Rs Tech Project Report
Rs Tech Project Report
Rs Tech Project Report
TAMIL NADU
by
R.YAMINI
Reg. No. 1120400108
Under the guidance of
DR. V.R.NEDUNCHEZHIAN
Professor
A PROJECT REPORT
submitted
In partial fulfillment of the requirements
for the award of the degree
of
Date: (R.YAMINI)
ACKNOWLEDGEMENT
I also thank our Madam Director Dr. Vijila Kennedy, for her encouragement and
continuous motivation.
I wish to express deep sense of obligation to Ms. S. Sangeetha, Assistant Professor (Senior
Grade), KCT Business School, for her guidance and support throughout the project from its
inception to its completion and also without whom we would be still seeking a direction to follow.
I thank my parents and family member for their moral support extended which was a great
help in project completion.
CHAPT
ERS TITLE PG.NO
1 INTRODUCTION 1
1.1 ABOUT THE STUDY 2
1.2 ABOUT THEORGANIZATION 5
1.3 STATEMENT OF PROBLEM 16
1.4 SCOPE OF THE STUDY 16
2 REVIEW OF LITERATURE 17
3 RESEARCH METHODOLOGY 21
3.1 TYPE OF RESEARCH 21
3.2 OBJECTIVES OF THE STUDY 21
3.3 DATA AND SOURCES OF DATA 21
3.4 TIME PERIOD COVERED 21
3.5 STATISTICAL TOOLS USED 21
3.6 LIMITATIONS OF THE STUDY 22
4 ANALYSIS & INTERPRETATION 23
4.1.1 LIQUIDITY RATIOS
A) CURRENT RATIO 23
B) LIQUID RATIO 25
C) ABSOLUTE LIQUID RATIO 27
D) INTERVAL MEASURE 29
E) DEBTORS TURNOVER RATIO 31
F) CREDITORS TURNOVER
RATIO 33
G) INVENTORY TURNOVER
RATIO 35
4.1.2 LONG TERM SOLVENCY RATIO
A) DEBT EQUITY RATIO 37
B) INTEREST COVERAGE RATIO 39
C) CAPITAL GEARING RATIO 41
D) PROPRIETORY RATIO 43
E) FIXED ASSET RATIO 45
4.1.3 ACTIVITY RATIO
A) FIXED ASSET TURNOVER
RATIO 46
6 BIBLIOGRAPHY 72
ABSTRACT
Financial analysis is the process of identifying the financial strength and weakness of the
firm by properly establishing the relationship between the items of the balance sheet and
profit and loss account.financial analysis can be undertaken by management of the firm or by
parties outside the firm,vizowners,creditors,investors and others.The nature of analysis will
differ depending on the purpose of analyst.
Ratio analysis is a powerful tool of financial statement analysis.A ratio is defined as “The
Indicated Quotient Of Two Mathematical Expressions” and as “The Relationship Between
Two Or More Things”.In financial statement analysis , a ratio is used as a benchmark for
evaluating the financial position and performance of a firm.The absolute accounting figures
reported in the financial statements do not provide a meaningful understanding of the
performance and financial position of a firm.
The study aims at comparing the last five years performance of Roots Industries India
Limited.
The main objectives of the study is to make an analysis on the financial performance of the
company for the past five years ,to calculate profitability turnover & financial ratios to assess
the financial position of Roots Industries India Limited,to study the efficiency and liquidity
position using ratios to study the trend of financial performance of the company, to assess
individual financial segments.
