as
fertilizers.
Fertilizers are used for improving soil fertility so that it can support larger invests. Fertilizers
represent the most common currently used by farmers to deposited plant nutrients into their
soil to ensure that adequate nutrients are available to feed the crop. India needs about 1
million tones incremental fertilizer nutrient to us per annum in the 90’s to feed our growing
population. The fertilizers consumption in India has invested many folds during last two
decades most of it is being applied manually in regard low fertilizer use efficiency crop
production in India has undergone a reasonable change in last 25 years. Modern agricultural
is high energy dependent in addition this energy input is predominantly based on fossil fuels.
Our country demand for fertilizers is continuously increasing year after year. Fertilizers use
has increased from 4.6 kg/ha in 1965-66 to 50kg/ha in 1984-85 in India total fertilizer
consumption NPK for the country exceeded 8.72 million tones. The number of farm holding
using fertilizers is above 65%. If remaining farmers are also motivated to come within the
fold of adopters and fertilizers use in increased to recommend level the fertilizers will
certainly go much higher.
Commercial fertilizers used in modern agriculture to correct known plant nutrient
deficiencies to provide high level of nutrition to maintain optimum soil fertility condition in
addition to improved crop quality. The major factors influencing the selection of the rate and

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placement of fertilizer are the crop characteristics and climate especially moisture supply
yield goal and the cost of fertilizer in relation to the sales price of the crop.

Agriculture in India:
The growth of Indian economy is based on food grains consumption it is estimated that India
will need 235 million tons of food grain by 2000 A.D. during the 1980-81 and 1990-91 food
gain production increased by about 40 million tons over the next 10- years period this as to be
increased by about 60 million tones which are needed a challenging task. Due to population
explosion in India the next per capital availability of cultivated land that was just 0.3 hectares
in 1950 is reduced to less than 0.14 hectare by turn of the century during the past three
decades 1960-61 to 1990-91 the total food grain production increased by about 90 million
tones of this 90% increase in other commodities further the crops growth is nearly 70% of
country’s rain fed areas.

These areas contributed to production of more than 40% of food grains, 80% of Maize 90%
of pellet and sorghum. About 95% of pales and 755 of oil seeds are also grown in these areas.
Nearly 56% of rice is grown in high rainfall areas without supplementary irrigation similarly
70% of cotton and almost whole jute and menthe are grown under rain fed condition. The
strategy for agriculture development in the 8th plan aims not agriculture commodities for
export to increase the income level of the former. The existence of a domestic fertilizers
industry is crucial to ensure the regulars supply of fertilizers and action goals of sufficiency
and food security as fertilizers have become a key agriculture input. Accordingly government
policy has also encouraged the industry by giving several benefits India ranks as the 4thlagest
producer in the world during 1991-92 as a result of great studies made3 in the development of
fertilizers industry.

Consumption of fertilizers has gone up marginally to 142 million tons. In 1991-92 on the
recommendation of joint parliamentary committee on fertilizer pricing potassium fertilizers
had withdrawn. The fertilizers industry depends on the core sectors of the economy and
agriculture growth i.e., fertilizers. The crucial role and importance of fertilizers have now
been from levy of custom duty. This will have a significant in the cost of production of
fertilizers.

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ORIGIN & DEVELOPMENT OF FERTILIZERS INDUSTRY IN INDIA
The first plant for production of nitrogenous fertilizers was built in 1940, in small capacity,
which augmented with production of about 50,000 per annum. Nitrogen in the form
ammonium sulphate in 1951 from the first public sector fertilizers plant in SINDRI since
then, the government of India has taken up the idea to build fertilizers plants at every state of
the country.

The real expansion of the industry took place 1960’s and since then, it has been expending at
repaid rate in public, private or joint sector to meet growing demand for fertilizers, both
nitrogenous and phosphoric. The farmers always wanted the fertilizers at low form gate
price. The producers always wanted increase the ex-factory pride. In 1977, the Indian
Government took a decisive step towards food sufficiency. It argued that the best way to
increase the fertilizers consumption and through that food grain producers would not be
willi9ng to sell at their price, the government made good the differential by paying then a
subsidy.
The Government Fix two prices for fertilizers:
 The price at which the manufacturer should sell fertilizers to farmers. This price is
fixed levels affordable to the farmers and is uniform for all manufacturers.

 A fair price at which the manufacturer ought to have received from the farmer. This
price is based on prescribed efficiency norms in regard to capacity utilization

Consumption of raw materials and usage of utilities differs with every plant. Thus, each plant
would have a different retention price the is so designed that often covers and the mandatory
cost the company that operated at 90% would earn a 12% post tax return on net worth. A unit
operating at higher operating rates would benefit by way of enhanced recovery of fixed
operating rates would relate charges. The government remembers difference between the
retention price and the Government reimburses the selling price to the manufacture as
subsidy. The cost of transporting the material from the factory to the consumption point it is
also reimbursed to the producers as equated freight.

The retention pricing scheme (RPS) was first introduction for nitrogenous fertilizers in 1977,
for phosphoric fertilizers other then signal super phosphate (SSP) in 1979 and for SSP in
1982. In the same year, imports of DAP were canalized through MMTC in order to project

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the local marketed by 1991, the spiraling expenditure on fertilizers as fertilizer subsidy has
led to the widening of the budgetary deficit. The Rao Government then on a tough ride
towards economic liberalization, was under pressure to knock off fertilizer subsidies, which
has snow balled from Rs.25 core in fiscal 1978 to Rs.3730 core in fiscal 1991.

In July 1991, nitrogenous fertilizers namely Ammonium Sulphate (AS), Calcium Ammonium
Nitrate (CAN) and Ammonium Chloride (AC) were decontrolled while the selling price of all
other fertilizers were aided by 40%. In the din of the political noise that followed, this was
reduced to 30%, with small ads marginal farmers fully exempted from the like. The
exemption in the market place land so they had to be abandoned soon. In August 1991 the
government tracked at the nitrogenous segment by putting AS, CAN and AC again under
control, retention subsidy, decontrolling phosphoric and potash fertilizers, jettisoned the
retention pricing and subsidy scheme and declared DAP.

DAP units in India with annual capacity of production

Table 1
S.No State/Name of the factory Location Annual Capacity
(Figures in 000’MT)
ANDHRA PRADESH
1 Coromandel Fertilizers Ltd., (N.P) 251.00
Visakhapatnam
ANDHRA PRADESH
2 Godavari Fertilizers & chemicals Ltd., (DAP) 300.00
Kakinada
GOA
3 Zaria Agro Chemicals(DA) 150.00
Zaria Nagar
GUJARAT
4 Gujarat State Fertilizers Co.,(DAP) 326.00
Sikka
IFFCO(DAP)
5 Kakinada N.A

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 KARNATAKA
6 MANGALORE Chemicals & Fertilizers Ltd, N.A
(MCIL)(DAP)
Mangalore
KERALA
7 FACT, (DAP) N.A
Ambalamedu
ORISSA
8 Pradeep Phosphates Ltd., 720.00
Paradeep

IMPORTANCE OF DAP
As regards the DAP that provides 65% of the total requirement of P2O5 nutrient, the present
demand of four million tones p2o5 would definitely go up on million tons by 2005 and by
another on4e million tones by 2010.unlike “N” production where the raw material could be
indigenously sourced. DAP or other phosphate fertilizers production in India calls for souring
all the Raw material from the international market. Considering the fact that the international
market with respect to phosphate fertilizers is heading toward a tight situation, it would be
prudent on the part of the Government and industry to tie up as many joint venture as
possible at this stage itself to ensure a sustained availability of flow of P2O5.

Raw materials for DAP are imported from Jordan, Germany, Canada, Rumania, UK, Japan,
Czechoslovakia, Norway, Saudi, Arabia, Philippines, Mexico and other.
Technological Progress:
The two major fertilizers products namely user and DAP are expected to remain to be pivotal
in providing N and sustained availability of the flow of p2o5 respectively in the foreseeable
future.
It is therefore, essential that the fertilizer industry devotes more and more efforts and resource
to improve the productivity and efficiency of the existing products and in particular urea and
DAP/NPK fertilizers.
With the continuing threat of exhaustion of the energy sources any improvement in the
process technology of manufacture of fertilizers should primarily focus on cutting down the
energy consumption, which should in turn help being down the cost of production.

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IMPORT OF DAP:
From countries: Jordan, Germany, Canada, Rumania, UK, Japan, U.S.A., Czechoslovakia,
Norway, Saudi Arabia, Philippines, Mexico, Former , U.S.S.R and other.

During the period 1981-82 to 1990-91 the fertilizers policy was stables the price of both
nitrogenous and phosphoric fertilizer remain unuttered. But the subsidy burden to the
Government of India went on increasing drastically. During 1981-82 it was Rs. 375 crores
where as in the tear 1990-91 it was increased to 4800 cores. Some of the reasons for increase
are agriculture growth, increase in cost production consumption of fertilizers etc.,

The joint parliamentary committee report 1992 suggested to do control phosphoric and
potassic fertilizers in order to reduce the subsidy burden to the government accordingly the
same with effect from 24th August, 1992.

