CHAPTER 1

INTRODUCTION
The financial statement of the company provides a rich
information about the operational result of the company and much can be
learned from a careful examination of these statement for decision making
purpose. The profit and loss account and balance sheet are indicators of two
significant factors – profitability and financial soundness.

The financial statements are mirrors which reflect the financial

position and operating strength or weakness of the company. A proper analysis
and interpretation of these statements enable a person to judge the profitability
and financial strength of the company. Financial analysis includes detailed
enquiry of financial data. It is a grad – stick which measures relationship
between variables. It is the technique to check upon the efficiency with which
working capital is being used in the company.

The company can easily perform forecasting, inter- firm

comparison, cost control through financial analysis. Financial analysis is the
powerful tool in the hands of the management. So it always maintains a
significant value to the management.

Kerala Small Industries Development Corporation

Limited (Kerala SIDCO) is a state agency of Kerala, India, established for the
promotion of small scale industries in the state of Kerala. It works in association
with the National Small Industries Development Corporation. Apart from acting
as the dispenser of government subsidies for starting a new small scale industry,
the Kerala SIDCO provides technical assistance, training, and also connects up
the aspirant industrialists to suppliers of raw materials as well as machinery.
Kerala SIDCO operates Industrial Parks, Industrial Estates and Mini Industrial
Estates in all the 14 districts of Kerala.
 My study is concentrated to analyse ‘The Financial
Performance of Kerala Small Industries Development Corporation (SIDCO)’
for five years from 2015 to 2019. It helps to know the financial strength of the
firm to make their best use and spot out financial weakness of the firm to make
plans and take suitable corrective actions through comparing the financial
performance of the past five years and find out the liquidity and profitability of
the concern.
CHAPTERISATION:

The report is mainly divided into five chapters as follows:

Chapter 1- Introduction

Chapter 2- Research Design

Chapter 3- Company Profile/Theories Related To Study Area

Chapter 4- Data Analysis and Interpretation

Chapter 5- Findings, Recommendations and Conclusions

REVIEW OF LITERATURE

The review of literature gives a broad outlook of various research studies made
in the past and details of such studies throw light on future studies to be made. It
also strengthens theoretical base of the research study.

Literature review was done by referring previous studies from which most
relevant literature was reviewed.

 KENNEDY and MULLER (1999) has explained that the analysis and
interpretation of financial statement are an attempt to determine the
significance and meaning of financial statements data so that the forecast
may be made of the prospectus for future earnings, ability to pay interest
and debt maturines (both current and long term) and profitability and
sound dividend policy.
 T.S.REDDY and Y.HARI PRASAD REDDY (2008) have stated that the
statement disclosing status of invests is known as balance sheet and the
statement showing the result is known as profit and loss account.
 PEELER J PATSUALA (2006) define that a sound business tells others
a lot about good sense and understanding of difficulties that a company
will face. We have to make sure that people to know exactly how we
arrived to the financial positions. We have to show the calculation but we
avoid anything that is too mathematical. A business performance
analysis indicates the further growth and the expansion. It gives a
physiological advantage to the employee and also a planning advantage.
 I.M.PANDEY (2007) had stated that the financial statements contain
information about the financial consequences and source and uses of
financial resources, one should be able to say whether the financial
condition of the firm is good or bad; whether it is improving or
deteriorating. One can relate the financial variable given in the financial
 statements in the meaningful way which will suggest the actions which
one may have to initiative to improve the firm’s financial condition.
 CHIDAMBARAM RAMESH KUMAR and Dr.N.ANBUMANI (2006),
he argue that the ratio analysis enables the business owner manager to
spot trends in a business and to compare its performance and condition
with the average performance of similar business in the same industry.
To do this compare your own ratio for several succeed years, watching
especially for any unfavourable trends that may be starting. Ratio
analysis may provide all important early warning indications that alone
you to solve your business problems before your business is destroyed
them.
 AGARWAL.B.D (2005), profitability is the measures of the amount by
which companies revenue exceeds its relevant expenses. Profitability
ratios are used to evaluate management’s ability to create earnings from
revenues generating bases within the organisation.
 ROBERT.S.KAPLAN and DAVID.P.NORTAN (1992), argue that a
comprehensive evaluation of company’s performance calls for looking at
financial measures as operational measures which indeed drive financial
measures.
 WOELFEL.C.J quoted that, analysing financial statement is the
systematic numerical evaluation of the relationship between one fact
with the other to measure the profitability, operational efficiency and the
growth potential of the business.
 METCALFE and TITARD quoted that, analysing financial statement is a
process of evaluating the relationship between the component parts of
the financial statements to obtain a better understanding of a firm’s
position and performance.
 SUR (2001) revealed that the overall liquidity should be managed in
such a way that not only it should not hamper profitability but also its
contribution towards increase in profitability should be positive.
 SUR, BISWAS & GANGULY (2001) found that a very high degree of
positive correlation between liquidity and profitability is a notable
feature, reflecting the favourable effect of liquidity on profitability.
 GERALD.K.DEBUSK, LARRY.N.KILLOUGH, ROBERT.M.BROWN
(2005) this paper examines potential cognitive difficulties inherent in the
use of performance measurement systems. We examine potential for
emphasizing financial measures as compared to on financial measures in
the evaluation of an organisation’s overall performance.
The results suggest that users of performance measurement data will
emphasis historical financial measures. To separate experiments, provide
additional evidence that users of performance management data suffers a
halo bias, in that an organisation’s performance on financial measures
appears to influence their perception of the organisation’s performance
on non-financial measures.
 RONALD.M.ROMAN, SEFA HAYIBOR, BRADLEY.R.A (1997) a
primary issue in the field of business and society over the past 25 years
has been the relationship between corporate social performance and
corporate financial performance. Recently, Griffin and Mohan (1997)
presented a table categorising studies that have investigated this
relationship. Motivated by concerns with this table, as well as a desire to
account for progress in research in this area, authors reconstructed it. The
authors present a portrait of this relationship that is:
(a) Substantially different from that shown in the Griffin and Mohan
table.
(b) More consistent with the latest research on the topic.
CHAPTER 2
 RESEARCH DESIGN
BACKGROUND and DEFINITION OF PROBLEM

My study is concentrated to “analysis of financial performance of Kerala

SIDCO” for five years 2015 to 2019. It helps to know the financial strength of
the firm to make their best use and spot out financial weakness of the firm to
make plans and to take suitable corrective actions through comparing the
financial performance of past five years and find out the liquidity and
profitability of the concern.

OBJECTIVES

The main objectives of the study are:-

 To analyse financial position of the company.

 To analyse liquidity, profitability and financial soundness of the
company.
 To analyse fixed asset, working capital and total asset.
 To ascertain the nature of assets and liabilities of the firm.
 To assess the correlation of sales and profit of the concern.
 To analyse net worth (total assets-total liabilities) of the company.
 To draft out various findings, suggestions and conclusion.

SCOPE AND SIGNIFICANCE OF THE STUDY

The scope of financial statement analysis is comparatively wider than other

method of analisation and this include both analysis and interpretation of the
financial data. The financial statements are the mirror which reflects the
financial position and operating strength or weakness of the concern. Through
the interpretation anything change can be making in the financial structure of
the organization and study the running in various situations in the economy and
find out solution to the financial position to arrive change to loss.

This study on the financial performance of SIDCO is conducted to make critical

appraisal on the level of its profitability and other aspects of its financial
management. The study helps to analyse the profitability and performance of
the company on the last five years from 2014-15 to 2018-19. The study also
provides suggestions based upon the findings. They may serve as an aid for
drawing out the plans in future. It helps to identify marketing opportunities and
scope of sales. Collection of data:- The secondary data have been used for the
study. The secondary data have been obtained from annual reports and other
published documents of the company.

RESEARCH METHODOLOGY

Research methodology is a science. It is a way to systematically solve the

research problem. It explains why a research has been undertaken, how the
research problem has been defined, in what way and why the hypothesis has
been formulated, what data have been collected, how to calculate various
statistical measures how to apply a particular research technique, which of the
various research method available is more relevant and so on. Research
methodology helps in studying how research is done scientifically. The design
adopted in the study comes under exploratory and evaluatory research. Since the
data collected from the financial statements of the company is analysed under
various financial and tactical tools. As such the design includes an outline of
what the researcher will do from writing hypothesis and its operational
implications to the final analysis of data in operational point of view.

DATA COLLECTION:
The study is based on the annual report of Kerala SIDCO, Thiruvananthapuram.
Hence the information related to profitability, solvency and turnover were very
much required for attaining the objectives of the present study. Secondary data
is based on the past data, i.e. Five-year annual reports [2015-2019].

TOOLS OF DATA ANALYSIS

 Ratio Analysis
 Comparative Balance Sheet
 Trend Analysis
 Correlation Analysis

PERIOD OF STUDY

The study was done in SIDCO for a period of 30 days. A five year data was
taken for the purpose of the study beginning from the financial year 2014-15
and ending on the financial year 2018-19.

