Chapter L Full
Chapter L Full
Every enterprise, whether big, medium or small need finance to carry on its operation and to
achieve its targets. In fact, finance is so indispensable today that it is rightly said to be the
lifeblood of an enterprise. Without adequate fiancé, no enterprise can possibly accomplish its
objectives.
The study is intended to examine the financial position of Deccan private limited and to evaluate
the profitability in this regard. Managing of financial is important activity, which involves both
short term and long term planning. Financial statements are prepared similarly for decision
making. They play dominate role in setting the framework of managerial decision. But the
information provided in the financial statement is not an end in itself as no meaningful
conclusion can be drawn from these statements is of immense use in making decision through
analysis and interpretation of financial statement
Financial analysis is the process of identifying the financial strengths weakness of the firm by
properly establishing relationship between the items of the balance sheet and the profit and loss
account. Financial analysis is an interpretation of financial statement to know the strength and
weakness of the company It is an attempt to determine the significant and meaning of the
financial statement so that forecast may be made for future earnings, ability to pay interest and
debt on maturity. The short term solvency and profitability position of the concern can also be
determined by the study.
There are various methods or techniques used in analyzing financial statement such as ratio
analysis, comparative statement analysis.
1
OBJECTIVIES OF THE STUDY
To forecast the financial performance of the company for the 3years period of 2015-
2016; 2016-2017;2017-2018
To know the profitability position of the company
To know the liquidity position of the company
To offer finding and suggestion to the company
2
RESEARCH METHODOLOGY
Research methodology is considered as the nerve of the project. Without a proper well organized
research plan it is impossible to complete the project and conclusion. The project was based on
the survey plan, the main objectives of survey was to collect appropriate data, which work as a
base for way to systematically solve the research problem Research methodology not only talks
about the methods but also the logic behind the methods used in the preference of the other
models
RESEARCH DESIGN
A research design is purely and simply the frameworks are plan study that guides the
collection and analysis of the data. Generally a research design is a blue print of the research that
is to be followed in completing the study.
1. Books
2. Journals, magazines
DATA TO BE USED
The data used for the analysis purposes is the last year data likes
3
CHAPTER-II
REVIEW OF LITERATURE
A financial statement review is a service under which the accountant obtain limited assurance
that there are no material modification that need to be made to an entities financial statement for
them to be in conformity with the applicable financial reporting frame work ( such as GAAP or
IFRS ) . A review does not require the accountant to obtain an understanding of internal control
or to assess fraud risk, or other type of audit procedures. Consequently, a review does not
provide the accountant with assurance that he has become aware of all the significant matters
that would normally have been discovered and disclosed in an audit.
MARTIN S. FRIDSON (2015)“the review is more expensive than a compilation and less
expensive than an audit. It is preferred by those businesses whose lender and creditors will allow
them to use this approach, thereby saving the cost of a full audit”
JOHN MYER, a renowned authority of financial statement analysis, has referred that in the
initial years of 20th century, the bankers and securities exchange authorities were extensively
relying on the financial statement of the companies for analysis, monitoring and control of the
activity and performance of businesses, The history, principal and financial statement, analysis
has been referred by another authority also Kennedy and McMullen.
Long back [2016], EF Donaldson “The important of business and financial reporting. He
highlighted that the economy depends on the business organization for goods and services.
United States believes in corporate world. The financial activities of business enterprises of
production and sale are of utmost important In his well know publication [corporate finance,
2017] he has referred to all important aspects of business finance like organization structure,
securities, production, capitalization, working capital, administration of incomes, expansion and
combinations [mergers] , reorganization and readjustment.”
4
FRIDSON AND FERNANDO ALVAREZ [2017]” Financial is a well-organized, through
explanation of the challenges facing practitioners Who rely on financial statement to make
investment and lending secessions In the preface martin fridson and Fernando alvarez state their
intention is to acquaint readers who have already acquired basic accounting skills with the
complications that arise in applying textbook derived knowledge to the real world.”
Throughout the book fridson and alvarez make a persuasive case that in the “real world”
Accepting financial reporting at face value is both nave and dangerous and that the best analysis
requires “the relentless pursuit of accurate financial profiles of the entities being analysed”
5
CHAPTER - III
World we are living differ from the plants because of water. Every living creature needs water as
envisaged by sage. Thiruvalluvar that ‘THERE WILL BE NO WORLD IFTHERE IS NO
WATER’. Increase in population, per capita consumption industrial activity, agricultural
operation, environment necessity, hygienic condition and a host of other processes add the
demand day to day. Nature provides us usable water by means of rain and snow.