Extensive research in going on world over to develop alternative forms from renewable
natural sources petroleum sources including nature and associated gases would be z-
occupying the dominant position as the major feed as the major feed stock in N (ammonia
production)

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 2.2 COMPANY PROFILE
COROMANDEL INTERNATIONAL LIMITED
INTRODUCTION:
The government of Andhra Pradesh in the endeavor of farming up by establishing the Di-
Ammonium phosphate (DAP) plants in the state.
The phosphoric fertilizers project of Coromandel fertilizers (CIL) is located at Kakinada on
the east coast of India. Growth project of consumption of phosphoric fertilizers. The DAP
plants of Coromandel fertilizers is one of the planned phosphoric unity.
A Coromandel fertilizer (CIL) was incorporated on 17th December. 1981 with its registered
office at Secunderabad. The company became public limited on 31st august, 1984 it was
further agreed to set up the plant at Kakinada, in East Godavari District an initial outlay of
RS.14 corers and a capacity of 3.00lakh MTS per annum.
GFCL became part of the Murugappa Group in July 2003 after Coromandel fertilizers (CIL)
acquired the 26% stake of Government of Andhra Pradesh in the process of disinvestments.
IFFCO, the other major shareholder and co-promoter of the company divested its
shareholding in favor of CIL on 12th April 2007. With this GFCL has become a subsidiary of
CIL, which holds currently 74.92% of the share capital.
Note: “GFCL” has merged in “CIL” so its increased their growth in that particular year
(2007-2008)

COROMANDEL VISION:
To be a leader in the phosphate industry, producing high quality fertilizers at low cost and
giving satisfaction to all stake holders.

COROMANDEL MISSION:
To enhance the prosperity of the farmer through supply of quality farm inputs and related
services to ensure value for money.
Farmers while promoting the economic interest of shareholders in line with the national
priorities.
In consideration of the promotional role played by IFFCO, so long as IFFICO’S the legal
and beneficial owner of not less than 79,70,000 issued and fully paid up equity shares of CIL,
i.e., the IFFCO shares IFFCO shall, as its options:

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Have a right to a share in the marking of CIL’S annual production if DAP/NPK up to a
maximum of 25% of the existing annual production of CIL, provided that such sales shall be
on terms and conditions decided by the boards of directors of CIL. (The board) which terms
and condition not be less advantageous than those offered to any of other CIL’S
marketers/distributors
Get DAP/NAK fertilizers manufactured in CIL’S plant (the plant) unto 25% of the existing
annual production capacity of the plant by supplying raw materials at IFFCO’S cost, and on
payment of conversion charges to CIL to be mutually determined on a similar basis as agreed
between IFFICO and CIL in the past.
The financial institution like IDBI, ICICI&IFCI and consortium of commercial banks
financed the project by financing of long –term loans (Thus, CIL has setup a Dia-Ammonium
phosphate (DAO) plants with a capacity of 3 lakh per annum at Kakinada.
The plant having been expended from time to time, the installed capacity has been brought to
8.32lakh MTS per annum, with capability to produced wide range of products.
CIL into production in December, 1987 its core DAP plant a modern and a sophisticated
fertilizers plant it produces quality granular DAP confirming the highest international
standards.
DAP is compile fertilizers and the raw materials required for production are liquid ammonia
and phosphoric Acid.

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COMPANY AT GLANCE: COROMANDEL INTERNATIONAL
Company LIMITED

Year : 17th December, 1981

Promoter : Government of Andhra Pradesh, IFFCO
Fertilizer Trade : 18:46:0
Annual production of DAP : 300000MMT
Capital Cost : 108
Means of Finance : 30% Equity, 70% Borrowed Capital
Major Raw Materials : Phosphoric Acid ,Ammonia, Urea ,Filler
Utilities, Water, Power , Bags
Marketing Territorities : Andhra Pradesh, Maharashtra,
Uttar Pradesh, Bihar, Karnataka, west
Bengal
Transportation : Rail 70%, Road 30%.
Fertilizers : Urea, MOP, SOP, AS, SZ Car.
Pesticides Monochrotophos, Qunolphos, Edhosulphon,
Carbondasin
Registered office : “VaniNilayam”
50, sedastian Road,
Secunderabad-533003
Bankers : State Bank of India,
State Bank of Hyderabad,
Andhra Bank,
Industrial Development Bank of India
Factory : Beach Road,
Kakinada-533001

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BOARD OF DIRECTORS:

Chairman : Mr.A.Vellagan
Directors : Mr.K.Balasubramaniam
Mr.N. Srinivasan
Mr.B.V.R. Mohan Reddy
Mr. Santhosh Reddy

Alternative Director : Mr.RakeshKapur

President and whole Time
Director : Mr.Ravi Chandra
Mr.K.A Nair
Company Secretary : Mr.P.Varadarajan (legal)

RECENT CHANGES IN COROMANDEL INTERNATIONAL LTD

Sale of shares of Government of Andhra Pradesh:
The Government of Andhra Pradesh have invited upon bids, by way of notices published in
the news papers on 10.05.2003, for sale of its 82,80,000/- Equity shares of Rs.10/-each.
Consequent upon the disinvestment of Government of Andhra Pradesh (GOAP) of its
shareholding in favor of M/s Coromandel International Limited (CIL), a consequential
change in the management of the company. Talking into consideration he changes
shareholders. Agreement has been entered into by and between M/s CIL and M/s Indian
Farmer Fertilizers Co-operative Limited (IFFCO) on 25% July 2003. These change
necessitated certain amendments to the articles of Association of the company, which require
the approval of the shareholders by way of a special resolution as required under section 31
of the companies Act, 1956.

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PLANT CAPACITY SUBSEQUENT TO EXPANSION
CIL’s plant capacity is now enhanced to 8,32,000 MTs per annum in terms of the
company’s regular grade DAP production Subsequent to completion to completion of up
gradation in both trains with pipe reactor.

PERFORMANCE PROFILES
Production:
There has been remarkable growth in the production of the company in terms of production
and turnover during the year under review as compared to the performance of the company
during the previous company achieved a production of 806807MTS of fertilizers consisting
of 740613MTS consisting of 1504191 MTS in production.

Marketing:
The sales performances of the company during the year under review had been quite
satisfactory in spite of stiff competition and increase in domestic availability of DAP. The
cumulative sales of phosphate Fertilizers of the company with 780152MTS as against the
previous year’s sales of 736806MTS. During the year company sold total sales 780152 MTS
consisting of 596141MTS of DAP 80684 other complexes and 103327 are traded products.
DISTRIBUTION NET WORK:
Companies marketing operating are performed and the distribution is carried out
through six maims states namely:
 Andhra Pradesh
 Madhya Pradesh
 Uttar Pradesh
 Maharashtra
 Bihar and

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REGIONAL OFFICES:
The regional officers are at:
 Bhopal
 Nagpur
 Lucknow

FINANCE:
During the 2015-2016 company get good profit i.e., 1,18,399 is the gross profit after deletion
of the tax is 574.44 this is the net profit of CIL.
During the 2016-2017 company has incurred losses for cause of stiff competition is sales so
company sales decrease and it is effect on to increase the expenditure.
During the year 2017-2018 company had also increase in losses. But the loss is not been
much more than previous year.
Again from 2019-2020 company is in good position in turnover. In the year company get
good profit and again good stability position financially.

SALES OF FERTILIZERS AND QUNTITY DURING THE LAST FIVE

YEARS
Table 2
Profit of the Provision for
Year Income Expenditure Profit/Loss
year income tax

2015-16 72535.47 74559.40 2023.93 0.00 1362.40

2016-17 90350.99 89322.91 1028.28 - 1028.08

2017-18 121146.00 118554.25 2591.75 - 1709.28
2018-19 152564.42 148362.01 4203.41 - 2610.00
2019-20 180353.82 172914.88 7438.94 - 4928.94

LAND ACQUISITION:
CIL has acquired 311.2acres of land from the Government of Andhra Pradesh and other
private owners. Out of this area, around 100 acres is covered by plant. About 45 acres are in
railway siding and the remaining is the low-lying area. Green belt is developed around one
kilometer radius of DAP unit per ecological and environmental population control.

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POWER AND WATER:
Power is supplied from APSEB rid to the 132 KV sub-station of CIL and distribute at refined
voltages to the consumers with in the plant.
Water is supplied from Arthakatla within the proximity of 8 K.M and treated water is
supplied to the consumers at different location with plant.

OBJECTIVE OF COROMANDEL INTERNATIONAL LIMITED

 TOWARDS NATION

To conduct profitable and progressive fertilizers products distribution and other related
agricultural input business of the wealth of the nation.
 TOWARDS INVESTORS

To provide good return on capital to generate internal resources for growth expectation
and diversification of industry and progress agricultural production.