LIMITATIONS OF THE STUDY

The study has the following limitations:-

 The study is done by applying the tool of ratio analysis. So the report
may suffer from the disadvantages of ratio analysis.
 The findings are arrived based only on five years under study.
 The sources information for this project belongs to annual reports
published by the organization and through websites. So that accuracy
cannot be ensured.
 Time constraint is also a limiting factor because in depth study was not
possible.
 The result of the study may not be applicable for other organisation as it
is limited to Kerala SIDCO LTD.
CHAPTER 3
 INDUSTRY PROFILE

SMALL SCALE INDUSTRY:

Small scale industries are differentiated from the former by the technique of
production. They use modern power-driven machines and employ labour a well.
The raw materials are also obtained from outside, if it is not available locally.
These industries are larger in size than cottage industries. Their products are
sold through traders beyond local markets. In many developing countries, the
role of these industries are crucial as they provide employment to a larger
number of people. In countries like India and China, a larger number of goods
like clothes, toys, furniture, edible oil and leather goods are produced by small
scale industries.

The Industries Development and Regulation Act of 1990 defines small scale
industries unit as a unit engaged in production, processing and preservation of
goods, repairs and servicing with an initial investment no exceeding Rs.60 lakhs
on plant and machinery.

THE MAJOR OBJECTIVES IN DEVELOPING SMALL SCALE

INDUSTRIES ARE AS FOLLOWS:

 To increase the supply of finished products.

 To encourage capital formation.
 To develop local entrepreneurship and skill.
 To create employment opportunities.
  To decentralise manufacturing activities from town areas and distribute
them to rural areas.
 To reduce regional imbalance.
 To popular entrepreneurial and managerial abilities and skills.

THE IMPORTANCE OF PROMOTING SMALL SCALE INDUSTRIES ARE

AS FOLLOWS:

 To create employment opportunities.

 Suitable for countries like India as they require less amount of capital.
 They have short gestation period and so they are quick yielding.
 They can be successful in operating in rural and backward areas.
 They can be installed as ancillary units if necessary.
 They act as catalytic agents to enhance the growth of entrepreneurship.
 Decentralisation of authority is very easy.

SMALL SCALE INDUSTRIES IN INDIA:

Since the time of independence, the small-scale industries in India has been a
major contributor to the country’s GDP. This traditional sector of India is
considered to have huge growth prospects with its wide range of products. With
40% share in in total industrial output and 35% share in exports, the small-scale
sector in India is acting as Engine of Growth in new millennium.

The definitions for small scale undertakings has changed over time. Initially the
were classified into two categories-those using power less than 50 employees
and those using power more than 50 but less than 100 employees. However, the
capital resources invested on plan and machinery, buildings have been the
primary category to differentiate small scale industries from large and medium
scale industries. An industrial unit has been categorized as a small-scale unit if
it fulfils the capital investment limit fixed by the Government of India for small
scale industries.

As per the latest definition which is effective since December 21 1999 any
industrial unit to be regarded as a Small-Scale industrial unit the following
conditions are to be satisfied:

 Investment in fixed assets like plants and equipment either held on

ownership terms on lease or on hire purchase should not be more than 10
million.
 However, the unit in no way can be owned or controlled or ancillary of
any other industrial unit.

The traditional small-scale industries differ from their modern counterparts

in many respects. The traditional SSI are highly labour consuming with age
old machineries and conventional techniques of production resulting in poor
productivity rate whereas the modern small-scale units are much more
productive with less manpower and more sophisticated machines.

Nowadays Indian SSIs are mostly modernised. Modernization have

increased their products offered by this industry. The items manufactured in
modern small-scale services and business enterprises in India now include
rubber products, plastic products, chemical products, glass and ceramics,
mechanical engineering items, hardware, electrical items, transport
equipment, electronic component and equipment, automobile parts, bicycle
parts, instruments, sports goods, stationary items and clocks and watches.

Since independence the Government of India has nurtured this sector with
special care with the following aims:

 To develop this sector as a major source of employment.

 To encourage decentralised industrial expansion.
  To ensure equitable distribution of income.
 To mobilise capital investment and entrepreneurial skills.

The small-scale industries play a vital role in the growth of the country. It
contributes almost 40% of gross industrial value added in the Indian economy.
The small scale industry (SSI) gathered momentum along with industrialization
and economic growth in India. It started growing due to the vision of our late
Prime Minister Jawaharlal Nehru who sought to develop core industry and have
a sustaining sector in the form of small scale enterprises. Being a labour
intensive sector, they offer a higher productivity of capital than capital intensive
enterprises due to low investment per worker. The SSI today constitute a very
important segment of the Indian economy as they help in dispersal of industries,
rural development, and the decentralization of economic power.

The definition of small scale industrial undertakings has changed over

years. Initially they were classified into two categories those using power with
less than 20 employees and those not using power with the employ strength
being more than 50 but less than 100. However, the capital resources invested
on plant and machinery, building has been the primary criteria to differentiate
the small scale industries from the large and medium scale industries. An
industrial unit can be categorised as small scale unit if it fulfils the capital
investment limit fixed by the government of India for small scale sector.

As per the latest definition which is effective since December 21,1999,

for any industrial unit to be regarded as small scale industrial unit, the following
conditions must be satisfied: -

 Investment in fixed assets like plant and equipment either held on

ownership terms on lease or on hire purchase should not be more than
rupees 10 million.
 However, the unit in no way must be owned or controlled or ancillary of
any industrial unit.

Since the time of independence, small scale sector in India has been a major
contributor to country’s the Gross Domestic Product (GDP). This traditional
sector in India which is considered to have huge growth prospect with its
wide range of products, with 40% share in total industrial output and 35%
share in exports, the small scale industrial sector in India is acting as the
engine of growth in the new millennium. The public policy in India had been
attaching a lot of importance to village and SSI on the following grounds.
SSI been labour intensive, helped to increase the volume of employment,
particularly in rural areas, it is estimated that about two crore persons are
engaged in India in these industries. The handloom industry alone employs
50 lakh people. They account for 6% of GDP, 95% of all industrial unit, and
34% of total exports. Around 39 lakh SSIs in India has emerged versatile
producing over 8000 products, from traditional handicrafts to high end
technical instruments.

In developed economies, about 60% of GDP is generated by small

enterprises, i.e.; enterprises with a maximum of 50 employee. The reason
being large number of small enterprises guarantees a high degree of
competition, and variety of economic activities that require millions of
enterprises to be reasonable competitive and efficient. The indirect jobs
created through forward and backward linkages are no less important. In real
terms, the SSI recorded a growth rate of 10.1% in 2009-2010 as against 7.1%
in 2006-2007 and 5.6% in 2005-2006. By the year 2025, if not controlled,
this sector will grow even more rapidly.
 COMPANY PROFILE

ABOUT SIDCO:

The Kerala SIDCO, a government owned public sector corporation,

was established in November 1975 for the development and promotion for
small scale industries. Currently, SIDCO IS expanding its area of works by
diversification to give new vision to the small scale industries.

God’s own country, Kerala, is gifted with abundant natural resources

essential for establishing industrial units and SIDCO is taking the initiative to
set up industrial units. Kerala SIDCO is the ‘Total solution provider’ for small
scale sector as it offers all facilities and help to set up a small scale unit.

This corporation is rendering valuable assistance to small scale units in

the state, including consultancy at the beginning of the project to the
identification of industrial site, commissioning of project, providing
infrastructure facilities, distribution of essential raw material, marketing of the
small scale industrial products, undertaking civil and electrical works, and
setting up of the small scale unit, Kerala SIDCO competently handles the
necessary requisites of any project.

Kerala SIDCO is now in the path of considerable profit and is now

granting basic facilities and marketing security to the industrialists and new
entrepreneurs through its diversified activities and new working style.
SMALL SCALE INDUSTRIES IN GLOBALISATION SCENARIO

Globalisation has stretched in social, political and economic activities

of countries beyond political frontiers, regions and continents. This has
resulted in rapid flow of investments, trade, finance and migration.

SSIs were deeply affected by globalisation of the markets;

Globalisation has rapidly gained momentum as a result of certain factors.
They are: Rapid technological advances in accessing and disseminating
information have resulted in reduction of costs and complexities of going
global. The world market are now open to new products and services, and
the SSIs which were earlier limited by cost considerations are open to export
opportunities.

The protective tariff and non-tariff barriers, which separated domestic

markets from international markets, slowly coming down. This has given
SSIs an option to either operate in the protective domestic environment or
accept the challenges of facing competition in the international arena.

The SSIs segment has its strength and weaknesses and therefore
created a niche for itself by its unique positioning in terms of offering value
added services and being flexible and yet cost effective. Being a small setup,
the decision-making process is quicker and services and product offered are
more customizable. The entrepreneur is ideally the soul decision maker or at
the most a small group of people who reach a consensus relatively easily.
The committee approach is avoided and the lag time between getting an offer
on business opportunities and grabbing the offer is kept as a minimum.
When it comes to the question of improving the competitive strength of their
SSI sector, the developing countries despite realizing the need and urgency
to do so, are constrained to extend the required kind of support to them
because of their own limitations, some of which could be grouped as under:
  Financial limitations.
 Lack of necessary infrastructure.
 Problems related to transition such as rigid mind set, resistance to
change both as administrative and enterprise levels.