Earth stores it over the surface and under the soil. The stored water can be brought to the
beneficiaries place by the use of pump. Hence in everyone’s life pump occupies the second place
as the largest manufacturing engineering product in the world. The first of course being the
motor which drives the pump.
A Deccan pump was started in the year 1981 with the first exclusive production line for
submersible pumps sets in the country. Bore well submersible pumps, open well submersible
pumps, jet pumps and centrifugal pumps are the major product groups. With an annual
production of 100 thousand units,Deccan is one of India’s leading pumps manufactures. Deccan
innovative pumps have been widely recognized in the largest producer of vertical open well
pumps in the country.
The group with four manufacturing units and 1 technology centre. The aim is to consolidate and
expand the continued development of pumping solutions. Strategically positioned at Coimbatore
the pumps city of Asia, Deccan pumps sets cater to the needs of Indian market besides being
exported to many Middle East, African countries with NEMA/DIM standards.
Heritage of more than 37 countries and 28 states across India. Sold in more than 37 countries
and 28 states across India. Government of India recognized export house. India’s largest
producer of open well submersible pump sets 4 manufacturing units, 1 technology centre with
the latest CNC, automated machined and produced within our manufacturing premises to ensure
highest quality standards. Our stainless steel sheet mental unit has excellent state of the art
manufacturing facilities for producing stainless steel parts experience.
6
COMPANY PROFILE
Ganapathy, Coimbatore,
Tamilnadu- 341006
K.Karthik (director)
A. kanishka arumgam(director)
7
CHAPTER IV
RATIO ANALYSIS
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated
quotient of two mathematical expression” and as “ the relationship between two or more things”.
In financial analysis, a ratio is used as an index or yardstick for evaluating the financial position
and performance of firm. Analysis statement is a process of evaluating relation between
components parts of financial statements to obtain a better understanding of the firm’s position
and performance.
Financial analysis is used a device to analysis and interpret financial health of the enterprise. The
absolute accounting figures reported in the financial statements do not provide a meaningful
understanding of the performance.
An accounting figure convey meaning when it is related to some other relevant information just
like a doctor examines his patients by recording his body temperature, blood pressure etc., before
making conclusion regarding the illness and before giving his treatment, a financial note is that a
ratio indicates a quantitative relationship, which can be in turn used to make a qualities
judgement. Such is the nature of all financial ratios.
Ratio analysis is important and age old technique of financial analysis. The data given in
financial statements, in absolute form are dump and are unable to communicate anything. Ratios
are relative from of financial data very useful techniques to check upon the efficiency of the firm
some ratios indicate the trend or progress or downfall of the firm.
Ratio analysis is based on the differential ratio which is calculated from the accounting data
contained in the financial statement. Different ratios are used for different purposes.
8
LIQUIDITY RATIOS
Common liquidity ratios include the current ratio, the quick ratio and the operating cash flow
ratio. Different analysis considers different assets to be relevant in calculating liquidity. Some
analysis will calculate only the sum of cash and equivalents divided by current liabilities because
they feel that they are the most liquid assets, and would be the most likely to be used to cover
short-term debts in an emergency.
A company’s ability to turn short-term assets into cash to cover debts is of the utmost importance
when creditors are seeking payment.
1. Current ratio
2. Liquid ratio
9
1. Current ratio
The ratio is used to assess the firm’s ability to meet its current liabilities. The
relationship of current assets to current liabilities is known as current ratio.
CURRENT LIABILITIES
Current assets are cash, bank, marketable securities, accounts receivable, inventories and prepaid
items.
Current liabilities include bank overdraft, sundry creditors, outstanding expenses and bills
payable.
10
TABLE NO.1
INTERPRETATION:
From the above table that the company maintains the favourable position of current
ratio was (2.3) during the year 2014-2015. There is a considerable increase in current ratio in the
ratio 2015-2016 up to (3.4) and during the year 2016-2017 it was increase up to (3.5). Thus it is
satisfactory condition to the firm.