LIST OF TABLES
2 LIQUID RATIO 25
4 INTERVAL MEASURE 28
11 PROPRIETORY RATIO 43
17 OPERATING RATIO 54
LIST OF CHARTS
2 LIQUID RATIO 26
4 INTERVAL MEASURE 30
11 PROPRIETORY RATIO 44
17 OPERATING RATIO 55
20 EXPENSE RATIO 60
21 RETURN ON INVESTMENT 62
20 EXPENSE RATIO 59
21 RETURN ON INVESTMENT 61
CHAPTER 1
INTRODUCTION
CHAPTER 1
INTRODUCTION
1.1.ABOUT THE STUDY:
Finance is the life blood of modern business economy.we cannot imagine a business without finance in the modern world.It is the basic of all economic activities.no matter,the business is
big or small.The problem of finance and that of financial management is to be dealt with in every organization.The problem of finance is equally important to government,semi-governments and
private bodies and profit and non-profit organisations. It is therefore,essential to clearly understand the meaning of financial management ,its scope and goals.
The analysis of financial statement reveals the nature of relationship between income and expenditure and the sources and application of funds.
The basic for financial planning,analysis and decision making is the financial information. Financial information is needed to predict,compare and evaluate the firm’s earning ability.It is also
required to aid in economic decision-making-investment and financial decision-making.
The financial information of an enterprise is contained in the financial statements or accounting reports.Three basic financial statements of great signifance to owners,management and investors
are balance sheet,profit and loss account and cash flow statement.
Every member of our company will have decent living standards. we care deeply for our families, for our environment and our society. we promise to pay back in full measure to
the society by way of selfless and unstinted service.
QUALITY POLICY:
They are committed to provide world-class products and services with due concern for the environment and safety of the society.
This will be achieved through total employee involvement, technology upgradation, cost reduction and continual improvement in
* Quality in behaviour
* Quality in governance
* Quality in human relation
VISION
we will stand technologically ahead of others to deliver world-class innovative products useful to our customers. we will rather lose our business than our customers' satisfaction. It is our aim that
the customer should get the best value for his money.
18
Roots believes in a quality culture that goes beyond just products. Equal emphasis is given to quality in human relation and quality in service. Roots in its journey towards Total Quality
Management has reached important milestones: ISO 9001, QS 9000, VDA 6.1, ISO/TS 16949 and ISO 14001 Certification, presently in the process of obtaining NABL accreditation for our
Metrology lab. The Group's TQM policy has a well-integrated Quality Circle Movement with active employee participation at various levels.
ENVIRONMENTAL POLICY
With due concern towards maintaining and improving the Quality of Life, Roots is committed for sustainable development by minimising pollution and conserving resources.
This will be achieved through continual improvement in Environmental Awareness of all employees & associates, Legal Compliance and Objective towards Environmental Protection. K.
Ramasamy
Chairman
Roots Group
Industries
Through interaction with workmen in these sessions, a process of 2 way communication has been initiated and valuable feedback has been received on worker feelings, perception, problems and
attitudes. Simultaneously management has communicated the problems faced by them and the plans to overcome these problems.
Roots has a strong people-oriented work culture that can be seen and felt across all its member concerns. Whether they work in group or in isolation, their effort is well appreciated and
achievements well rewarded. They have a sense of belonging and they revel in an environment of openness and trust. Cross-functional teams function as one seamless whole
and foster the true spirit of teamwork.
Roots as a learning organization systematically trains its employees at all levels. Conducted in-house, the training programmes equip them to meet new challenges head on. Employees are
encouraged to voice their feelings, ideas and opinions. There is a successful suggestion
scheme in operation and best suggestions are rewarded.
Lasting relationship will evolve only when people know that their work is valued and that they contribute meaningfully to the growth of the organization. At Roots, people across the group
companies, through interactions at workshops and seminars, get to know each other individually, share their common experiences and learn something about life.
·
··· Schwarze, Australia
·
·· Research & Development:
· ROOTS MULTICLEAN has emerged over the years as a strong engineering company, recognizing the importance of Research and Development. This has lead to the
· significant investments towards R&D facilities. ROOTS ENGINEERING RESEARCH CENTRE (ERC) is a central facility that caters to the entire
Roots Group of Companies in the areas of Product Development, Tool Development and Facilities Development.