ROLE OF GOVERNMENT IN DEVELOPMENT OF SSIs

All the 5 years plans and industrial policy resolutions

statement have a stresses the need to accelerate the development of village
and small industries to create large scale employment opportunities, promote
decentralisation and dispersal of industries, achieve diffusion of ownership
and prevention of concentration of economic power, promote
entrepreneurship, develop agro based and ancillary industries, improve the
skills of artisans and quality of their products, reduce the role of subsidies
and to set up the productions of essential articles and those having potential
for exports.

The Government, Central and State, have been a number of

measures to help solve the age-old problems of these industries, such as lack
of credit facilities, outmoded methods and techniques, absence of organised
marketing, unsatisfactory raw material supply and competition from large
scale units.

The Government, Central and State, have taken a number of

steps, including the establishments of agencies to faster the development of
the village and small industries.

DIVISIONS OF SIDCO:

The various divisions under Kerala SIDCO include;

1. Marketing Division

2. Production Division

3. Industrial Estate Division

4. Industrial Park Division

5. Raw Material Division

6. Construction Division

7. IT&TC and Trading Division

8. Export, Import & Project Division

9. Consultancy Division

Marketing Division

SIDCO provides marketing support to Micro Small and Medium Enterprises

functioning in the State. During 2010-11 a total of 50.71 Crore worth SSI
Products have been marketed successfully to various Government Departments
and PSU’s. In the course of this mission, we have contributed Rs.103 lakhs to
state exchequer towards collections and remittance of VAT. During 2012-13,
the division achieved a turnover of Rs. 74 crores. SIDCO is also entrusted as the
nodal agency for the fixing of prices for electrical items- one among the
reserved items for MSME Sector.

Production Division

SIDCO owns 8 Production Units across the States, manufacturing Wooden and
Steel Furniture, Survey equipment, Pressure Die Cast Components, Jigs and
fixtures and machining of precision component. A major expansion and
modernization policy has set in motion to transmute the Division to enlarge the
product line.
Industrial Estate Division

SIDCO presently manages 17 major Industrial Estates and 36 Mini Industrial

Estates. These estates are the havens of numerous SSIs, where SIDCO provides
common infrastructural facilities for all the units.

Industrial Park Division

Government has devised Industrial Park as a tool for developing industries in

our State for which SIDCO is accepted as a Nodal Agency for constructing such
Parks. Government of Kerala envisages at least one IP in each assembly
constituency as a measure for employment generation. In this venture, SIDCO
has completed 7 Industrial Parks that host 218 Industrial Units with a direct
employment opportunity for nearly 1000 people.

Raw Material Division

This division aims to distribute scarce raw materials to small scale industries.
As low cost raw materials is inevitable to sustain the MSME in the field owing
to cutthroat competition, SIDCO sacrificing its margin while supplying essential
raw materials at the lowest possible cost. The Division achieved a turnover of
Rs.54 Crore during 2010-11 and 79 crores during 2011-12. SIDCO seeks to
widen its horizon by working in tandem with other central and state public
sector undertaking for the best help of MSME Sector.

Construction Division

Our Civil Construction Division that undertakes civil construction works caters
the needs for various PSU’s, Tourism Department, various Government
Departments, Industrial Estates / Mini Industrial Estates etc. The Division is at
the behest of a Chief Engineer whose mission is assisted and supplemented by a
group of experienced civil and Electrical engineers. The Division offers a host
of integrated services-Structural design, preparation of detailed estimate,
surveying, execution and management of civil and electrical works.

IT&TC Division

The division, now conferred as a Total Solution Provider of Government of

Kerala undertakes all gamuts of activities related to the arena of information
technology. Now it ventures Telecom City, a major project with a total outlay
of Rs.600 Crores on BOT basis with a 50000 Nos of prospective employment
opportunities. The prestigious Tool Room cum Training Centre with state-of-
the art technology, set up with a total outlay of Rs. 12 crore for the manufacture
of tooling equipments and training is also functioning under the Division.

Export, Import & Project Division

This division is created to undertake special projects. Under this division it is

proposed to start IOC/ONGC Petro/Diesel Pumps at Cherthala, Ollur,
Kanichukulangara, Olavakkode, Pachalam and Ernakulam. This division also
undertakes supply / installation of LED Street Lights, e-toilets, High Security
Number Plates etc. SIDCO is playing a vital role for the promotion of Small
Micro and Medium Industries in the State that provides more than 10000 Direct
employment opportunities and over 20,000 indirect employment opportunities,
its activities to lift this sector is very vital from social and economic view point.

Consultancy Division

This division is mainly constituted for assisting entrepreneurs and

Government/semi Government institutions right from project development to its
execution. Consultancy extends its service for project development, preparation
of project report, assistance for obtaining term loans and finally its
implementation. So far the division has bagged a handful of prestigious project
for the consultancy services.
STRATEGIC INTEND

VISION

“Serving small scale industry on a large scale.”

MISSION

“To provide full client satisfaction by adding value with respect to service
quality and service experience that goes beyond managing time, cost and
quality.”

OBJECTIVES

Development of small scale industries in the state by providing:

 Infrastructure facilities
 Raw material
 Marketing products of Small Scale Industries unit.
 Promotional activities for SSI products.

PRODUCT PROFILE

Kerala SIDCO is public undertaking. Government have examined the proposal

given by the company in detail and are pleased to appoint Kerala SIDCO as the
agency for procurement supply for the following item to government
department and public sector undertaking in addition to the items enumerated to
the government order.

The company supplies, Water facilities, public water taps, plastic

moulded furniture, pipes and pipe fittings, plastic water tanks and survey
equipment’s. Kerala SIDCO is functioning eight production units out there.
 These units include Wood working units and 4 Engineering units.
Kerala SIDCO is a sole canalizing agent for procurement supply of selected
item manufactured by Small Scale Industrial Units. SSI products are steel
furniture, hospital furniture, wooden furniture and lab equipment and chemicals.
The raw material includes Iron and Steel, Paraffin Wax, Titanium Dioxide,
Plastic Granules, Cement and GI Pipes, Aluminium Sheet, Coal, Petroleum
products like Lubricants, Rubber Processing Oil, and Bitumen. Other items
include:

1. Tarpaulin
2. Electrical Chocks, Condensers, Starters
3. Control Panels
4. Lab Chemicals
5. Aluminium and Steel Products
6. Man Hole Covers
7. Wax Candles
8. Rolling Shutters
9. Voltage Stabilizers
10.Agricultural Tools and Implements
11.Paints and Varnishes
12.Safety Matches

At present 8 production units are functioning. All units depend on job works.
The government department’s purchases various furniture and equipment
produced by these units without any tender formalities.

Considering the importance of SSIs in the industrialisation of the state as

part of the government policy, the task of setting up an industrial park each in
the 140 legislative constituencies in states is being implemented by Kerala
SIDCO.
Competitor:There is only one main competitor for Kerala SIDCO is KINFRA
(Kerala Infrastructural Development Corporation). Other competitors include
Local Companies and Foreign MNCs.

Customer Profile: The main customers of Kerala SIDCO are Government

Departments and Public Undertakings. The main customers of Raw materials
produced by Kerala SIDCO are Iron and Steel Authority of India, Tata Iron and
Steel Company Ltd, Vishakhapatnam Steel Plant and Madras Refineries Ltd for
Paraffin Wax.

THEORETICAL FRAMEWORK

Financial analysis is the process of determining the significant operating

and financial characteristics of a fir from accounting data. Broadly, the term
financial analysis applied to almost any kind of detailed enquiry into financial
data. The profit and loss account and balance sheet are indicators of two
significant factors-profitability and financial soundness.

According to Metcalf and Titard,” Analysis of financial statement is a

process of evaluating the relationship between component part of a financial
statement to obtain a better understanding of a firm’s position and
performance”.

The following are the main objectives of financial analysis:

 To estimate the earning capacity of the firm.

 To gauge the financial position and financial performance of the firm.
  To determine the long-term liquidity of the funds.
 To judge the solvency of the firm.
 To decide about the future prospects of the firm.
 To measure the efficiency of operations.
 Assessment of past performance and current position.
 Prediction of net income and growth prospects.
 Prediction of bankruptcy and failure.
 Loan decision by financial institutions and banks.

OVERALL PERFORMANCE OF THE FIRM

Financial analysis involves the use of financial statements. A financial

statement is a collection of data that is organised according to logical and
consistent accounting procedures. Its purpose is to convey an understanding of
some financial aspects of business firm. It may show a position of a period of
time as in the case of balance sheet, or may reveal a series of activities over a
given period of time, as in the case of an income statement. Thus, the term
financial statements ‘generally refers to two basic statements’ the balance sheet
and the income statement. The balance sheet shows the financial
position(condition)of the firm at a given point of time. It provides a snapshot
that maybe regarded as a static picture. “Balance sheet is a summary of a firm’s
financial position on a given data that shows total assets =total liability
+owner’s equity”

The income statement (referred to in India as the profit and loss statement)
reflects the performance of the firm over a period of time. “Income statement is
a summary of a firm’s business revenues and expenses over a specified period,
ending with net income or loss for the period”.

However, financial statements do not reveal all the information related to the
financial operation of the firm, but they furnish some extremely useful
information, which highlight two important factors profitability and financial
soundness.

TOOLS OF FINANCIAL ANALYSIS

The analysis of financial statements consists of a study of relationship and

trends to determine whether or not the financial positions of the concern and its
operating efficiency have been satisfactory.