IMPORTANT FUNCTION OF PLANT ACCOUNTS DEPARTME

1. Revenue and capital budgets monitoring and controlling:
Year budget activity starts during the months of November, December and department wise
revenue budget requirement will be received by plant account and after verification and
discussions with individual department the same will be consolidated and will be sent to
corporate finance the data sent by plant will be further scrutinized and corporate finance will
prepared revenue budget of the company after considering the budget requirements of making
and corporate office. Similarly and safety requirements and operational and maintenance
bases VED analysis.
Both capital and revenue budgets will be put up board during February/March after their
kind approval. Approved budgeted copies will be received by plant accounts, which will be
divided into departmental budget and will be sent to individual departments of their use. All
the expenditure proposed are monitored and controlled as per the approved budget.
2. Arrangement of financial concurrences:
Based on the approved budget indenting department prepares a purchase requisition and
material department initiates the procurement process by floating enquires in press if value
exceeds Rs.10.00 lakhs, minimum five enquiries if the value in press is more than Rs.1 lakh
and minimum three enquires in case the values less than Rs.11 lakh material department will

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be enquires and a quotation comparative statement (QCS) will be prepared to identify the L1
party and a purchase other will be placed on the party as per recommendation o the indents
and approval of the GM any deviation from the procedures requires the prior approval of the
competent authority with justifications.
Proposal before final approval will be come to finance for concurrence. Finance concurrence
for the proposal will be given after verifying the budget provision, purchase procedure,
delegation of power and other guide lines issued in this regard.
3. Management Information System:
Preparation of monthly cost sheet of DAP and NPK if produced during that month.
Preparation of variance to find out the rate, usage, volume and expenditure variances for
taking corrective action, budget commitment reports department wise all other date as
required by corporative finance from time to time.
4. Insurance:
Obtaining the insurance coverage for raw materials socks, finished product in soil and bag
aging plant, transmit insurance, ship insurance, fixed assets insurance etc. arrangement of
renewal, the expiring policies and follow up for claim settlements.
5. Import of spares etc:
Having foreign letter of credit facility availed with the bankers for import of spares as per
requirement of indenter.
6. Raw Material Accounting:
Monthly phosphoric Acid, ammonia, Urea, Water, LAHS bags etc., consumption figures will
be arranged by DAP and off sites Department to accounts department and the monthly
consumption after verification will be booked in the general ledger as per the weighted
average cost of raw materials prices stores ledge (PSL). Import payments are handled at
corporate office and after payment the same is transferred to plant in rupees, which will be
taken as receipt, as consumption is taken as issue in PSL.
7. Arrangement of payment to creditors for supplies, working and projects:
After receipts and acceptance of the indented at stores material receive report (MRR) will
be prepared and original will be sent to accounts. The same will be valued as per invoice and
purchase order. Supplies bill are processed as arranging the payment work and projects bills
are processed as per the work order and the contract and payment will be arranged.

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8. Priced Stores ledger (STORES):
Stores department will enter the quantity part of the MRR and account will feed the
value for the same. Materials Issued voucher (MIV0 will be entered into the package by store
for every issue as per the requirement of indenter, indicating the quantities value of MIVS are
arrived on the basis of weighted average cost method by identifying the material code.

9. Establishment of pay Rolls:

Approximately around 440 employees are working in Kakinada plants and
Visakhapatnam. All the establishment payments and salaries for the employees are arranged
from the plant submission of ITDS returns to statutory authorities’ payments for other
statutory deduction are complied.
10. Cash and Bank:
Plant accounts is having total working capital sub limits of Rs.295 lakhs in the bank
viz. state bank of India Rs.225 lakhs, Bank of India Rs.50 lakh and Andhra Bank Rs.20 lakh.
Funds are transferred from Corporative official to plant based on the requirement. Monthly
bank reconciliation of the plant accounts will be prepared. Cash credit interest debit will be
verified before accounting the same, liaison with bank, preparation of daily cash flow
statement etc.
11. Audit:
Plant accountant is responsible for attending the following:
1. Statutory Auditors

Statutory Audit by statutory auditors, appointed by shareholders at AGM and they

will continue to hold the office till the completion of next AGM.
2. Tax Auditors:

Tax auditors are appointed by Board of directors and after the Tax Audit the auditors
will give the reports, which will be submitted ton income Tax Authorities along with
return of income of the company.
3. Cost Audit:

Based on the recommendation of the Board, Government will appoint the cost
auditors and after completion of report the auditor will submit the same to company
Law Board with a copy to the company.

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 4. Internal Auditors:

The internal auditors will conduct periodical audits, and replies will be arranged for
their finding.

COROMANDEL INTERNATIONAL LIMITED AWARDS

 ISO 14001 certificates received by Coromandel for environment management system.
 Government of Andhra Pradesh labor department May Day Award 2017 for Best
Management.
 ISO 9001 certificate received for quality management system
 FAPCCI Award received for outstanding contribution of Coromandel for social
welfare.
 FAI Award for improvement in overall performance for the year 2004-05.

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 CHAPTER-III
THEORETICAL FRAMEWORK OF THE STUDY

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 3.1 THEORETICAL FRAME WORK
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated
quotient of two mathematical expressions and relationship between two or more things. In
financial analysis a ratio is used as an index for evaluating the financial position and
performance of the firm. The absolute accounting figures reported in the financial statements
do not provide a meaningful understanding of the performance and financial position of a
firm. An accounting figure coveys meaning when it is related to some other relevant
information.

Ratio analysis is the process of determining and interpreting numerical relationship based on
financial statements. A ratio is a statistical yard stick that provides a measure of the
relationship between variables of figures. Thus relationship can be expressed as a percentage
on as quotient.

Ratio analysis is the systematic use of ratio to interpret the Financial Statements so that the
strength and weakness of a firm as well as its historical performance and current financial
position can be determined. The relational of ratio analysis lies in the fact that it makes
related information comparable. A single figure by itself has no meaning but when expressed
in terms of related figure. It yields significant inferences.

DEFINITION
“The relationship between two accounting figures expressed mathematically”.

MEANING OF RATIO:
Ratio is one figure express in terms of another figure. It is a mathematical yardstick that
measures the relationship two figures, which are related to each other and mutually
interdependent. Ratio is express by dividing one figure by the other related figure. Thus a
ratio is an expression relating one number to another. It is simply the quotient of two
numbers. It can be expressed as a fraction or as a pure ratio or in decimal absolute figures as
“so many times”. As accounting ratio is an expression relating two figures or accounts or
two sets of account heads or group contain in the financial statements.

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MEANING OF RATIO ANALYSIS:
Ratio analysis is the method or process by which the relationship of items or group of items
in the financial statements are computed, determined and presented.
The basis for financial analysis of any firm is financial information. A business firm prepares
its financial statements as they provide useful financial information and are helpful for the
purpose of decision-making. Financial information is needed to predict, compare and
evaluate the firm’s earning ability. The profit or loss statement shows the operating profit of
the concern and the balance sheet depicts the balance value of acquired assets and liabilities
at a particular point of time.

For the purpose of obtaining the material and relevant information necessary for ascertaining
the financial strengths and weakness of an enterprise, it is necessary to analyze the data
depicted in the financial statement. The analysis is done by properly establishing the
relationship between the items of balance sheet and profit /loss account.

Financial statement analysis’ is a meaningful interpretation of ‘Financial statements’ for

‘parties demanding financial information’. There are certain steps, which have to be taken
into consideration for financial statement analysis:
 Identification of user’s purpose.
 Identification of data source.
 Selecting the techniques to be used for such analysis.

Meaning and concept of Financial Analysis:

The term Financial Analysis is also known as analysis and interpretation of financial
statements refers to process of determining financial strengths and weakness of the firm by
establishing strategic relationship between the items of the Balance sheet, Profit & Loss A/c
and operative data. The purpose of financial analysis is to diagnose the information
contained in the financial statements so as to judge the profitability and financial soundness
of the firm. Financial statements analysis is an attempt to determine the significance and
meaning of the financial statement data so that the forecast may be made of the future
earnings, ability to pay interest and debt maturities and profitability of a sound dividend
policy.

36`
The term analysis is used to mean the simplification of financial data by methodical
classification of the data given in financial statements, interpretation means explaining the
meaning and significance of the data so simplified. However, both analysis and
interpretation are interlinked and complementary to each other. Analysis is useless without
interpretation and interpretation without analysis is difficult or even impossible.

Financial analysis is required for many Financial Management Decisions:

 How to manage the finances to achieve the strategic goals of the institution
 How to increase profitability
 How to reach self-sufficiency/breakeven point
 How to increase efficiency especially reducing the cost per unit
 What is the optimum level of each different operational expense including the cost of
funds
 How to manage the costs of Human resources as part of overall human resource
management
 How to deal with the effect of inflation
 How much capital do you need?
 What should the asset structure be?
 How to manage the fixed assets, i.e., the depreciation policy, how to finance them, are
they insured
 Are they safe?
How to undertake trend analysis and to compare actual performance against planned
performance
Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial
health and profitability of business enterprises. Ratio analysis can be used both in trend and
static analysis. There are several ratios at the disposal of an analyst but their group of ratio he
would prefer depends on the purpose and the objective of analysis.

While a detailed explanation of ratio analysis is beyond the scope of this section, we will
focus on a technique, which is easy to use. It can provide you with a valuable investment
analysis tool.

This technique is called cross-sectional analysis. Cross-sectional analysis compares financial

ratios of several companies from the same industry. Ratio analysis can provide valuable

37`
information about a company's financial health. A financial ratio measures a company's
performance in a specific area. For example, you could use a ratio of a company's debt to its
equity to measure a company's leverage.

By comparing the leverage ratios of two companies, you can determine which company uses
greater debt in the conduct of its business. A company whose leverage ratio is higher than a
competitor's has more debt per equity. You can use this information to make a judgment as to
which company is a better investment risk.

However, you must be careful not to place too much importance on one ratio. You obtain a
better indication of the direction in which a company is moving when several ratios are taken
as a group.