11
CHART NO.1
2017-2018
5
4.5
3.5
2.5 2016-2017
1.5
0.5
12
2. LIQUID RATIO
This ratio is used to assess the firm’s short term liquidity. The relationship of
liquid assets to current liabilities is known as liquid ratio. It is otherwise called as quick ratio or
acid test ratio
CURRENT LIABILITIES
Liquid assets include all current assets except stock and prepaid expenses
Current liabilities Include bank, sundry creditors, outstanding expenses and bills payable
13
TABLE NO.2
INTERPRETATION:
The table shows that it is low in the year 2015-2016 the ratio was (1.4) during the year 2011-
2012 there is a considerable increase in absolute liquid ratio up to (1.6). The highest ratio in the
year 2015-2016 the ratio is (1.8). It can infer that the proportions are increase in year by year. So
it is concluded that the company should increase the short term liquidity
14
CHART NO. 2
2015-2016
2
1.8
1.6
1.4
1.2
RATIO
0.8
0.6
0.4
0.2
0
2015-2016 2016-2017 2017-2018
2015-2016 1.4 1.6 1.8
15
PROFITABILITY RATIO
A profitability ratio measures a company ability to generate earnings relative to sales, assets and
equity. These ratios assess the ability of a company to generate earnings, profits and cash flows
relative to some metric, often the amount of money invested. They highlights how effectively the
profitability of accompany is beings managed. Common examples of profitability ratios include
return on sales, return on investment, return on equity, return on capital employed gross profit
margin and net profit margin.
16
1. GROSS PROFIT RATIO
The ratio indicates the efficiency of trading activities. The relationship of gross
profit to sales is known as gross profit ratio
SALES
Gross profit is taken from the trading account of a business concern. Otherwise gross profit is
calculated by deducting cost of goods sold from sales. Sales mean net sales.
17
TABLE NO.3
INTERPRETATION:
From the above table that the company’s position of gross profit ratio was (45.7)
In the year 2015-2016. There is a considerable increase in the year 2016-2017 up to (49.1) and
during the year 2017-2018 it was increase up to (56.8). The ratio is calculated which is in
increasing position. So it indicated there is increased in profit. So it is satisfactory in ratio .
18
CHART NO.3
2015-2016
60
50
40
RATIO
30
20
10
0
2015-2016 2016-2017 2017-2018
19
2. NET PROFIT RATIO
The ratio determines the overall efficiency of the business. The relationship of
net profit to sales is known as net ratio.
SALES
Net ratio is taken from the profit and loss account of the business concern or the net profit
can be calculated by deducting administration expenses, selling expenses and distribution
expenses from the gross profit of the concern.
20
TABLE NO.4
INTERPRETATION:
The table shows that it is low in the year 2015-2016 the ratio was (29.7). During the
year 2016-2017 there is a considerable increase in net profit ratio up to (30.6). The highest ratio
in the year 2017-2018 the ratio is (34.0). It can infer that the proportions are increase in year to
year.
21
CHART NO. 4
2017-2018
25
20
15
RATIO
10
0
2015-2016 2016-2017 2017-2018
22
3. OPERATING PROFIT RATIO
The ratio is an indicator of the operational efficiency of management. It establishes the
relationship between operating profit and sales.
SALES
Where operating profit are net profit + non-operating expenses – non operating income.
Where non-operating expenses are interest on loan and loss on sale of assets.
Financial expenses like interest on loan are excluded for this purpose
23
TABLE NO.5
INTERPRETATION:
From the above table that the company maintains the favourable position of operating
profit was (17.9) during the year 2015-2016. There is a considerable increase in current ratio in
the year 2016-2017 up to (18.2) and same was maintain the year 2017-2018. Thus it is
satisfactory condition to the firm.
24
CHART NO. 5
2015-2016
18.25
18.2
18.15
18.1
18.05
RATIO
18
17.95
17.9
17.85
17.8
17.75
2015-2016 2016-2017 2017-2018
25
ACTIVITY RATIOS
Accounting a ratio that measures a firm’s ability to convert different accounts within its
balance sheets into cash or sales. Activity ratios are used to measure the relative efficiency of a
firm based on its use of its assets, leverage or other such balance sheet items. These ratios are
important in determining whether a company’s management is doing a good enough job of
generating revenues, cash, etc., from its resources.
FIXED ASSETS
26
TABLE NO .6
INTERPRETATION:
From the above table that the company’s fixed asset turnover ratio was (1.9) during the
year 2015-2016. Same ratio was maintaining the year 2016-2017 &2017-2018.
The company’s total assets were increased the entire three years during the study period.
The ratio was in increased position in all years. So the total assets turnover ratio was in
satisfactory.