Techniques used for this study are:

 Ratio analysis
 Comparative balance sheet
 Trend analysis
 Correlation analysis

1) RATIO ANALYSIS

Ratio analysis is one of the techniques of financial analysis where ratios are
used as a yardstick for evaluating the financial condition and performance of a
firm. It aims at making use of quantitative information for decision making. A
ratio is an expression of relationship between two variables. Ratio can be
computed from the basic financial statements, Balance sheet and profit and loss
account.

Ratio analysis is an important widely used tool of analysis of financial

statements. It is essentially an attempt to develop meaningful relationship
between individual items of group of items in balance sheet and profit and loss
account. The object and utility of ratio analysis as a technique of financial
analysis is confined not only to the internal parties but to trade creditors , bank
and lending institutions also. It functions as a sort of health test. In the nut shell,
ratio analysis gives answer to the problems such as:

 Whether the enterprise’s financial position is basically sound.

 Whether the capital structure of the business is in proper order.
 Whether the profitability of the enterprise’s is satisfactory
 Whether the credit policy in relation to sales and purchase is sound.
 Whether the company is credit-worthy.

Thus, ratio analysis highlights of profitability, liquidity and solvency.

Advantages of ratio analysis:

 Simplifies financial statements: Ratio analysis simplifies the

comprehension of financial statement. Ratio tells the whole story of
financial condition of the business.
 Facilities inter-firm comparison: ratio analysis provides data for
inter firm comparison. Ratios highlights the factors associated with
successful and unsuccessful firms. They also reveal strong firms
and weak firms, overvalue and undervalue firms.
 Make intra-firm comparison possible: ratio analysis also makes
possible comparison of the performance of the different divisions of
the firm. The ratios are helpful in deciding about their efficiency or
otherwise in the past and likely performance in the future.

The following are the important categories of ratios used for analysis of
financial performance of KERALA SIDCO:

A. Liquidity Ratios

1. Current Ratio

2. Acid Test Ratio or Quick Ratio

3. Absolute Liquid Ratio

 B. Solvency Ratios
1. Debit-Equity Ratio
2. Proprietary Ratio
3. Fixed asset to shareholders fund ratio
4. Current asset to shareholders fund ratio
C. Efficiency Ratios
1. Inventory Turnover Ratio
2. Working Capital Ratio
3. Current Asset Turnover Ratio
4. Fixed Asset Turnover Ratio
5. Debtors Turnover Ratio
6. Debt Collection Period (in days)
7. Creditors Turnover Ratio
8. Debt Payment Period (in days)
D. Profitability Ratios
1. Gross Profit Ratio
2. Net Profit Ratio
3. Return on Capital Employed Ratio
4. Return on Shareholders Fund
5. Return on Total Asset

LIQUIDITY RATIO

i. Current Ratio:

Current ratio expresses relationship between current assets and

current liabilities. It is computed by dividing current assets by current liabilities.
The higher current ratio is a clue that company will be able to pay its debt
maturing within a year. On the other hand, a low current ratio points to the
possibility that a firm may not be able to pay its short term debt.
Current Ratio = Current Assets ÷ Current Liabilities

Current Assets = Current Assets + Loans and Advances

Total Current Liability = Current Liability + Secured Loan +Unsaved Loans+

Provisions

ii. Acid Test Ratio or Quick Ratio:

It is also known as “Liquid Ratio”. It shows the relationship between Quick

Assets and Current Liabilities. These liquid assets are those which are easily
converted into cash immediately without any diminishing value.

Quick Ratio = Quick Assets ÷ Current Liabilities

Quick Assets = Current Assets – (Stock + Prepaid expenses)

Quick ratio is the true test or the business solvency. The ideal ratio is 1:1. It
indicates found financial position.

iii. Absolute Liquid Ratio:

The ratio is calculated by dividing the absolute liquid assets(cash in

hand, cash at bank and marketable securities) by current liabilities. The
accepted norm for the ratio is 50% or 0.5:1, i.e. Rs 1 worth liquid assets are
considered adequate to pay Rs. 2 worth current liabilities.

Absolute Liquid Ratio = Absolute Liquid Assets ÷ Current Liabilities.

SOLVENCY RATIOS

Many of the financial analysis are interested in the relative use of debt and
equity in the firm. These ratios measure the long term solvency position of firm.
The important leverage ratios are

1) Debt-Equity ratio
 Debt – equity ratio expresses the relationship between debt and
equity. Debt equity ratio is directly computed by dividing total debt by
net worth
Debt Equity Ratio = Total debt ÷ Net worth
The acceptable norm from this ratio is considered to be 2:1. A
high ratio shows that the claims of creditors are greater than those of
Owner’s. A high Debt company is able to borrow funds on very
restrictive terms and conditions.

2) Proprietary Ratio
The proprietary ratio relates to the shareholder’s fund to total assets. This
ratio shows the long term solvency of the business. It is calculated by
dividing shareholder’s fund by total assets. Total asset include all assets
including goodwill (excluding fictitious assets). The acceptable norm of
the ratio is 1:3.
Proprietary ratio = Shareholder’s fund÷Total assets

3) Fixed Assets to Shareholder’s Fund ratio

This ratio shows the relationship between fixed assets and shareholder’s
fund. The purpose of this ratio is to find out the percentage of the owners
fund invested in fixed assets. It is calculated as

Fixed Assets to Shareholders Fund Ratio = Fixed Asset÷Proprietors fund

If the ratio is greater than one, it means that creditor’s funds have been used to
acquire a part of the fixed assets.

EFFICIENCY RATIOS

1) Inventory Turnover Ratio

 This ratio indicates the effectiveness of the inventory management.
The ratio how speedily the inventory is turned into accounts receivable
through sales. Higher the ratio, the more efficiency the inventory is
said to be managed vice versa.
Inventory Turnover Ratio = Net sales÷ Average stock
OR
Inventory Turnover Ratio =Cost of Goods Sold÷ Average stock
Cost of Goods Sold = Sales + Gross profit
Average stock= Opening stock + Closing stock÷2
A high ratio is ideal and it indicates brisk sales and under investments
in inventory. A higher ratio reflects efficient business activities. A low
ratio indicates over investment in inventory and dull business, leave to
be taken to increase the sales.
2) Working Capital Turnover Ratio
This ratio indicates the number of times the working capital is turned
over in the course of a year. The ratio measures the efficiency with
which the working capital is being used by a firm. A high ratio is being
used by a firm. A higher indicates efficient utilization of working
capital.

Working Capital Turnover Ratio = Net Sales ÷Net Working Capital

3) Current Asset Turnover Ratio

Current assets turnover ratio indicates the efficiency with which
current assets turns into sales. A high ratio implies that the current
assets are being utilized efficiently by the firm and also indicates
reduced lock up funds in current assets. An analysis of this firm over a
period of time reflects working capital management of a firm.
Current Assets Turnover Ratio = Net Sales ÷ Net Fixed Assets
4) Fixed Assets Turnover Ratio
It shows the relationship between fixed assets and sales. Yet it indicates the
extent to which the investments in fixed assets contribute towards sales. The
ratio is calculated by

Fixed Assets Turnover Ratio = Net Sales ÷ Net Fixed Assets

5) Debtors Turnover Ratio

Debtors Turnover ratio is shows the extent trade credit granted and the
efficiency in the collection of debts. Thus, it is an indication of
efficiency of trade credit management and prompt payment by the
customers of debtors.

Debtors Turnover Ratio = Net Credit Sales ÷ Average Accounts

Receivable

6) Debt Collection Period

Debt collection period measures how long it takes to collect cash from
the debtors by the firm. The actual collection period can be compared
with the stated credit terms of the company. If the period is longer
than those terms, then it indicates insufficiently the procedure of
collecting debts.
Debt Collection Period= Sundry Debtors ÷ Net Sales×365

7) Creditors Turnover Ratio

The creditors turnover ratio indicates the prompt payment
made by the firm to its creditors. This ratio is similar to the debtors
turnover ratio. It compares creditors with the total credit purchases. It
signifies the credit period enjoyed by the firm in paying creditors.
Accounts payable include both sundry creditors and bills payable.
 Creditors Turnover Ratio=Net Credit Purchases ÷ Average
Accounts Payable

8) Debt Payment Period

Measurement of debt payment period shows the average time taken to

pay for goods and services purchased by the company. In general longer
period is considered as good, but if a too long period is taken to pay
creditors the credit rating of the company may suffer thereby making it
more difficult to obtain suppliers in the future.