OBJECTIVES OF RATIOS:

Ratio is work out to analyze the following aspects of business organization:

 Solvency:
1) Long term
2) Short term
3) Immediate
 Stability
 Profitability
 Operational efficiency
 Credit standing
 Structural analysis
 Effective utilization of resources
 Leverage or external financing

IMPORTANCE OF RATIO ANALYSIS:

The importance of ratio analysis lies in the fact that it presents facts on a Comparative basis
and enables the drawing of inferences regarding the Performance of the firm. Ratio analysis
is relevant in assessing the performance of a firm in respect of the following points.
(a) Liquidity Position:
With the help of ratio analysis conclusions can be drawn regarding the liquidity position of
the firms. The liquidity position of the firms would be satisfactorily if it is able to meet its

38`
current obligations when they become due. The liquidity ratios are particularly useful in
credit analysis by banks and other suppliers of short term loans.
(b) Long-term Solvency:
Ratio analysis is equally useful for assessing the long term financial viability of a firm. The
long term solvency is measured by the leverage/ capital structure and profitability ratios,
which focus on earning power and operating efficiency. Ratio analysis reveals the strength
and weakness of a firm in this respect.
(c) Operative Efficiency:
It is relevant from the view point of management and it throws light on the degree of
efficiency in the management and utilization of its assets. The ultimate analysis depends upon
the sales revenue generated by the use of its assets total as well as its components.
(d) Overall Profitability:
In this the management is constantly concerned about the overall profitability of the
enterprise. They are concerned about the ability of the firm to meet its short term as well as
long term obligation s to its creditors to ensure a reasonable return of its owner and secure
optimum utilization of the asserts of the firm .
(e) Inter firm comparison:
Ratio analysis is also stepping stone to remedial methods. This is made possible due to inter-
firm comparison and comparison with industry averages. One of the popular techniques is to
compare the ratios of the firm with the industry averages. An inter firm comparison would
demonstrate the relative position of its competitors.

(f) Trend Analysis:

Ratio analysis enables a firm to take the time dimension into account. In other words
whether the financial position of as firm is improving or deteriorating over the years. This is
made possible by the use of trend analysis. A significant of trend analysis of ratio lies in the
fact that the analyst can know the direction of moment. The present level may be
satisfactorily but the trend may be declining one. Thus the trend analysis is of great
significance.

Basis of comparison:
The ratio analysis involves several types of comparison. They are listed below:
a. A comparison of present ratio with the past and expected future

39`
 ratios of the same firm.
b. A comparison of the ratios of the firm with those of similar firm or with industry
averages at the same point time. Such a comparison would provide considerable
insights into a relative financial condition and Performance of the firm.
c. Trend series or analysis is also one of the comparison . A Financial ratio over a
period of time is compared, it is known as trend. The analysis should not simply
determine the change, but more important He should understand why the ratios have
changed.

The other comparison may related to comparison of items with a single year’s financial
statement of a firm comparison with standards or plans.

FORMS OF RATIO:
Since a ratio is a mathematical relationship between two or more variables / accounting
figures, such relationship can be expressed in different ways as follows

A] As a pure ratio:

For example the equity share capital of a company is Rs. 20,00,000 & the preference share
capital is Rs. 5,00,000, the ratio of equity share capital to preference share capital is
20,00,000: 5,00,000 or simply 4:1.

B] As a rate of times:

In the above case the equity share capital may also be described as 4 times that of preference
share capital. Similarly, the cash sales of a firm are

Rs. 12, 00,000 & credit sales are Rs. 30, 00,000. So the ratio of credit sales to cash sales can
be described as 2.5 [30, 00,000/12, 00,000] or simply by saying that the credit sales are 2.5
times that of cash sales.

C] As a percentage:

In such a case, one item may be expressed as a percentage of some other item. For example,
net sales of the firm are Rs.50,00,000 & the amount of the gross profit is Rs. 10,00,000, then
the gross profit may be described as 20% of sales [ 10,00,000/50,00,000]

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STEPS IN RATIO ANALYSIS
The ratio analysis requires two steps as follows:
1. Calculation of ratio

2. Comparing the ratio with some predetermined standards. The standard ratio may be the
past ratio of the same firm or industry’s average ratio or a projected ratio or the ratio of the
most successful firm in the industry. In interpreting the ratio of a particular firm, the analyst
cannot reach any fruitful conclusion unless the calculated ratio is compared with some
predetermined standard. The importance of a correct standard is oblivious as the conclusion is
going to be based on the standard itself.

PRE-REQUISITIES TO RATIO ANALYSIS

In order to use the ratio analysis as device to make purposeful conclusions, there are certain
pre-requisites, which must be taken care of. It may be noted that these prerequisites are not
conditions for calculations for meaningful conclusions. The accounting figures are inactive in
them & can be used for any ratio but meaningful & correct interpretation & conclusion can be
arrived at only if the following points are well considered:

1) The dates of different financial statements from where data is taken must be
same.
2) If possible, only audited financial statements should be considered, otherwise
there must be sufficient evidence that the data is correct.
3) Accounting policies followed by different firms must be same in case of cross
section analysis otherwise the results of the ratio analysis would be distorted.
4) One ratio may not throw light on any performance of the firm. Therefore, a
group of ratios must be preferred. This will be conductive to counter checks.
5) Last but not least, the analyst must find out that the two figures being used to
calculate a ratio must be related to each other, otherwise there is no purpose of
calculating a ratio.

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 Figure 1
CLASSIFICATION OF RATIO

BASED ON FINANCIAL BASED ON FUNCTION BASED ON USER

STATEMENTS

1 BALANCE SHEET 1 LIQUIDITY RATIOS 1 RATIOS FOR

RATIOS 2 LEVERAGE RATIOS SHORT TERM
2 REVENUE 3 ACTIVITY RATIOS CREDITORS
STATEMENT 4 PROFITABILITY 2 RATIOS FOR
RATIOS RATIOS SHAREHOLDERS
3 COMPOSITE 5 COVERAGE 3 RATIOS FOR
RATIOS RATIOS MANAGEMENT
4 RATIOS FOR
LONG TERM
CREDITORS
BASED ON FINANCIAL STATEMENTS:
Accounting ratios express the relationship between figures taken from financial statements.
Figures may be taken from Balance Sheet, P& L A/C, or both. One-way of classification of
ratios is based upon the sources from which are taken.

1. Balance sheet ratios:

If the ratios are based on the figures of balance sheet, they are called Balance Sheet Ratios.
E.g. Ratio of current assets to current liabilities or ratio of debt to equity. While calculating
these ratios, there is no need to refer to the Revenue statement. These ratios study
the relationship between the assets & the liabilities, of the concern. These ratio help to judge
the liquidity, solvency & capital structure of the concern. Balance sheet ratios are Current

42`
ratio, Liquid ratio, and Proprietary ratio, Capital gearing ratio, Debt equity ratio, and Stock
working capital ratio.

2. Revenue ratios:
Ratio based on the figures from the revenue statement is called revenue statement ratios.
These ratios study the relationship between the profitability & the sales of the concern.
Revenue ratios are Gross profit ratio, Operating ratio, Expense ratio, Net profit ratio, Net
operating profit ratio, Stock turnover ratio.

3. Composite ratios:
These ratios indicate the relationship between two items, of which one is found in the balance
sheet & other in revenue statement.
There are two types of composite ratios-
a) Some composite ratios study the relationship between the profits & the investments of
the concern. E.g. return on capital employed, return on proprietors fund, return on
equity capital etc.
b) Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios, dividend
payout ratios, & debt service ratios

BASED ON FUNCTION:
Accounting ratios can also be classified according to their functions in to liquidity ratios,
leverage ratios, activity ratios, profitability ratios & turnover ratios.

1 Liquidity ratios:
It shows the relationship between the current assets & current liabilities of the concern e.g.
liquid ratios & current ratios.

2 Leverage ratios:
It shows the relationship between proprietors funds & debts used in financing the assets of
the concern e.g. capital gearing ratios, debt equity ratios, & Proprietary ratios.

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3] Activity ratios:
It shows relationship between the sales & the assets. It is also known as Turnover ratios &
productivity ratios e.g. stock turnover ratios, debtor’s turnover ratios.

4 Profitability ratios:
a) It shows the relationship between profits & sales e.g. operating ratios, gross profit
ratios, operating net profit ratios, expenses ratios
b) It shows the relationship between profit & investment e.g. return on investment,
return on equity capital.

5 Coverage ratios:
It shows the relationship between the profit on the one hand & the claims of the outsiders to
be paid out of such profit e.g. dividend payout ratios & debt service ratios.

BASED ON USER:

1. Ratios for short-term creditors:

Current ratios, liquid ratios, stock working capital ratios

2. Ratios for the shareholders:

Return on proprietors fund, return on equity capital

3. Ratios for management:

Return on capital employed, turnover ratios, operating ratios, expenses ratios

4. Ratios for long-term creditors:

Debt equity ratios, return on capital employed, proprietor ratios.

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MANAGERIAL USE OF RATIO ANALYSIS:
1) Helps in Decision making: Financial statement is prepared primarily for decision-
making. But the information provided in financial statements is not an end in itself and no
meaningful conclusion can be drawn from these statements alone. Ratio analysis helps in
making decision on the information provide in these financial statements.
2) Helping in Financial forecasting and Planning: Ratio analysis is of much help in
financial forecasting and planning. Planning is looking ahead and the ratios calculated for a
number of years work as a guide for the future. Meaningful conclusions can be drawn for
future from these ratios. Thus, ratio analysis helps in forecasting and planning.
3) Helping in Communication: The financial strength and weaknesses of a firm are
communicated in a more easy and understandable manner by the use of ratios. The
information contained in the financial statements is conveyed in a meaningful manner to the
one for whom it is meant. Thus, ratios help in communication and enhance the value of
financial statement.
4) Helps in Co-ordination: Ratios even helps in co-ordination, which is of utmost
importance in effective business management. Better communication of the efficiency and
weaknesses of an enterprise results in better co- ordination in the enterprise.
5) Other uses: There are so many other uses of ratio analysis. It is an essential part of the
budgetary control and standard costing. Ratios are of immense importance in the analysis and
interpretations of financial statements as they bring out the strength and weakness of the firm.
(a) Utility of share holders/investors: an investor in the company will like to assess the
financial position of the concern where he is going to invest. His first interest will be security
of his investment and then a return in the form of dividend or interest. For the3 first purpose
he will try to assess the value of fixed loans raised against them. The investor will feel
satisfied only if the concern as sufficient amount of asserts. Long term solvency ratios, on the
other hand, will be useful to the investor’s initial Marking up his mind whether financial
position of the concern warrants further investment or not.
(b) Utility to Creditors: The creditors’ are or suppliers extent Short-term credits to the
concerns. They are interested to know whether their payments at a specified time or not. The
concerns pay short-term Creditors out of its current assets. If the current assets are quite
sufficient to meet current liabilities then the creditors will not hesitate in extending Credit
facilities. Current and quick ratios will give an idea about the Current financial position of the
concern.