27
CHART NO. 6
YEAR
2.5
1.5
RATIO
0.5
0
2015-2016 2016-2017 2017-2018
28
COMPARATIVE FINANCIAL ANALYSIS
Comparative financial statements are those statements which have been designed in a way
so as to provide time perspective to the consideration of various elements of financial position
embodied in such statements. In these statements figures for two or more periods are placed side
by side to facilitate comparison. Both the income statements and balance sheet can be prepared
in the form of comparative financial statements.
The income statement discloses net profit or net loss on account of operations. A
comparative income statement will show the absolute figures for two or more periods, the
absolute changes from one period to another and, if desired, the change in terms of percentages.
Comparative balance sheet as on two or more different dates can be used for comparing
assets and liabilities and finding out any increases or decreases in those items. Thus, while in a
single balance sheet the emphasis is on present position, it is on change in the comparative
balance sheet.
Here, the comparative balance sheet analysis is a method used to analysis a company’s
balance sheet, a financial statement showing assets, liabilities and equity there are two methods
for comparative balance sheet analysis. A horizontal analysis compares a company’s
performance over a period of time. A vertical analysis involves the use of equation to perform a
deeper examination. Therefore the horizontal analysis comparison is followed in this study for
the performance of the company over a period of time.
29
COMPARATIVE PROFIT AND LOSS A/C FOR THE YEAR ENDED 2014-
2015.
INCOME
EXPENDITURE
Other
manufacturing
expenses 2.03 1.23 - 0.8 - 39.40
Selling and
administrative
expenses 542 5.62 0.2 - 3.69 -
Miscellaneous
expenses 2.96 2.33 - 0.63 - 21.28
Less
30
PEDIT 7.60 8.78 1.18 - 15.52 -
Extra- ordinary
item 0.00 0.26 -0.26 - - -
Corporate dividend
tax 0.21 0.11 - 0.10 - 47.61
INTERPRETATION:
The table shows that the comparative p4rofit and loss of the company for the period of
2105-2016. During 2015, the sale of the company is 0.47% increase in 2015 as compare 2016.
The other income has been increase 28% in 2015 as compare to 2016.
The other manufacturing expenses are decrease 39.40% in 2016 as compare to 2015.
There is an increase in depreciation of 10.83% in 2015 as compare to 2016
There is an increased in net profit after taxation 30.86% in 2016. The increase or decrease
in the net profit will give an idea to about overall profitability of the concern.
31
COMPARATIVE PROFIT AND LOSS A/C FOR THE YEAR ENDED 2015-
2016
INCOME
EXPENDITURE
Other
manufacturing
expenses 1.23 1.61 0.38 - 30.89 -
Selling and
administrative
expenses 5.62 6.73 1.11 - 19.75 -
Miscellaneous
expenses 2.33 3.03 0.7 - 30.04 -
Less:
32
PEDIT 8.78 11.30 2.52 - 28.70 -
Extra- ordinary
item 0.26 0.03 - 0.23 - 88.46
Corporate dividend
tax 0.11 0.13 0.02 - - 47.61
INTERPRETATION:
The table shows the comparative profit and loss of the company for the period of 2016-
2017. During 2017, the sale of the company is 19.19% increase in 2017 as compare 2014.
The other manufacturing expenses are increase 30.89% in 2016 as compare to 2017.
There is an increase in depreciation of 12.78% in 2016 as compare to 2015.
There is an increased in net profit after taxation 28.50% in 2016. The increase or decrease
in the net profit will give an idea to about overall profitability of the concern.
33
COMPARATIVE PROFIT AND LOSS A/C FOR YEAR ENDED 2017-2018
INCOME
EXPENDITURE
Other
manufacturing
expenses 1.61 0.36 - 1.25 - 77.63
Selling and
administrative
expenses 6.73 0.00 - - - -
Miscellaneous
Expenses 3.03 13.22 10.19 - - -
LESS:
PEDIT 11.30 14.65 3.35 - 29.64 -
34
PBDT 9.69 12.72 3.03 - 31.26 -
Extra- ordinary
item 0.03 0.00 - - - -
Corporate dividend
tax 0.13 0.13 - - - -
INTERPRETATION:
The table shows that the comparative profit & loss of the company for the period of 2017-2018.
During 2017, the sale of the company is 33.40% increase in 2018 as compare 2018. The other
income has been increase 62.79% in 2017 as compare to 2016.