Debt Payment Period=Sundry Creditors ÷ Net Purchases × 365

PROFITABILITY RATIOS

1) Gross Profit Ratio

The ratio expresses the relationship between gross profit and net sales.
Gross profit means net sales minus cost of goods sold. Net sales means
total sales minus sales return. This ratio is significant because it is a
useful test of profitability and management efficiency. Higher ratio is
better.
Gross Profit Ratio=Gross Profit ÷ Net Sales × 100
2) Net Profit Ratio
It expresses the relationship between net profit and net sales. The profit
margin indicates the management liability to operate the business
successfully. Their ratio measures the overall profitability of the firm
which is useful to owners.
Net Profit Ratio= Net Profit ÷ Net Sales × 100
3) Operating Ratio
It establishes the relationship between total operating expenses and net
sales. Total operating expenses include cost of goods sold, office and
 operating expenses, selling and financial expenses. The ratio is
complementary to net profit ratio incase the NPR is 20%, and then the
operating ratio is 80%. This shows efficiency of the firm. Low ratio is
ideal.
Operating Ratio=Cost of Goods Sold+Operating Expenses÷Sales×100
4) Return on Total Assets
It is calculated by dividing net profit by total asset. The ideal ratio of
return on assets to be kept is 1%.
Return on Total Asset=Net Profit÷ Total Assets×100
5) Return on Shareholders Fund
It is calculated by dividing net profit and shareholders fund. It shows the
rate of profit on shareholder’s fund. It relates the profit available for the
shareholders to their investment.
Return on Shareholders Fund=Net Profit÷ Shareholders fund× 100

2) COMPARATIVE BALANCE SHEET

In this statement two or more different year’s data can be used for comparing
assets and liabilities, and to find out any increase or decrease in these items.
This facilitates the comparison of figures of two or more periods and provides
necessary information, which may be useful in forming an opinion regarding the
financial condition as well as the progressive outlook of the concern.
3) TREND ANALYSIS
In financial analysis the direction of change over a period of years is of crucial
importance. Trend analysis of ratio indicates the direction of change. This kind
of analysis is particularly applicable to the items of P&L account. For trend
analysis the use of index number is generally advocated.
 TREND RATIOS ( TREND PERCENTAGE)
Under this technique of financial analysis, the ratios of different items for
various period are calculated and then a comparison is made. An analysis of
ratios for past few years may well suggest the trend or direction in which the
concern is going upward or downward. The method of trend percentages is a
useful analytical device for the management since by substituting percentages
for larger amounts; the brevity and readability are achieved.
4) CORRELATION ANALYSIS
Correlation is the relationship between any two or more variables. Simpson and
Kafka defines, “Correlation Analysis deals with the association between two or
more variables.” Two variables are said to be correlated if change in one
variable results in a corresponding change in other variable. That is, when two
variables move together, we say they are correlated.
nεxy−(εxεy )
r= ¿¿
 CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

1. RATIO ANALYSIS
 LIQUIDITY RATIO

CURRENT RATIO

Table No:4.1 Current Ratio (Rs in Lakhs)

 YEAR CURRENT CURRENT CURRENT
ASSET LIABILITY RATIO
2015 17749930988.19 1849118137.43 0.9599
2016 2057828626 1957969191 1.0510
2017 2173404655 2491294229 0.8723
2018 2534307208 2994751265 0.8462
2019 1748588376.05 2281746088 0.7663
Source: Secondary Data

Chart No:4.1 Diagram showing Current Ratio

1.2

0.8

0.6

0.4

0.2

0
2015 2016 2017 2018 2019

Interpretation
In a sound business a current ratio of 2:1 is considered as an ideal one. From the
analysis it is inferred that the firm is not in standard rate in all years. But in the
2015 there is a variation in the current ratio than previous year as 1.0510.

QUICK RATIO
Table no.:4.2 Quick Ratio (Rs in lakhs)

YEAR QUICK CURRENT QUICK

ASSETS LIABILITIES RATIO
2015 1725265948 1849118137.43 0.9330
2016 2037087371 1957969191 1.0404
2017 2143400837 2491294229 0.8603
2018 2504865870 2994751265 0.8364
2019 1727586098 2281746088 0.7571
Source: Secondary Data

Chart no.:4.2 Diagram showing Quick Ratio

1.2

0.8

0.6

0.4

0.2

0
2015 2016 2017 2018 2019

Interpretation:

An acid test ratio of 1:1 is considered satisfactory as a firm can easily

meet all its current liabilities. But in here 2015 (1.040) as the firm attain the
satisfactory level. So, the financial position of the firm is unsound.
ABSOLUTE LIQUIDITY RATIO

Table no.:4.3 Absolute Liquidity Ratio (Rs in Lakhs)

Year Cash and Current Absolute Liquid

 Marketable Liabilities Ratio
Securities
2015 123573315.63 1849118137.43 0.0668
2016 215871931.49 1957969191 0.1102
2017 235548785.1 2491294229 0.0945
2018 299737583 2994751265 0.1008
2019 464253323.16 2281746088 0.2034
Source: Secondary data

Chart no.:4.3 Diagram showing Absolute Liquidity Ratio from 2015 to 2019

0.25

0.2

0.15

0.1

0.05

0
2015 2016 2017 2018 2019

Interpretation:

A ratio of 0.75:1 is recommended to ensure liquidity. From the

analysis its inferred that liquidity position of the firm not in satisfactory level in
past 5 years.
  SOLVENCY RATIO / LEVERAGE RATIOS

DEBT-EQUITY RATIO

Table no.:4.4 Debt Equity Ratio (Rs in Lakhs)

YEAR TOTAL SALES DEBTORS DEBTORS

TURNOVER
 RATIO
2015 2608136919 1062399771 2.45
2016 2630613638 1430883388 1.85
2017 2651079289 1251027061 2.12
2018 1137348182 1092263240 1.04
2019 1583964677 1216162998 1.3
Source: Secondary data

Chart no.:4.4 Diagram showing Debt Equity Ratio

2.5

1.5

0.5

0
2015 2016 2017 2018 2019

Interpretation:

In 2017 the ratio was higher; it indicates that the debts are
collected rapidly. The higher value of debtor’s turnover, the more efficient is the
management of credit. In the year 2018, it shows a decreasing trend.
PROPRIETARY RATIO

Table no.:4.5 Proprietary Ratio

YEAR SHAREHOLDER’ TOTAL PROPRIETARY

S FUND ASSETS RATIO
2015 84252684.76 2354943461 0.0357
2016 204266178 2629927280.61 0.0776
2017 242376067 2673379975 0.090
2018 -409944988 3023038515 0.1356
2019 -605637225.86 2438279604.60 0.2483
Source: Secondary data
Chart no.:4.5 Diagram showing Proprietary Ratio

0.3

0.25

0.2

0.15

0.1

0.05

0
2015 2016 2017 2018 2019

Interpretation:

The acceptable norm of the proprietary ratio is 0.33:1. From the

analysis it infers that in 2018-2019 (0.2483), shows the ratio satisfy the standard
rule of the proprietary ratio. But other years does not satisfy. So the long term
solvency of the firm is not good.
FIXED ASSETS TO SHAREHOLDERS FUND RATIO

Table no.:4.6 Fixed Assets To Shareholders Fund Ratio

YEAR FIXED SHAREHOLDERS FIXED

ASSETS FUND ASSETS TO
NET WORTH
RATIO
2015 515730074.8 84252684.76 6.121
2016 504832888 204266178 2.47
2017 482811838 242376067 1.991
2018 471458526 -409944988 -1.150
2019 477098687.7 -605637225.86 -0.787
Source: Secondary Data
Chart no:4.6 Diagram showing Fixed Assets to Net Worth Ratio

0
2015 2016 2017 2018 2019

-1

-2

Interpretation:

The ratio shows is proportion of shareholder’s funds invested in fixed

assets. If the ratio is greater than 1; it means the creditors fund has been used to
acquire a part of fixed assets. Here the ratios are above 1, so creditors fund has
not been used in fixed assets. From 2015 to 2019 both fixed assets and
shareholder’s fund are showing decrease trend.
  ACTIVITY RATIO

INVENTORY TURNOVER RATIO

Table no.:4.7 Inventory turnover ratio

YEAR COST OF AVERAGE RATIO

GOODS SOLD STOCK
2015 2640.14 4074.14 0.64
2016 2648.14 3411.21 0.77
2017 2722.99 2317.86 1.17
2018 1304.91 2752.85 0.47
2019 1718.37 1972.82 0.87
Source: Secondary data

Chart no.:4.7 Diagram showing Inventory turnover ratio

 1.4

1.2

0.8

0.6

0.4

0.2

0
2015 2016 2017 2018 2019

Interpretation:

The above diagram shows a fluctuating trend in inventory

turnover ratio. The year 2017 shows the lowest ratio, it may be due to
overstocking and the highest ratio in the year 2016 and then declining in the
year 2017. The average inventory ratio is 0.78.
FIXED ASSETS TURNOVER RATIO

Table no.:4.8 fixed assets turnover ratio

YEAR NET SALES FIXED FIXED ASSET

ASSETS TURNOVER
RATIO
2015 3072464028.19 515892853.73 5.95
2016 2651079289.40 504832888 6.79
2017 3430613637.50 482811839 5.49
2018 1137348182 471458526 2.41
2019 1662138914.92 477098687.65 3.48
Source: Secondary data

Chart no.: 4.8 Diagram showing Fixed Asset Turnover Ratio

 8

0
2015 2016 2017 2018 2019

Interpretation:

From the analysis inferred that the firm properly use its fixed
assets because net sales above five times increases than fixed assets in
2016&2017. In 2018 it decreased to 2.41 times then slightly increases in
2019 to 3.48 times.
DEBTORS TURNOVER RATIO