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(C) Utilities of Employees: The employees are also interest in the financial position of the
concern especially profitability. Their wage I increases and amount of fringe benefits are
related to the volume of profits earn by the concern the employees make use of information
available, in financial statements. Various profitability ratios relating to gross profit,
operating profit, Net profit etc,. Enable employees to put forward their view point for the
increase of wages and other benefits.
(d) Utility to government: Government is interested to know the overall strength of the
industry. Various financial statements published by industrial units are used to calculate
ratios for determining the short- term, long- term and overall finance position of the concern.
Profitability indexes can also be prepared with the help of ratios. Government may base its
future policies on the bases of industrial information from various units. The ratios may use
as indicators of overall financial strength of public as well as private sector. In the absence of
the reliable economic information, government plans and polices may not prove successful.

ADVANTAGES OF RATIO ANALYSIS:

The various advantages of ratio analysis are given below:
1. It becomes easier to analysis.
(a) Liquidity (b) Solvency (c) Profitability (d) Efficiency
2. It helps the management in evolution of the present health and the future planning can be
based on the parameters.
3. The efficient with which the firm is utilizing its various assets in Generating sales
revenue.
4. The ratio analysis helps in decision-making process.
5. The ratio analysis is also helps in security analysis.
6. The details of cumbersome set of numbers are reduced to easily interpretable numbers.

LIMITATIONS OF RATIO ANALYSIS:

The various limitations of ratio analysis are given below:
 A single ratio not covers much of sense. To make better interpretation a number of
ratios have to calculated, which is likely to confuse the analyst for interpretation.
 Financial statements can be easily window dressed their figures. As a result the
correct picture cannot be drawn up by the ratio analysis, although certain structural
defects can be detected.

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  Comparison between two variables proves worth provide basis of Valuation is
identical.
 Ratios are computed on the basis of past result. It does help properly to predict future,
to prepare budgets and estimates.

PURPOSE OF RATIO ANALYSIS:

1. To identify aspects of a business’s performance to aid decision making
2. Quantitative process – may need to be supplemented by qualitative Factors to get a
complete picture.
3. 5 main areas:
 Liquidity – the ability of the firm to pay its way
 Investment/shareholders – information to enable decisions to be made on the extent
of the risk and the earning potential of a business investment
 Gearing – information on the relationship between the exposure of the business to
loans as opposed to share capital
 Profitability – how effective the firm is at generating profits given sales and or its
capital assets
 Financial – the rate at which the company sells its stock and the efficiency with
which it uses its assets

ROLE OF RATIO ANALYSIS:

It is true that the technique of ratio analysis is not a creative technique in the sense that it
uses the same figure & information, which is already appearing in the financial statement. At
the same time, it is true that what can be achieved by the technique of ratio analysis cannot be
achieved by the mere preparation of financial statement.
Ratio analysis helps to appraise the firm in terms of their profitability & efficiency of
performance, either individually or in relation to those of other firms in the same industry.
The process of this appraisal is not complete until the ratio so computed can be compared
with something, as the ratio all by them do not mean anything. This comparison may be in
the form of intra firm comparison, inter firm comparison or comparison with standard ratios.
Thus proper comparison of ratios may reveal where a firm is placed as compared with earlier
period or in comparison with the other firms in the same industry.

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INTRODUCTION OF RATIO ANALYSIS:
Ratio analysis is a powerful tool of financial analysis. It helps in making certain decision
calculation of more ratios does not serve any purpose. Unless several appropriate ratios are
analyzed and interpreted.
A ratio is a simple arithmetical expression of the relationship of one number to another.
According to Wixom, Kelly and Bedford a ratio “is an expression of the quantitative
relationship between two numbers”.
Ratio Analysis is a widely used tool of financial analysis. A ratio is defined as the “indicated
quotient of two mathematical expressions” and “a relationship between two or more things”.
A ratio is used as an index or yardstick for evaluating the financial Position and performance
of the firms, the relationship between two accounting inures expressed mathematically, is
known as financial ratio. Ratio helps to summarize the large quantities of financial data and
to make qualitative Judgment about the firm’s financial position. A rational ratio analysis lies
in the fact that it makes related information comparable. A ratio may be expressed simply in
one number as the result of a comparison between two figures.
Ratio may be expressed in the following ways:-
 In the pure ratio.
 As a rate.
 As a percentage.

TYPES OF RATIO’S:
The ratios are divided into 4 types. They are
 Liquidity ratios
 Leverage ratios
 Activity ratios
 Profitability ratios.

1) Liquidity ratios:

Liquidity means prerequisites for the survival of firm. The liquidity Ratio’s measures the
ability of the firm to meet its short applications and reflect the short term financial solvency
of a firm. The ratios which indicate the Liquidity of the firm are:

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(a) Current Ratio:
The current ratio is the ratio of total assets to total current liabilities. The higher the current
the larger amount of rupees available per rupee of current liabilities. The, more the firm’s
ability to meet current obligation and the grater the safety of funds on short term creditors.
Current assets
Current Ratio= ---------------------------
Current labilités
Generally a current ratio of 2:1 or more consider satisfactorily.

(b) Quick Ratio:

This ratio enables the relationship between quick assets and current liabilities. The quick ratio
is found out by dividing the total of the quickest asserts by total current liabilities

Current Asserts- Inventories

Quick Ratio = ---------------------------------------
Current liabilities
Basically quick ratio of 1:1 is considered satisfactorily for current financial condition.

2) Leverage Ratios:
The second category of the financial ratios is leverage ratios. This ratio is calculated from the
balance sheet items to determine the proportion of dept in total financing. Leverage ratios are
calculated to a judge the financing position of the firm.
a. Debt Equity ratio:
This is calculated by dividing total debt by Net worth or capital employed.

Total debt

Debt Equity Ratio = --------------------------

Net worth

Total debt means short and long term borrowings, financial institutions
Debentures/bonds, book borrowings, public deposits and other interest bearing Loans.

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(b)Dividend coverage Ratio:
It shows the relationship between the profits after payment of interest and taxes and
preference dividend.

Profit after tax

Dividend Coverage Ratio = ---------------------------------
Preference dividend

1) Interest Coverage Ratio:

It shows the relationship between the profits before payment of interest and taxes and fixed
interest charged.

EBIT
Interest Coverage Ratio = ---------------------
Interest

2)Capital Equity Ratio:

This ratio indicates long-term solvency of the Organization. It is computed by dividing
capital employed by Net worth.

Capital Employed
Capital Equity Ratio = -------------------------------
Net worth
3) Activity Ratios:
Activity Ratios are concerned with measuring the efficiency in asset Management.
Sometimes these ratios are called efficiency ratios or asset Utilization ratios. Actually ratios
involve a relationship between sales and Assets. There are various types of activity ratios.
(a) Inventory Turnover Ratio:
This ratio can be computed by dividing the cost of goods sold by the average inventory.
Cost of Goods sold
Inventory Turnover Ratio= ------------------------------------
Average Inventory

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Inventory Turnover Period:
No. of Days in a year

Inventory Turnover Period = ---------------------------------------

Inventory Turnover Ratio

(b) Debtors Turnover ratio:

The second major activity ratio is the debtor’s turnover Ratio. The debtor’s turnover ratio is
a test of the liquidity of the debtors of a firm. The debtor’s turnover ratio is found out by
dividing credit sales by average debtors.
Sales
Debtors turnover ratio = ------------------------------
Debtors
Debtors Collection Period:
This ratio helps to identify the collection of Credit from debtors. It is also known as Debtors
Velocity. It shows the Relationship between numbers of days in a year to Debtors turnover.
365
Debtors collection period = -------------------------------------
Debtors’ Turnover Ratio
(c) Assets Turnover Ratio:
A firm should manage its sales sufficiently to maximize its sales. The relationship between
the sales and assert is called assets turnover.

Sales
Assets Turnover Ratio = ---------------------------
Total Assets

(d) Fixed Assets to Capital Employed:

This ratio shows the relationship between the fixed assets and capital employed.

Fixed Assets
Fixed asset to Capital Employed = -----------------------------
Capital employed

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4) Profitability Ratios:
These ratios are determined on the bases of either sales or investments. Profitability ratios are
calculated to measure the operating efficiency of the company. Profitability ratios are two
types:
1. Profitability and relation to sales.
2. Profitability in relation to investment.
1) Profitability and relation to sales:
These ratios are based on the premise that a firm should earn sufficient profit on each rupee
of sales. In this, the ratios consist of:
Profit Margin: This profit measures the relationship between profit and Sales. There are two
types of profit margins
a) Gross profit:
This is also known as gross margin. It is calculated by dividing gross profit by sales.

Sales – Cost of goods sold

Gross profit = ---------------------------------------- x 100

Sales
(b) Net profit:
This ratio is also known as net margin. This measures the relationship between net profit and
sales of a firm.