The other manufacturing expenses are decrease 77.63% in 2018 as compare to 2018. There is an
increase in depreciation of 30.66% in 2018 as compare to 2018.
There is an increased in net profit after taxation 36.71% in 2018. The increase or decrease in
the net profit will give an idea to about overall profitability of the concern.
35
CHAPTER V
FINDINGS:
1. The current ratio of the firm increase every year. The ratio stood high in the year 2014-
2015 (3.5) and 2015-2016 (2.3). Thus the company was satisfactory.
2. The absolute liquid ratio is good and it is increasing every year. It stood high in the year
2014-2015 (1.6) and high in the year 2015-2016 (1.8). thus the liquid ratio of the
company is good
3. The gross profit ratio is the firm increases every year. It stood high in the year 2016-2017
(56.8) and low in the year 2014-2015(45.7). Thus it is the satisfactory condition.
4. The net profit ratio is the firm increases every year. It stood high in the year 2016-2017
(34.0) and low in the year 2014-2015 (29.7) thus the company was satisfactory condition.
5. The operating profit ratio is the firm increase every year. It stood high in the year 2014-
2015 (18.2) and low in the year 2014-2015 (17.9). Thus the company was satisfactory
condition.
6. The fixed asset turnover ratio of the firm. It stood high in the year 2015-2016 (1.98)
And low in the year 2016-2017 (0.55). Thus the company was not satisfactory condition
SUGGESTIONS:
1. The liquid ratio is satisfactory and hence proper cash flows can be maintained in order to
have a good liquidity position.
2. The fixed assets turnover ratio can be improved by proper planning. The planning
activities should be carried regularly based on he needs of the concern.
3. Cost reduction can be implemented to increases its more profits.
4. The non-operating expenses must be reduced to increases its market share.
5. Further activities can be done in order to improve the development of the concern in the
upcoming years to a greater extent.
36
CONCLUSION
Deccan pump private limited is one of the leading successful industries in the market. It has a
very good performance in the last three years (i.e. during the study period). This study will guide
the company to know their performance in the past years. And helps in taking decisions for the
betterment of the company in future. The management should take necessary steps to elevate its
business in the competitive era by means of adopting the above suggestions as a point in their
discussion.
The company can improve its financial performance more efficiently and effectively,
which would improve the future financial health and prospects of the company.
The study is very useful for getting knowledge about financial performance which helps
for our future period.
37
BIBLIOGRAPHY
1. Shashi k Gupta and R.K Sharma (2002), “financial management”.
2. Kalyani publication, third edition.
3. Shashi k Gupta and R.K. Sharma (2000), “management accounting”.
4. www.google.com
5. www.wikipedia.com
6. www.deccanpumps.co.in
38
Balance Sheet of
------------------- in Rs. Cr. -------------------
DECCAN Pumps
Dec '18 Dec '17 Dec '16 Dec '15
12 12 12 12
months months months months
Sources Of Funds
Total Share Capital 34.81 34.81 34.81 34.81
Equity Share Capital 34.81 34.81 34.81 34.81
Reserves 557.13 518.42 470.89 428.44
Net worth 591.94 553.23 505.70 463.25
Secured Loans 5.18 1.30 24.38 3.19
Unsecured Loans 0.00 0.00 0.00 0.00
Total Debt 5.18 1.30 24.38 3.19
Total Liabilities 597.12 554.53 530.08 466.44
Dec '17 Dec '16 Dec '15 Dec '14
39
12 12 12 12
months months months months
Application Of Funds
Gross Block 488.55 436.79 413.03 380.30
Less: Accum.
269.92 242.74 222.22 199.05
Depreciation
Net Block 218.63 194.05 190.81 181.25
Capital Work in
16.50 14.22 9.96 8.24
Progress
Investments 6.32 6.32 6.32 6.32
Inventories 211.86 182.64 201.77 183.30
Sundry Debtors 179.73 177.11 178.01 126.02
Cash and Bank Balance 197.38 225.24 172.08 154.63
Total Current Assets 588.97 584.99 551.86 463.95
Loans and Advances 129.51 101.51 103.24 90.67
Total CA, Loans &
718.48 686.50 655.10 554.62
Advances
Current Liabilities 282.47 269.21 268.08 231.60
Provisions 80.32 77.36 64.02 52.40
Total CL & Provisions 362.79 346.57 332.10 284.00
Net Current Assets 355.69 339.93 323.00 270.62
Total Assets 597.14 554.52 530.09 466.43
40