Table no.:4.9 Debtors turnover ratio

YEAR TOTAL SALES DEBTORS DEBTORS

TURNOVER
RATIO
2015 2608136919 1062399771 2.45
2016 2630613638 1430883388 1.84
2017 2651079289 1251027061 2.12
2018 1137348182 1092263240 1.04
2019 1583964677 1216162998 1.3
Source: Secondary data

Chart no.:4.9 Diagram showing Debtors turnover ratio

 3

2.5

1.5

0.5

0
2015 2016 2017 2018 2019

Interpretation:

In 2015 the ratio was higher. It indicates that the debts were
collected rapidly. The higher value of debtor’s turnover the more efficient is
the management of credit. In 2019 it shows a decreasing trend.
AVERAGE DEBT COLLECTION PERIOD/DEBTORS
COLLECTION PERIOD

Table no.:4.10 Average debt collection period

YEAR NUMBER OF DEBTORS DEBTORS

DAYS IN A TURNOVER COLLECTION
YEAR RATIO PERIOD
2015 365 2.45 149
2016 365 1.84 198
2017 365 2.12 172
2018 365 1.04 351
2019 365 1.3 281
Source: Secondary data

Chart no.:4.10 Diagram showing Average debt collection period

 400

350

300

250

200

150

100

50

0
2015 2016 2017 2018 2019

Interpretation:

In 2018, it shows an increasing trend, it indicates that the

customers hadn’t made the payment promptly. In 2015, the ratio is less that
indicates that customers had made payment in time.
  PROFITABILITY RATIOS

GROSS PROFIT RATIO

Table no.:4.11 Gross profit ratio

YEAR GROSS NET SALES GROSS

PROFIT PROFIT
RATIO
2015 212848147 3072464028.19 6.92%
2016 199229571 2651079289.40 7.515%
2017 237361629 3430613637.50 6.91%
2018 154405667 1137348182 13.57%
2019 165647283 1662138914.92 9.96%
Source: Secondary data

Chart no.:4.11 Diagram showing Gross profit ratio

 16

14

12

10

0
2015 2016 2017 2018 2019

Interpretation:

There is no norm or standard to interpret gross profit ratio.

Generally, higher ratio is considered better. From the analysis it is inferred that
gross profit ratios are decreased in all years. That means the firm has
insufficient to cover all expenses and provide for profit.
NET PROFIT RATIO

Table no.:4.12 Net Profit Ratio

YEAR NET PROFIT/ NET SALES NET PROFIT

NET LOSS RATIO
2015 -32011350.12 2354943462 -1.36
2016 -17533064.46 2629927281 -0.67
2017 -7191776.36 2673379975 -2.69
2018 -167568920 3023038515 -5.54
2019 -134407183.7 2438279605 -5.51
Source: Secondary data

Chart no.:4.12 Diagram showing Net Profit Ratio

 0
2015 2016 2017 2018 2019

-1

-2

-3

-4

-5

-6

Interpretation:

The diagram shows net loss for the past five years and the net
loss is more in the year 2018&2019.
OPERATING RATIO

Table no.:4.13 Operating ratio

YEAR OPERATING NET SALES OPERATING

COST RATIO
2015 2859615881 3072464028.19 93%
2016 2454540142 2651079289.40 92.5%
2017 3195324001 3430613637.50 93.14%
2018 9837622665 1137348182 86.4%
2019 1496491632 1662138914.92 90%
Source: Secondary data

Chart no.:4.13 Diagram showing Operating ratio

 94

92

90

88

86

84

82
2015 2016 2017 2018 2019

Interpretation:

Lower the ratio the more profitable are the operation indicating
an efficient control over costs and an appropriate selling price. From the
analysis inferred that there are the ratios higher in 2015, 2016, and 2018. It
slightly decreased in 2017. That is the efficiency of the firm over expenses not
yet better.
RETURN ON TOTAL ASSETS

Table no.:4.14 Return on total assets

YEAR NET PROFIT TOTAL RETURN ON

ASSETS TOTAL ASSET
2015 2608136919 515730074.8 5.05
2016 2630613638 504832888 5.21
2017 2651079289 482811838 5.49
2018 1137348182 47145826 2.45
2019 1583964677 477098687.7 3.31
Source: Secondary data

Chart no.:4.14 Diagram showing Return on total assets

 6

0
2015 2016 2017 2018 2019

Interpretation:

The above diagram shows the return on total assets of the company
is very low. This means that the company cannot utilise their assets in an
effective manner.
WORKING CAPITAL TURNOVER RATIO

Table no.:4.15 Working capital turnover ratio

YEAR NET SALES NET WORKING

WORKING CAPITAL
CAPITAL TURNOVER
RATIO
2015 3072464028.19 -74125039 41.44
2016 2651079289.40 99859426 34.35
2017 3430613637.50 -317889575 -8.339
2018 1137348182 -460444057 -2.47
2019 1662138914.92 -533157712 -3.11
Source: Secondary data

Chart no.:4.15 Diagram showing Working capital turnover ratio

 50

40

30

20

10

0
2015 2016 2017 2018 2019

-10

-20

Interpretation:

From the analysis it infers that firm has maintained their

working capital turnover only at 2015 (34.35). Other year’s negative ratio
indicates that a business is investing in too many account receivables and
inventory assets to support its sales, which could eventually lead to an excessive
amount of bad debts and obsolete inventory.
 2.COMPARATIVE BALANCE SHEET
Comparative Balance Sheet of SIDCO

for the year ending 31st march 2015 and 2016

Table No.:4.16

Particulars 2015 2016 Increase/Decrease Percentage

Amount
A. ASSETS
Fixed Assets 515892853.7 508289760 -7603093.73 -1.47
Investment 63577584.75 7559870 -56017714.75 -88.11
Long Term Loans 479925 56249024.42 55769099.42 116.20
and Advances
Total 579950363.5 572098654.4 -7851709.98 -1.35
Current Assets
Inventories 49629206.38 18595049.13 -31034157.25 -62.53
Trade Receivables 1081121139 1425748764 344627624.6 31.88
Cash and Cash 123573315.6 215871931.5 92298615.87 74.69
Equivalents
Short Term Loans 170139525.3 210057887.3 39918362.04 23.46
and Advances
Other Current 66913987.19 11206556.33 -55707430.86 -83.25
Assets
Inter Unit Account 283615924 176348438 -107267486 -37.82
Total 1774993098 2057828626 282835528.2 15.93
TOTAL ASSETS 2354943461 2629927281 274983819.7 11.68
B. LIABILITIE
S
Capital and Long
Term Liabilities
Share Capital 298691083 270843000 -27848082.97 -9.32
Reserves and 24.07
Surplus
Non-Current 590078009 848376184.2 258298175.2 43.77
Liabilities
Share Application 0 27848082.97 -27848082.97 -100.00
Money
Total 505825324.2 671958089.3 166132765.1 32.84
Current Liabilities
Short Term 333641690.9 0 -333641690.9 -100.00
Provisions
Short Term 112275.67 0 -112275.67 -100.00
Borrowing
Trade Payables 1112198482 1621898246 509699763.9 45.83
Inter Unit Account 238727317.5 208036356.2 -30690961.25 -12.86
Other Current 164438371.3 128034589.4 -36403781.88 -22.14
Liabilities
Total 1849118137 1957969191 108851053.6 5.89
TOTAL 2354943462 2629927281 274983819.3 11.68
LIABILITIES

Interpretation:

Both Current Assets and Current Liabilities show an increasing

trend of 15.83% and 5.89% respectively. The share capital decreased in 2016
compared to 2015 due to increase of shareholders value. Due to the
accumulated losses of the company, both the reserves and surplus and share
capital shows a decrease, which indicates the sale of fixed assets in order to pay
noncurrent liabilities. The short term and long term loans and advances
increased in 2016 and it effects the cash balance of the company positively. In
overall the financial position of the company is in good condition.
 Comparative Balance Sheet of SIDCO

for the year ending 31st March 2016 and 2017

Table No.:4.17

Particulars 2016 2017 Increase/Decrease Percentage

Amount
A. ASSETS
Fixed Assets 508289760 482811838 -25477922 -5.01
Investment 7559870 7484870 -325000 -4.29
Long Term Loans 56249024.42 9678611 46570413.42 82.79
and Advances
Total 572098654.4 500375319 72123335.42 12.61
Current Assets
Inventories 18595049.13 27762265 9167215.87 49.3
Trade Receivables 1425748764 1209888694 -215860069.9 -15.14
Cash and Cash 215871931.5 235548785 19676853.51 9.12
Equivalents
Short Term Loans 210057887.3 253519976 43462088.66 20.69
and Advances
Other Current Assets 11206556.33 23778204 12571647.67 112.18
Inter Unit Account 176348438 422906731 246558293 139.81
Total 2057828626 2173404655 115576028.8 5.62
TOTAL ASSETS 2629927281 2673379974 43452693.39 1.65
B. LIABILITIES
Capital and Long
Term Liabilities
Share Capital 270843000 270843000 0 0
Reserves and Surplus -475109 177. -513219067 -38109889.11 8.02
9
Non Current 848376184.2 414399809 -433976375.2 -0.51
Liabilities
Share Application 27848082.97 10062004 -17786078.97 -63.86
Money
Total 671958089.3 182085764 -489872343.3 -72.9
Current Liabilities
Short Term 0 57003143 -57003143 -100.00
Provisions
Short Term 0 37888687 -37888687 -100.00
Borrowings
Trade Payables 1621898246 1435651854 -186246391.8 -0.11
Inter Units Account 208036356.2 400903960 192867603.9 0.92
Other Current 128034589.4 559846584 -431811994.6 3.36
Liabilities
Total 1957969191 2491294228 533325036.7 27.24
TOTAL 2629927281 2673379974 43452693.39 1.65
LIABILITIES

Interpretation:

The comparative balance sheet reveals that the company’s

current assets show an increasing trend in 2016 except trade receivables. In
2016, fixed assets decreases and it indicates that the company sold 5.01% of its
fixed assets. Long term loans and advances decreased by 82.8%. During the
year 2016-2017, there is no change in the share capital. Reserve and surplus
increased by 8.8%. The overall position of the company is not satisfactory.