Profit after tax

Net profit Ratio = ------------------------- x 100
Sales
2. Profitability in relation to investment:
The profitability ratios can also be computed by relating the profit of a firm to investment.
(a) Return on Investment:
It is also known as “overall profitability ratio”. It indicates earning gained from investment. It
shows relationship Between Earnings before interest and taxes to Capital employed.
EBIT
Return on Investment = ------------------------------- x 100
Capital Employed

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(b) Return on Equity:
In this ratio, the earnings after taxes are related to the market value of total share holder’s
fund.
Profit after Tax
Return on Equity = ------------------------------
Net worth

(c) Return on Capital Employed:

It shows relationship between profits after taxes before interest to capital employed.
Capital employed refers to long-term funds provide by owners.
P.A.T + interest
Return on Capital Employed = ------------------------------
Capital employed

(d) Return on Assets:

The profitability ratios are measured in terms of the relationship between net profits and
assets.

Profit after Taxes

Return on Asserts = --------------------------------
Total Assets
(e) Earnings per share ratio:
This ratio helps in the assessment of the profitability of the firm from the stand point
of equity share holders. It calculates the earrings per each equity share.
Profit after Tax

Earnings per share = -----------------------------------

No. of Equity Shares

(f) Dividend per share ratio:

This ratio represents dividend paid to the share holder on per basis.

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 Dividend
Dividend per share = ---------------------------
No. of Equity Shares

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CHAPTER-IV
DATA ANALYSIS
AND
INTERPRETATION

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 4.1 DATA ANALYSIS AND INTERRPRETATION
CURRENT RATIO:
It is the most common and popular measure of studying the liquidity position of a firm. It is
calculated as follows.
Total Current Assets
Current ratio = ---------------------------
Total Current Liabilities

The current ratio throws light on the firms ability to pay its current liabilities out of its
current assets. Generally, the ideal current ratio is 2:1 and is considered to be
satisfactory.
1. The table showing Current Ratio of Coromandel fertilizers for the last five years
Table 1 (Rs.in Lakhs)
YEAR CURRENT CURRENT RATIO
ASSETS LIABILITIES
2018-19 10176.76 3900.90 2.61
2019-20 9180.69 3828.58 2.40
2020-21 7375.58 2825.46 2.61
2021-22 8242.14 3254.08 2.53
2022-23 9180.69 3828.58 2.40
The Graph showing the Current Ratio of Coromandal fertilizers for last five years
Figure 1

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INTERPRETATION:
As a conventional rule, a current ratio of 2 to 1 or more is considered satisfactory.
The company has recorded highest current ratio of 2.61 in the year 2018-19 and 2021-22
respectively and the low is recorded in the year 2019-20 and 2022-23 i.e. 2.40 respectively.
Since the firm is doing well, the ups and downs in the current ratio is not
significant because the current ratio is a test of quantity not quality.

QUICK RATIO:
It is also called the acid test ratio or liquid ratio. This ratio established the relationship
between quick/liquid current assets and the current liabilities. A current asset is considered to
be liquid if it is convertible in to cash without loss of time and value. On the basis of this
definition of liquid assets and inventory and prepaid expenses are ruled out as they
considered being potentially illiquid. So the quick ratio looks for the redy availability or
convertibility in to cash.

Quick Assets
Quick Ratio= -----------------------------
Total Current Liabilities

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2. The Table showing Quick Ratio of Coromandal fertilizers for the last five years
Table 2 (Rs.in Lakhs)
YEAR QUICK CURRENTLAIABILITIES RATIO
ASSETS
2018-19 5510.31 4302.56 1.28
2019-20 3789.74 3828.58 0.99
2020-21 4142.47 2825.46 1.47
2021-22 4353.73 3562.53 1.27
2022-23 3789.74 3828.58 0.99

The Graph showing the Quick Ratio of Coromandel Fertilizers Ltd. for last five years
Fugire 2

INTERPRETATION:
Generally a quick ratio of 1:1 is considered to be satisfactory because this means that the
quick assets of the firm are just equal to quick liabilities and there does not seem to be a
possibility of default in payment by the firm.

The quick ratio in the year 2019-20 was 0.99. The Quick ratio was satisfactory in the
organization except in the years 2019-120 and 2022-23 it was recorded 0.99 respectively.

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ABSOLUTE LIQUID RATIO:

This ratio is also known as super quick ratio or cash reserve ratio. This ratio is thee
most vigorous measure of the firm’s liquidity position. However, it is not widely used in
practice.
The cash ratio of 0.5:1 may be satisfactory. If the super liquid assets are too much in
relation to the current liabilities then it may affect profitability of the firm, as these super
liquid assets are the most unproductive assets of all statements. It is calculated as follows:
Absolute Liquid Assets
Super Quick Ratio = -----------------------------------------
Current Liabilities

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3. The Table showing Absolute Liquid Ratio of Coromandel fertilizers for the last five years
Table 3 (Rs. in lakhs)
YEAR QUICK CURRENTLAIABILITIES RATIO
ASSETS
2018-19 991.47 4302.56 0.23
2019-20 965.14 3828.58 0.25
2020-21 1247.54 2825.46 0.44
2021-22 1265.76 2988.15 0.42
2022-23 965.14 3828.58 0.25

The Graph showing the Absolute Liquid Ratio of Coromandel fertilizers for last 5 years
Figure 3

INTERPRETATION:
The company maintains the ALR ratio at a magnitude of 0.23:1 in the year 2018-19 and
around 0.25:1 in all the previous year. In the year 2020-21 it was 0.44 because absolute liquid
assets was increased and at the same time current liabilities was decreased and in the year
2021-22 it was 0.42 it is low when compared with the 2018-19and very low in the years,
2019-20 and 2022-23 the ratio was 0.23 & 0.25, 0.23 respectively.

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DEBT-EQUITY RATIO:
This is the most common measure of studying the indebtedness of the firm. The Debt equity
ratio is based on the assumption that the extent to which the firm should employ the debt
should be viewed in terms of the size of the cushion provided by the shareholders funds. It is
calculated as follows:
Total long term debt
Debt-Equity Ratio= ------------------------------------
Total Shareholders funds
Where the long-term debts include the long-term loan, borrow8ngs and debentures and the
term shareholders funds include the equity share capital, the preference share capital and all
accumulated reserves and surplus.

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4. The Table Showing Debt-Equity Ratio of Coromandel fertilizers for the last five
years
Table 4 (Rs. in Lakhs)

YEAR TOTAL TOTALSHARE RATIO

LONG TERM HOLDERS FUNDS
DEBTS
2018-19 12051.76 6265.00 1.92
2019-20 11964.26 6300.94 1.89
2020-21 13731.52 7350.16 1.86
2021-22 12164.13 7537.65 1.37
2022-23 11964.26 6300.94 1.89

The Graph showing the Debt Equity Ratio of Coromandel fertilizers for last five years
Figure 4

INTERPRETATION:

The Debt Equity Ratio standard norm is generally 1:1 in public sector and 2:1 in Private
Sector.

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 In the year 2021-22 the debt equity is 1.37:1 and in the year 2018-19 LDE was 1.93
compare with the past years, it was high because in the year 2019-20 the long term debts was
decreased and shareholders’ funds was increased.
INTEREST COVERAGE RATIO:
This ratio is also called the times interest earned ratio and it measures the ability of the firm
to pay the fixed interest liability. The Interest Coverage ratio may be calculated as follows:
EBIT
Interest Coverage Ratio = ----------------------
Interest Charges

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5. The Table Showing Interest Coverage Ratio of Coromandel fertilizers for the last 5
years
Table 5
YEAR EBIT INTEREST CHARGES RATIO
2018-19 1076.68 1380.95 0.78
2019-20 2450.48 1250.25 1.95
2020-21 1956.52 956.25 2.04
2021-22 2250.13 1123.43 2.02
2022-23 2450.48 1250.25 1.95

The Graph showing the Interest Coverage Ratio of Coromandel fertilizers for last 5 years
Figure 5

INTERPRETATION:.

In the above case the Interest Coverage ratio of the firm it is recorded highest in the year
2020-21 i.e. 2.04 and the lowest recorded in the year 2018-19 i.e. 0.78.
The firm and lenders prefer higher interest coverage ratio since the probability of
committing default is reduced and the firm is considered to be less risk.

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INVENTORY TURNOVER RATIO:
This ratio is also known as stock turnover ratio. It established the relationship between
the cost of goods sold during the year and the average inventory held during the year by the
firm. It is calculated as follows:
Cost of Goods Sold
Inventory Turnover Ratio = ---------------------------------
Average Inventory

Opening Stock + Closing Stock

Average Inventory = -----------------------------------------
2
Cost of Goods Sold = Sales – Gross Profit

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6. The Table showing Inventory Turnover Ratio of Coromandel fertilizers for the last 5 years

Table 6 (Rs. in Lakhs)

YEAR COST OF GOODS AVERAGE RATIO
SOLD INVENTORY
2018-19 12858 4695.82 2.74
2019-20 13624.46 4390.10 3.10
2020-21 16070.97 3233.11 4.94
2021-22 14077.56 3898.56 3.61
2022-23 13624.46 4390.10 3.10

The Graph showing the Inventory Turnover Ratio of Coromandel fertilizers for the last 5
years
Figure 6

INTERPRETATION:
.In the year 2020-21 the ITR is 4.94 if we compare with the other 4 years it is little bit higher.
In the year 2018-19 the ratio was 2.74 because here the cost of goods sold was decreased. In
the year 2019-20 it is raised to 3.1 here the average inventory was decreased but the cost of
goods sold was increased. Totally the inventory turnover ratio is not satisfactory.