·
· Research activities are being carried out constantly to provide state-of-the art products which meet global standards. Innovation and intelligence meet to
cater to the challenges we face in the cleaning industry.
·
· Advanced state-of-the-art softwares like CAD/CAM etc. are extensively made use of for product design and development activities. Our team of trained
and experienced Engineers work through the year for designing world class products, meeting global market needs as well their safety standards.
·
·· MILESTONES:
1970 Promotes American Auto Service for manufacture of Electric Horns.
1984 Roots Auto Products Private Limited was established to manufacture Air Horns.
Die Casting Unit commences commercial operations.
1990 Roots Industries India Ltd takes over Electric Horn business.
1992 Roots Industries India Ltd obtains the National Certification - ISI mark of quality.
2000 Becomes the first horn manufacturer in Asia to obtain VDA 6.1 and the first in the
world to win ISO / TS 16949
2000 The first to introduce digitally controlled air horns and low frequency, low decibel
irritation free Jumbo Air Horns.
2003 Roots Industries India Ltd., Horn Division is accredited with ISO 14001 : 1996
2003 Roots Industries India Ltd., upgraded its ISO / TS 16949 from 1999 version to
2002 version
2004 Roots Industries India Ltd (RIL) opens its 100% exclusive Export Oriented Unit
at their Horn Division, Thoppampatti, Coimbatore to cater the needs of Ford
North America.
2004 Roots Multiclean Limited (RMCL) inaugurates its 100% EOU Plant at Kovilpalayam,
Coimbatore
2004 Roots Cast Private Limited (RCPL) inaugurates its Unit II at Arugampalayam,
Coimbatore
2004 Roots Auto Products Pvt Ltd (RAPPL) expands with its Machining Division at
Arugampalayam, Coimbatore
2004 The group company American Auto Service is accredited with ISO 9001 : 2000
2005 Roots Industries India Ltd., is certified with MS 9000, a pre-requisite for Q1
award for Ford Automotive Operations Suppliers. Focus on Systems and Processes
2005 Roots Metrology & Testing Laboratory has been accredited by National
Accreditation Board for testing & calibration in the field of Mechanical – Linear &
Angular
2005 Roots Industries India Ltd., Horn Division upgraded its ISO : 14001 from 1996
version to 2004 version.
ALLIANCES
CHAIRMAN
DIRECTOR
(FINANCE)
CHAPTER 2
REVIEW OF LITERATURE
1 Mabwe Kumbirai and Robert Web“A financial Ratio Analysis of Commercial Bank Performance in South Africa” , African Review of Economics and Finance, Vol.
2, No. 1, Dec 2010
2 Amalendu Bhunia, Sri Somnath Mukhuti and Sri Gautam Roy”Financial Performance Analysis-A Case Study”Current Research Journal of S ocial Sciences
3(3): 269-275, 2011 ISSN: 2041-3246
13
M.Avinash,B.Prabhavathy,S.SivA”A Study On Financial Efficiency Of Pipdic (Pondicherryindustrial Promotion Development And Investment Corporation Ltd) “Arth Prabhand: A
Journal Of Economics And Management Vol.1 Issue 1, April 2012, Issn
4
Tze San Ong and Cia Ling Teo,Boon Heng The” Analysi s On Financial Performance And Efficiency Changes Of Malaysian Commercial Banks After Mergers And
Acquisitions “International Journal of Business and Management T omorrow Vol. 1 No. 2
system satisfaction. Furthermore, the results using structural equation modeling indicate that performance measurement diversity is associated with the satisfaction of performance
measurement system. These outcomes show that companies benefit from performance measurement systems that incorporate a wide range of financial and non-financial
performance measures. Finally, this study has verified further research opportunities that could enrich the understanding of performance measurement systems.