Comparative Balance Sheet of SIDCO

for the year ending 31st March 2017 and 2018

Table No.:4.18

Particulars 2017 2018 Increase/Decreas Percentage

e Amount
A. ASSETS
Fixed Assets 482811838 515892853.7 33081015.73 6.85
Investment 7484870 63577584.75 56092714.75 749.41
Long Term Loans 9678611 479925 -9198686 -95.04
and Advances
Total 499975319 579950363.5 79975044.48 16.00
Current Assets
Inventories 27762265 49629206.38 21866941.38 78.76
Trade Receivables 1209888694 1081121139 -12876554.6 -10.64
Cash and Cash 235548785 123573315.6 -111975469.4 -47.54
Equivalents
Short Term Loans 235319976 170139525.3 -83380450.74 -32.89
and Advances
Other Current Assets 23778204 66913987.19 43135783.19 181.41
Inter Unit Account 422906731 283615924 -139290807 -32.94
Total 2173404655 1774993098 -398411557.2 -18.33
TOTAL ASSETS 2673379974 2354943461 -318436512.7 -11.91
B. LIABILITIES
Capital and Long
Term Liabilities
Share Capital 270843000 298691083 27848082.97 10.28
Reserves and Surplus -513219067 -382943767.7 130275299.3 -25.38
Non-Current 414399809 590078009 175678200 42.39
Liabilities
Share Application 10062004 0 10062004 100.00
Money
Total 182085746 505825324.2 323739578.2 177.80
Current Liabilities
Short Term 57003143 333641690.9 276638547.9 485.30
Provisions
Short Term 37888687 112275.67 -37776411.33 -99.70
Borrowing
Trade Payables 1435651854 1112198482 -323453371.9 -22.53
Inter Unit Account 400903960 238727317.5 -162176642.6 -40.45
Other Current 559846584 164438371.3 -395408212.7 -70.63
Liabilities
Total 2491294228 1849118137 -642176090.6 -25.78
TOTAL 2673379974 2354943462 -318436512.3 -11.91
LIABILITIES

Interpretation
In the year 2017-18, there is no change in share capital and
investment. Fixed assets decreases and it indicates that the company sold 2.35%
 of its assets and its inflow of cash. Loans and advances increased in 2018.
Inventories decreased in 2018 and it indicates the sale of inventories. Due to this
reason, the cash balance of the company increases by 27.25%. The overall
performance of the company is not in a good position.

Comparative Balance Sheet of SIDCO

for the year ending 31st March 2018 and 2019

Table No.:4.19

Particulars 2018 2019 Increase / Percentage

Decrease
Amount
A. ASSETS
Fixed Assets 482811838 477098687.7 5640161.65 1.19
Investment 7484870 7510870 26000 0.347
Long Term Loans 9678611 205081670.9 -195293759.9 1.9952
and Advances
Total 499975319 689691228.6 200959921.6 41.12
Current Assets
Inventories 49629206.38 20833550.36 -6461317.64 -23.67
Trade Receivables 1081121139 1216162998 165038124.7 15.7
Cash and Cash 123573315.6 464253323.2 164515740.2 54.89
Equivalents
Short Term Loans 170139525.3 45290076.83 -195811007.2 -81.22
and Advances
Other Current 66913987.19 2048428 -23253785 -91.9
Assets
Inter Unit Account 283615924 0 283615924 100.00
Total 1774993098 1748588376 3876436791 -31
TOTAL ASSETS 2354943461 2438279605 4077396713 -19.34
B. LIABILITI
ES
Capital and Long
Term Liabilities
Share Capital 298691083 280160000 9317000 3.44
Reserves and -382943767.7 -885797225.9 -205009237 -30.11
Surplus
Non-Current 590078009 761426222.5 333255989.5 77.83
Liabilities
Share Application 0 744519.89 744519.89 100
Money
Total 505825324.2 156533516.5 128246267.5 45.337
Current Liabilities
Short Term 333641690.9 191486918.8 142881712.8 2.9396
Provisions
Short Term 112275.67 0 112275.67 100
Borrowing
Trade Payables 1112198482 1099062343 -680934556 -38.25
Inter Unit Account 238727317.3 0 238727317.3 100
Other Current 164438371.3 991196826.5 424248907.5 74.92
Liabilities
Total 1849118137 2281746088 -713005177.9 -23.81
TOTAL 2354943461 2438279605 4077396713 -19.34
LIABILITIES

Interpretation
During 2019, fixed asset shown an increase trend of 1.20%. In the
asset side almost all the assets shown an increase trend. Share Capital increased
by 3.44%. Current Liabilities decreased by 23.81% in 2019. The cash balance of
the company is drastically increased by 54.9%. the investment has increased in
2019 which indicates that the investments has been properly made.
 3. CORRELATION ANALYSIS

 Correlation Analysis Of Current Assets And Net Loss

Table no.:20
Year Current Net x2 y2 XY
Assets(in Loss(in
lakhs) (x) lakhs) (y)
2015 17749 320 315027001 102400 5679680
2016 20578 175 423454084 30625 3601150
2017 21734 719 472366756 516961 15626746
2018 25343 167 642267649 27889 4232281
2019 17485 1344 305725225 1806336 23499840
∑x=10288 ∑y=2725 ∑ x 2= ∑ y 2= ∑xy=
9 215884071 2484211 52639697
5

nεxy−(εxεy )
r= ¿¿

=-0.532

Negatively correlated
  Correlation Analysis Of Current Liability And Net Loss
Table no.:21
Year Current Net x2 y2 XY
Liabilitiy(i Loss(in
n lakhs) (x) lakhs) (y)
2015 18491 320 341917081 102400 5917120
2016 19579 175 383337241 30625 3426325
2017 24912 719 620607744 516961 17911728
2018 29947 167 896822809 27889 5001149
2019 22817 1344 520615489 1806336 30666048
∑x=115746 ∑y=2725 ∑ x 2= ∑ y 2= ∑xy=
2763300364 2484211 62922370

nεxy−(εxεy )
r= ¿¿

=-0.0173

Negatively correlated
  Correlation Analysis Of Fixed Asset And Net Loss
Table no.:22
Year Fixed Net x2 y2 XY
Asset(in Loss(in
lakhs) (x) lakhs) (y)
2015 5158 320 26089164 102400 1650560
2016 5048 175 25482304 30625 883400
2017 4828 719 23309584 516961 3471332
2018 4714 167 22221796 27889 787238
2019 4770 1344 22752900 1806336 6410880
∑x=24518 ∑y=2725 ∑ x 2= ∑ y 2= ∑xy=
119855748 2484211 13203410

nεxy−(εxεy )
r= ¿¿

=-0.417

Negatively correlated
  Correlation Analysis Of Long Term Liabilities And Net Loss
Table no.:23
Year Long Term Net x2 y2 XY
Liabilities(i Loss(in
n lakhs) (x) lakhs) (y)
2015 5900 320 34810000 102400 1888000
2016 8433 175 71961289 30625 1484525
2017 4143 719 17164449 516961 2978817
2018 4281 167 18326961 27889 714927
2019 7641 1344 57972996 1806336 10233216
∑x=30421 ∑y=2725 ∑ x 2= ∑ y 2= ∑xy=
200235695 2484211 17299485

nεxy−(εxεy )
r= ¿¿

=0.185

Positively correlated
Interpretation
The main result of a correlation is called correlation coefficient
(or “r”). It ranges from -1.0 to +1.0. The closer r is to +1 or -1, the more closely
the two variables are related.
If r is close to 0 it means there is no relationship between the
variables. If r is positive it means that as one variable gets larger the other gets
larger. If r is negative it means that as one variable gets larger the other gets
smaller (often called an ‘inverse’ correlation).
From the analysis it is inferred that the net loss is positive
correlation between long term liabilities of the firm because the solvency
position of the firm is not good. The net losses are inverse relationship between
current asset, current liability and fixed asset, so the firm has to maintain their
solvency position make it better.
 4. TREND ANALYSIS

 Trend Analysis Of Sales

Table no.:24
Year Net Sales Trend Percentage
2015 2354943462 100
2016 2629927281 101.65
2017 2673379975 11.30
2018 302303515 806.56
2019 243879605 12.39
Source: Secondary Data
Chart no:4.16 Diagram showing Trend Analysis of Sales

Sales
12.39
100

101.65
11.3

806.56

2015 2016 2017 2018 2019

Interpretation
Trend specifies tendency. Therefore, review and appraisal of
tendency in accounting variables as trend analysis. An analysis of ratio for the
past five years may well suggest the trend direction in which the concern is
going upward or downward. Trend analysis reveals that the net sales have been
increasing from the base year 2015. In 2016 & 2018 shows an increase in net
sales. Whereas in 2017 & 2019 shows a decrease in net sales.
  Trend Analysis Of Net Profit
Table no.:25
Year Net Profit/Net Loss Trend Percentage
2015 -32011350.12 100
2016 -17533064.46 410.15
2017 -71912776.36 233.01
2018 -167568920 80.21
2019 -134407183.7 80.21
Source: Secondary Data
Chart no:4.17 Diagram showing Trend Analysis of Net Profit

Net Profit
80.21 100

80.21

233.01
410.15

2015 2016 2017 2018 2019

Interpretation
The analysis shows that there occurs a tremendous change in net
profit of Kerala SIDCO from 2015 to 2019. In past five years it shows net loss.
Thus graph shows negative impact on net profit trend of Kerala SIDCO.
CHAPTER 5
 FINDINGS

RATIO ANALYSIS

 In a sound business, a current ratio of 2:1 is considered as an ideal one.