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INVENTORY HOLDING PERIOD:

There is no ideal or standard for evaluating an inventory turnover ratio of a firm so it

should be compared with the inventory turnover ratio of other firms or past inventory
turnover ratio of the same firm. Since inventory turnover ratio is a test of efficient
inventory management the higher the inventory turnover the better it is.
The concept of inventory turnover ratio can be extended to find out the number of
days the inventory held (DIH) as follows:
365
Inventory Holding Period = -----------------------------------
Inventory Turnover Ratio

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7. The Table showing Inventory Holding Period of Coromandel fertilizers, for the last 5
years
Table 7
YEAR DAYS IN A YEAR INVENTORY INVENTORY
TURNOVER HOLDING
RATIO PERIOD
2018-19 365 2.74 133 DAYS
2019-20 365 3.10 117 DAYS
2020-21 365 4.94 73 DAYS
2021-22 365 3.61 121 DAYS
2022-23 365 3.10 117 DAYS

The Graph showing Inventory holding Period of Coromandel fertilizers, for the last years
Figure 7

INTERPRETATION:
It means that the firm is maintaining stock for the sales requirement of 121 days in the year
2021-22 and it is decreased to 117 days 2022-23. The highest inventory holding period is
recorded in the year 2018-19 i.e. 131 days and the lowest in the year 2020-21.

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RECEIVABLES (OR DEBTORS) TURNOVER RATIO:
In case a firm sells goods on credit, the realization of sales revenue is delayed and the
receivables (both debtors and bills) are created. The cash is realized from these receivables at
a later stage. The speed with which these receivables are collected affects the liquidity
position of the firm. The receivables turnover ratio attempts to through light on the collection
and credit policies of the firm. The receivables turn over ratio reveals the velocity of
receivable collection by matching the annual credit sales to the average receivable.

Annual Net Credit Sales

Receivable turnover ratio = -------------------------------------
Average Receivables

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8. The Table showing Receivables (Debtors) Turnover Ratio of Coromandel fertilizers,
for the last 5 years
Table 8 (Rs. in Lakhs)
YEAR CREDIT SALES AVERAGE RATIO
DEBTORS
2018-19 15632.10 3571.64 4.38
2019-20 15352.20 3452.53 4.40
2020-21 14356.49 3489.94 4.10
2021-22 14546.54 3480.34 4.02
2022-23 15352.20 3452.53 4.40

The Graph Showing Receivables (Debtors) Turnover Ratio of Coromandel fertilizers, for the
last 5 years
Figure 8

INTERPRETATION:
In the year 2019-20 and 2022-23 the ratio was 4.40, it was recorded high when compared to
the other years. In the year 2018-19 it was 4.38 and in the year 2020-21 it was 4.10 and in the
year 2021-22 it was 4.02. Increase of debtors’ turnover ratio means increase in the credit
sales and decrease in average debtors.

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PAYABLES (OR CREDITORS) TURNOVER RATIO:

The payables turnover ratio shows the velocity of debt payment by the firm. It
compares the annual credit policies with the average payables (creditors and bills). A low
turnover ratio reflects liberal credit terms granted by suppliers, while a high ratio shows
that accounts are to be settled rapidly. The Creditors turnover ratio is an important tool of
analysis as a firm can reduce its requirement of current assets by relying on supplier’s credit.
The extent to which trade creditors are willing to wait for payment can be approximated by
the creditor’s turnover ratio:
Annual Net Credit Purchases
Payables Turnover Ratio = -----------------------------------
Average Payables
This can be supplemented with the average payment period as follows:
365
Average Payment Period = ----------------------------------
Payables Turnover Ratio

A firm should try to maintain the average payment period, which is exactly equal to
the credit terms of the supplier. This will help improving the goodwill and credit worthiness
of the firm in the market.

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9. The Table Showing Payables (Or Creditors) Turnover Ratio of Coromandel fertilizers,
for the last 5 years
Table 9 (Rs. in Lakhs)
YEAR CREDIT AVERAGE RATIO
PURCHASES PAYABLES
2018-19 5286.22 3954.90 1.34
2019-20 5452.16 3895.41 1.39
2020-21 5356.87 2856.41 1.87
2021-22 5257.54 3251.13 1.61
2022-23 5452.16 3895.41 1.39

The Graph Showing Payables (Creditors) Turnover Ratio of Coromandel fertilizers, for the
last 5 years
Figure 9

INTERPRETATION:
In the year 2021-22 the ratio was 1.61 and 2020-21 it was 1.87 and in the years 2018-19,
2019-20, 2022-23 the ratios were 1.34,1.39,1.39 respectively.

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WORKING CAPITAL TURNOVER RATIO:

Working capital turnover ratio studies the velocity or utilization of the working capital
of the firm during a year. The working capital here refers to net working capital, which is
equal to the total current assets less total current liabilities. The working capital turnover is
calculated as follows:

Annual Net Sales

Working Capital Turnover Ratio = ---------------------------
Net Working Capital

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10. The Table Showing Working Capital Turnover Ratio of Coromandal fertilizers for the last
5 years
Table 10 (Rs. in Lakhs)
YEAR TOTAL SALES WORKING RATIO
CAPITAL
2018-19 15632.10 6265.49 2.49
2019-20 16243.15 4351.16 3.73
2020-21 15924.10 4550.12 3.88
2021-22 15998.01 4656.12 3.43
2022-23 16243.15 4351.16 3.73

The Graph Showing Working Capital Turnover Ratio of Coromandal fertilizers, for the last 5
years
Figure 10

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INTERPRETATION:
In the year 2020-21 the working capital turnover ratio is 3.88 it was increased as compared
with the previous year 2019-20 i.e. 3.73 and the ratio was recorded low in the year 2018-19
i.e. 2.49 and in the years 2020-21 and 2022-23 the ratio was 3.43 and 3.73 respectively.

TOTAL ASSETS TURNOVER RATIO:

Net Sales
Total Assets Turnover Ratio = ----------------------
Net Assets

This ratio measures the per rupee sales generated against rupee of tangible assets being
maintained by the firm. It may be noted that intangible assets such as goodwill etc are not
considered that the tangible assets are taken at their written down values.

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11. The Table Showing Total Assets Turnover Ratio of Coromandal fertilizers, for the last 5
years

Table 11 (Rs. in Lakhs)

YEAR TOTAL SALES NET ASSETS RATIO

2018-19 15632.10 24576.82 0.64
2019-20 16243.15 23546.24 0.64
2020-21 15924.10 25486.98 0.62
2021-22 16123.01 24354.12 0.66
2022-23 16243.15 23546.24 0.64

The Graph Showing Total Assets Turnover Ratio of Coromandal fertilizers, for the last 5
years
Figure 11

INTERPRETATION:
The total assets turnover ratio is 0.64 times in the years 2018-19, 2018-19 and 2022-23. The
highest is recorded in the year 2021-22 i.e.0.66 times and the lowest in the year 2020-21 i.e.
0.62.

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FIXED ASSETS TURNOVER RATIO:

Fixed assets turnover ratio is calculated by establishing the relationship between sales
and fixed assets. The ratio gives an idea about adequate investment or over investment or
under investment in fixed assets.

Net Sales
Fixed Assets Turnover Ratio = -----------------------------------
Net Fixed Assets

If a firm depends heavily on the intangible assets such as patents, trademarks, copy
rights etc for its sales then it is advisable to follow this ratio.

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12. The Table showing Fixed Assets Turnover Ratio of Coromandal fertilizers, for the last 5
years
Table 12 (Rs. in Lakhs)

YEAR TOTAL SALES NET FIXED RATIO

ASSETS
2018-19 15632.10 13618.97 1.15
2019-20 16243.15 12786.18 1.27
2020-21 15924.10 11689.50 1.36
2021-22 16143.13 11700.34 1.37
2022-23 16243.15 12786.18 1.27

The Graph Showing Fixed Assets Turnover Ratio of Coromandal fertilizers, for the last 5
years
Figure 12

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INTERPRETATION:
In the years 2018-19 and 2022-23 the FAT ratio is 1.27 and the lowest is recorded in the year
2019-20. The ratio in the years 2020-21, 2021-22 is recorded at 1.36 and 1.37.

CAPITAL TURNOVER RATIO:

Net Sales
Capital Turnover Ratio = ------------------------------
Capital Employed

The higher the ratio the greater is the sales made per rupee of capital employed in the
firm and hence higher is the profit. Low capital turn over ratio refers to low sales generated in
relation to capital employed or excessive capital being used in the firm.

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13. The Table showing Capital Turnover Ratio of Coromandal fertilizers, for the last 5 years
Table 13 (Rs. in Lakhs)
YEAR TOTAL SALES CAPITAL RATIO
EMPLOYED
2018-19 15632.10 18316.76 0.85
2019-20 16243.15 12785.18 1.27
2020-21 15924.10 11684.50 1.36
2021-22 15643.11 11884.34 1.32
2022-23 16243.15 12785.18 1.27

The Graph Showing Capital Turnover Ratio of Coromandal fertilizers, for the last 5 years
Figure 13

INTERPRETATION:
In the year 2018-19 the ratio was recorded low i.e. 0.85 and highest in the year 2020-21 i.e.
1.36, here there is no greater difference between previous years. This ratio reveals efficiency
of the firm in utilizing its capital.
PROFITABILITY RATIOS:

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The profitability ratios measure the profitability or the operational efficiency of the firm.
These ratios reflect the final results of business operations the results of the firm can be
evaluated in terms of its earnings with reference to a given level of assets or sales or owners
interest etc., therefore, the profitability ratios are broadly classified in three categories.

1) Profitability ratios required for analysis from owners point of view

2) Profitability based on assets / investment
3) Profitability ratios based on sales of the firm.