From the analysis it is inferred that the firm is not in standard rate all
years. But in 2016 there is a variation in the current ratio than previous
year ie., 1.0510.
 An acid test ratio of 1:1 is considered satisfactory as a firm can easily
meet all its current liabilities. But in here 2016 (1.040) as the firm attain
the satisfactory level. So financial position of the firm is unsound.
 An absolute liquid ratio of 0.75:1 is recommended to ensure liquidity.
From the analysis it is inferred that liquidity position of the firm is not in
satisfactory for the past five years.
 In 2017 the ratio was higher; it indicates that the debts are collected
rapidly. The higher value of debtor’s turnover, the more efficient is the
management of credit. In the year 2018, it shows a decreasing trend.
 The acceptable norm of the proprietary ratio is 0.33:1. Here in 2018-19
(0.2483) shows the ratio satisfies the standard rule of the proprietary
ratio. But other years not satisfactory. So the long term solvency is not
good.
 The ratio shows is proportion of shareholder’s funds invested in fixed
assets. If the ratio is greater than 1; it means the creditors fund has been
used to acquire a part of fixed assets. Here the ratios are above 1, so
 creditors fund has not been used in fixed assets. From 2015 to 2019 both
fixed assets and shareholder’s fund are showing decrease trend.
 There is a fluctuating trend in inventory turnover ratio. The year 2017
shows the lowest ratio, it may be due to overstocking and the highest
ratio in the year 2016 and then declining in the year 2017. The average
inventory ratio is 0.78.
 From the analysis inferred that the firm properly use its fixed assets
because net sales above five times increases than fixed assets in
2016&2017. In 2018 it decreased to 2.41 times then slightly increases in
2019 to 3.48 times.
 In 2015 the ratio was higher. It indicates that the debts were collected
rapidly. The higher value of debtor’s turnover the more efficient is the
management of credit. In 2019 it shows a decreasing trend.
 In 2018, it shows an increasing trend, it indicates that the customers
hadn’t made the payment promptly. In 2015, the ratio is less that indicates
that customers had made payment in time.
 There is no norm or standard to interpret gross profit ratio. Generally,
higher ratio is considered better. From the analysis it is inferred that gross
profit ratios are decreased in all years. That means the firm has
insufficient to cover all expenses and provide for profit.
 In net profit ratio, there is net loss for the past five years and the net loss
is more in the year 2018&2019.
 Lower the ratio the more profitable are the operation indicating an
efficient control over costs and an appropriate selling price. From the
analysis inferred that there are the ratios higher in 2015, 2016, and 2018.
It slightly decreased in 2017. That is the efficiency of the firm over
expenses not yet better.
 The return on total assets of the company is very low. This means that the
company cannot utilise their assets in an effective manner.
 From the analysis it infers that firm has maintained their working capital
turnover only at 2015 (34.35). Other year’s negative ratio indicates that a
business is investing in too many account receivables and inventory
assets to support its sales, which could eventually lead to an excessive
amount of bad debts and obsolete inventory.

COMPARATIVE BALANCE SHEET

 In 2015-16 current assets show an increase of 15.93% whereas current

liabilities show an increase of only 5.88. It shows that the working capital
is in a comfortable and better position and the total non current asset 1.35
has decreased than total current liabilities 32.84. It shows that the entire
amount has been employed in liabilities.
 In 2016-17 current assets show decrease of 5.61% whereas current
liabilities show decrease of 27.23. It shows that the working capital is not
in better position and the total noncurrent assets has decreased 12.5 than
total noncurrent liabilities 72.90%. Again it shows that the entire amount
has been employed in liabilities.
 In 2017-18 curent asset show increase in proportion of 23.15% to current
liability 20.20%. It shows that the working capital is in better position
and the total noncurrent assets has decreased -14.57% than previous year
whereas total noncurrent liabilities 84.46%. Again it shows that the entire
amount has been employed in liabilities.
 In 2018-19 current assets show increase of 31% whereas current liability
as 23.80%. It shows that the working capital is in better position and the
total noncurrent assets has decreased -41.11% than previous year whereas
total noncurrent liabilities 45.11%. Again it shows that the entire amount
has been employed in liabilities.
 CORRELATION ANALYSIS

The main result of a correlation is called correlation coefficient (or “r”). It

ranges from -1.0 to +1.0. The closer r is to +1 or -1, the more closely the two
variables are related.

If r is close to 0 it means there is no relationship between the variables. If r is

positive it means that as one variable gets larger the other gets larger. If r is
negative it means that as one variable gets larger the other gets smaller (often
called an ‘inverse’ correlation).

From the analysis it is inferred that the net loss is positive correlation between
long term liabilities of the firm because the solvency position of the firm is not
good. The net losses are inverse relationship between current asset, current
liability and fixed asset, so the firm has to maintain their solvency position
make it better.

TREND ANALYSIS

 Trend specifies tendency. Therefore, review and appraisal of tendency in

accounting variables as trend analysis. An analysis of ratio for the past
five years may well suggest the trend direction in which the concern is
going upward or downward. Trend analysis reveals that the net sales have
been increasing from the base year 2015. In 2016 & 2018 shows an
increase in net sales. Whereas in 2017 & 2019 shows a decrease in net
sales.
 On the analysis of trend in net profit it shows that SIDCO is in net loss
for the past five years.
 SUGGESTIONS

 The firm must try to gain stability in liquidity position as the condition of
liquidity of the firm in present is poor and so the firm must take effective
measures to increase financial stability in future.
 Formulate adequate policies and procedures to improve the solvency of
Kerala SIDCO.
 Utilize the secured and unsecured loans provided by various financial
institutions, whether long term or short term.
 The firm must improve profitability of the organisation. In Kerala
SIDCO, the sales are increasing every year but the firm has in net loss in
every year which indicates that profit is not increasing corresponding to
increase in sales. So firm must take adequate steps to manage it.
 The working capital stability of the concern is poor.
 The working capital position has to be improved by maintaining low
current liabilities and high current assets, that will improve the financial
position of the company.
 The company has to improve its assets consumption pattern to increase
working capital.
 The company should take measures to decrease the cost of production
and increase the profitability of the company.
 Optimum utilisation of overall resources is necessary for growth of
organisation as a whole.
 In order to improve profitability to manage expenses increase reserve and
surplus as reserves maintain long and short term obligation.
 In SIDCO noncurrent liabilities has increased than noncurrent assets
every year. It shows that entire amount has raised have been employed
over liability it reduces solvency position of the firm. So manage
noncurrent liability.
CONCLUSION

The study on the “financial performance of Kerala SIDCO,

Trivandrum” was conducted to analyse the company’s financial position,
profitability and performance over the 5 years. The study incorporated the
methods of Ratio analysis, Comparative balance sheet, Correlation
analysis, Trend analysis. The objective of the study is to analyse
profitability, liquidity, solvency and net worth of the company. The
liquidity position is satisfactory condition.
It is hoped that if they give proper value to suggestion
SIDCO will attain higher levels of performance. Being the state
government venture the SIDCO has its own goodwill. If we exploit the
market potentialities the organisation can prosper and achieve better
result.
During the period of the study, the functioning of the
company and all activities were studied in brief. The study was aimed in
getting an insight into the day to day operations of a typical industry. The
study helps to gain practical and theoretical knowledge. The study was
really helpful to integrate classroom knowledge with real situation in the
organisation.
BIBLIOGRAPHY
 BOOKS
1. Agarwal B.D: (2005) “Advanced Financial Accounting”. New
Delhi; Pitambar Publishing Company.
2. Maheshwari S.N: (2008) “Principles Of Management
Accounting”. S N Chand & Sons; New Delhi.
3. K G C Nair: (1983) “Higher Accountting”. B.com; Chand
Publication Trivandrum.
4. L R Potti (2005) “Research Methodology”. MBA; Yamuna
Publications Trivandrum.
 JOURNALS AND REPORTS
1. Annual Reports of SIDCO
2. Magazines and Newspapers
3. Company Brochures
 WEBSITES
1. www.keralasidco
2. www.investopedia
3. google.co.in