The profit of the firm belongs to the owners who have invested their funds in the form of
equity share capital or preference share capital or retained earnings. Therefore, the profits of
a firm should be analyzed from the point of view of owners also, as profit belongs to them,
irrespective of the fact whether it is distributed now in the form of dividends or retained in
the firm for reinvestment purpose. These reinvestment profits will ultimately result in
growing profits in the future, the profits of the firm can be analyzed from the point of view
of owner’s funds in difference perspectives as follows :

EARNINGS PER SHARE:

The profitability of a firm from the point of view of ordinary shareholders can be measured in
terms of number of equity shares. This is known as earnings per share. It helps in
determining the market price of the equity shares of the company. A comparison of earning
per share of the company with another will also help in deciding whether the equity share
capital is being effectively used or not. It also helps in estimating the company’s capacity to
pay dividend to its equity share holders. The ROE measures the profitability in terms of the
total funds and explains the return as a percentage of funds. The profitability can also be
measured in terms of number of equity shares. This is known as EPS that is derived by
dividing the PAT by the number of equity shares. So, it is calculated as follows:

Profit after taxes – Preference dividend

E.P.S = -----------------------------------------------------------
Number of equity shares outstanding

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14. The Table showing Earnings Per Share Ratio of Coromandel fertilizers, for the last 5
years
Table 14 (Rs. in Lakhs)
YEAR PROFIT AFTER NO.OF EARNINGS
TAX EQUITY PER SHARE
SHARES
2018-19 530 13596800 3.90
2019-20 610 13596800 4.48
2020-21 590 13596800 4.33
2021-22 605 13596800 4.44
2022-23 610 13596800 4.48

The Graph Showing Earnings per Share of Coromandal fertilizers, for the last 5 years
Figure 14

INTERPRETATION:
The Earning per share is high i.e. 4.48 in the years 2018-19 and 2022-23. In the year 2018-19
it is recorded low i.e. 3.90. It is recorded 4.33 and 4.44 in the years 2019-20 and 2021-22
respectively.

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GROSS PROFIT RATIO:
The ratio expresses the relationship between gross profit and sales. It reflects the efficiency
with which management produces each unit of product.
The Gross Profit ratio may be interpreted by comparing this ratio of the same
concern over a period of time or comparing this ratio of the two similar concerns.
Normally higher ratio is always considered good and serves as an index of higher
profitability. This ratio indicates the degree to which the selling price of goods per unit may
decline without resulting in losses from operations to the firm, it also helps in ascertaining
whether the average percentage of mark up on the goods is maintained.

The formula for computing this ratio is as under:

Gross Profit
Gross Profit Ratio = -------------------- X 100
Sales

Gross Profit = Sales – Cost of goods sold

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15. The Table showing Gross Profit Ratio of Coromandal fertilizers, for the last 5 years
Table 15 (Rs. In Lakhs)
YEAR GROSS PROFIT SALES RATIO
2018-19 2774 15632 18
2019-20 2624 16243.16 16
2020-21 2723 15924.10 17
2021-22 2813 16043.12 17
2022-23 2624 16243.16 16

The Graph Showing Gross Profit Ratio of Coromandel fertilizers, for the last 5 years
Figure 15

INTERPRETATION:

The Gross Profit Ratio is recorded highest in the year 2018-19 i.e. 18% and then the
lowest is recorded in the year 2021-22 is 16%. Thereafter the ratio is improved in the years
2020-21 and 2021-22 i.e. 17% and then it is fell down to 16% in the year 2022-23.
Normally the % change in gross profit ratio may result due to the change in selling
price or cost price or raw material consumption per unit.

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NET PROFIT RATIO:
Net Profit is obtained when operating expenses, interest and taxes are subtracted from the
gross profit. Net Profit ratio established a relationship between net profit and sales and
indicates the management’s efficiency in manufacturing, administering and selling the
products. This ratio is the overall measure of the firm’s ability to turn each rupee sales into
net profit. This ratio also indicates the firm’s capacity to withstand adverse economic
conditions.
A firm with a high net margin ratio would be in advantageous position to survive in the face
of falling sale prices, rising cost of production or decling demand for the product.
The Net Profit Ratio is measured by dividing profit after tax by sales.
Net Profit
Net Profit Ratio = ------------------------ x 100
Sales

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16. The Table showing Net Profit Ratio of Coromandal fertilizers, for the last 5 years
Table 16 (Rs. in Lakhs)
YEAR NET PROFIT SALES RATIO
2018-19 530 15632 3.39
2019-20 610 16243.15 3.75
2020-21 590 15924.10 3.70
2021-22 605 16023.11 3.77
2022-23 610 16063.15 3.79

The Graph Showing Net Profit Ratio of Coromandel fertilizers, for the last 5 years
Figure 16

INTERPRETATION:
In the year 2018-19 was 3.39% which is lowest among all the years and the highest is
recorded in the year 2022-23 i.e. 3.79%. In the years 2019-20, 2020-21, and 2021-22 the
ratio was 3.75%, 3.70% and 3.79 % respectively.

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CHAPTER-V
SUMMARY
FINDINGS
SUGGESTIONS
CONCLUSION
BIBLIOGRAPHY
ANNEXURE

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 5.1 SUMMARY

The technique of financial analysis is typically devoted to evaluate the past, current and
projected performance of a business firm. The financial tools help the manager to determine
which source offers the lowest cost of funds and which activities will provide the greatest
return on invested capital. Financial analysis is the starting point for making plans, before
using and sophisticated forecasting and planning procedures. Ratio analysis is one of the
analytical methods used the find in financial analysis.
From the analysis of last five years, the company’s current ratio is at satisfactory level
except in the year 2020-21. Since the firm is doing well, the ups and downs in the current
ratio is not significant because the current ratio is a test of quantity not quality
The quick ratio in the current year was 1.27. The Quick ratio was satisfactory in the
organization except in the year 2018-19 and 2021-22 it was recorded 0.99 respectively.
In the year 2020-21 the debt equity is 1.37:1 and in the year 2018-19 LDE was 1.93 compare
with the past years, it was high because in the year 2017-18 the long term debts was
decreased and shareholders’ funds was increased.
. Totally the inventory turnover ratio is not satisfactory and it is having more decrement
from the year 2020-20 and having fluctuations up to current year because average inventory
is fluctuating.

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 5.2 FINDINGS
 The quick ratio of COROMANDEL INTERNATIONAL LTD is exposed to some
fluctuations. The ideal quick ratio is 1:1. The company’s quick ratio was satisfactory it
means that the company is maintaining enough quick assets during the period of study.
 It is found that the absolute liquid ratio of COROMANDEL INTERNATIONAL LTD is
very low.
 The proprietary ratio of COROMANDEL INTERNATIONAL LTD was continuously
increased year by year as it shows that the company is utilizing its financial resources
effectively.
 The fixed assets turnover ratio of the company is fluctuating throughout the period of the
study.
 The working capital turnover ratio of the company having some fluctuations during the
period. The working capital turnover ratio of the company said to be satisfactory level.
 The debtors’ turnover ratio of the company is in increasing trend year by year.
 The total assets turnover ratio of the company is not satisfied as per the industry
standards.
 It is found that the gross profit ratio of the company has been good overall but it has been
fluctuating because of the change in the prices of raw materials and other resources.
 The net profit ratio of the company is increased when compared with year to year during
my study period but not increased substantially.

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 5.3 SUGGESTIONS
 As the current ratio was is maintaining little more than the ideal ratio, measures need
to be taken to have proper planning in investing current assets as idle assets would
earn nothing.
 The company is maintaining the quick ratio as per the industry standards. So it should
maintain the same in the future for smooth functioning of the operations.
 It is suggested that the company should utilize its idle cash assets towards appropriate
investment to maintain an optimal absolute liquid ratio.
 It is suggested for the company to reduce its debt level to the equity of the company
as the ratio is high when compared with the industry standards as using more debt
involves high risk.
 It is suggested for the time to maintain fixed assets in a stable manner for a good.
Fixed Assets Turnover ratio as the sales are influenced by both internal and external
environmental conditions.
 It is suggested that the working capital turnover ratio is maintaining as per industry
norms, it should maintain the same in the future years also.
 The company debtors’ turnover ratio is having upward trend. It is beneficial to the
company as company collection from the debtors is good, so the company should
maintain same in the future.
 It is suggested for the company to take necessary steps to improve gross profit ratio
and net profit ratios by optimum utilization of the resources.

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 5.4 CONCLUSION

A study on ratio analysis in COROMANDEL FERTILIZERS has been carried out as a

project, the study was conducted for a period of 2018-19 to 2022-23. A thorough financial
analysis was done by using Ratio Analysis technique by establishing relationship between the
Profit and Loss Account and the Balance Sheet items and made some suggestions to improve
the financial performance of the company based on my knowledge gained during my study.

Having been considered and implemented my suggestions made with necessary changes, I
am confident that the company can utilize its resources effectively thereby increases the
productivity resulting improvement in the gross profit and net profit margins and finally
results in earning the appreciation of the shareholders by increasing their wealth.

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 5.5 BIBLIOGRAPHY
The study of quotes valuable inputs of eminent authors and contains authentic statements.
DATA SOURCE:
 Corporate files
 Annual reports of the COROMANDEL FERTILIZERS(2022-2023)

TEXT BOOKS:

S.NO AUTHOR NAME BOOK NAME PUBLISHERS

1
I.M.PANDEY Financial Vikas publications
management

2 Financial
M.Y.KHAN &P.K JAIN management Tata McGrawhill

3
V.K.BHALLA Financial Anmol publications
management and
policy

4 Accounting for
KHAN & JAIN managers Tata McGrawhill

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