15 Puwanenthiren Pratheepkanth “ capital structure and financial performance:evidence from selected business companiesin colombo stock exchange sri lanka”Journal
of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172
6
Majdy Zuriekat , Rafat Salameh , Salah Alrawashdeh “Participation in Performance Measurement Systems and Level of Satisfaction” International Journal of Business and Social
Science Vol. 2 No. 8; May 2011
the purpose of this study is to classify the commercial banks in Oman in cohesive categories on the basis of their financial characteristics revealed by the financial
ratios. A total of five Omani commercial banks with more than 260 branches were financiallyanalyzed, and simple regression was used to estimate the impact of asset
management,operational efficiency, and bank size on the financial performance of these banks. Thestudy found that the bank with higher total capital, deposits, credits, or total
assets does notalways mean that has better profitability performance.
the first objective of this study was to determine and evaluate the effects of bank-specific factors; Capital adequacy, Asset quality, liquidity,
operational cost efficiency and income diversification on the profitability of commercial
banks in Kenya. The second objective was to determine and evaluate the effects of market structure factors; foreign ownership and market concentration, on the profitability of
commercial banks in Kenya. This study adopted an explanatory approach by using panel data research design to fulfill the above objectives. Annual financial statements of 38
Kenyan
Puwanenthiren Pratheepkanth5
Capital structure is most significant discipline of company’s operations. This researcher constitutes an attempt to identify the impact between Capital Structure and
Companies Performance, taking into consideration the level of Companies Financial Performance.The analyze has been made the capital structure and its impact on Financial Performance
capacity during 2005 to 2009 financial year of Business companies in SriLanka. The results shown the relationship between the capital structure and financial performance is negative
association.Co-efficient of determination ,F and t values.It is reflect the insignificant level of theBusiness Companies in Sri Lanka. Hence Business companies mostly depend on the debtcapital.
iii
Therefore, they have to pay interest expenses much.
the aim of this study was to investigate the use of variety of financial and non-financial performance measures identified in performance measurement
systems literature. Based on survey responses from 87 Financial Managers, performance measurement diversity explains how participation leads to a greater level of
commercial banks from 2002 to 2008 were obtained from the CBK and Banking Survey 2009. The data was analyzed using multiple linear regressions method. The analysis showed that all the
bank
specific factors had a statistically significant impact on profitability, while none of the market factors had a significant impact. Based on the findings the study recommends policies that would
encourage revenue diversification, reduce operational costs, minimize credit risk and encourage banks to minimize their liquidity holdings. Further research on factors influencing the liquidity of
commercials banks in the country could add value to the profitability of banks and academic literature.
iv 7
Majdy Zuriekat , Rafat Salameh , Salah Alrawashdeh “Participation in Performance Measurement Systems and Level of Satisfaction” International Journal of Business and Social Science Vol. 2 No. 8; May 2011
8
Tobias Olweny , Themba Mamba Shipho “ Effects Of Ba nking Sectoral Factors On The Profitability Of Commercial Banks In Kenya “Economi cs and Finance Review Vol. 1(5) pp. 01 – 30,
July, 2011 ISSN: 2047 - 0401
CHAPTER 3
RESEARCH METHODOLOGY
CHAPTER 3
METHODOLOGY
3.1 TYPE OF RESEARCH:
Research Design:
The study is aimed at assessing the financial performance precisely the research design adopted here is based on the analytical method.
Analytical Research Design:
Analytical research design is the design where the researcher has used the facts or information already available and analyzed them to make a critical evaluation.
3.2 OBJECTIVES OF THE STUDY:
The objectives of this study are as follows:
PRIMARY OBJECTIVE:
· To assess the overall financial performance of the company.
SECONDARY OBJECTIVE:
· To determine the profitability, liquidity, Turnover and solvency position of the company.
3.5 LIMITATIONS:
In order to do the research articulately utmost care has been taken but still it can have certain limitations
· The analysis is made using secondary data only.
· The period of study only for five years from 2006-2011
· This study is applicable only to Roots Industries India Ltd, Coimbatore.
CHAPTER 4
Formula:
CURRENT RATIO = CURRENT ASSETS/ CURRENT LIABILITIES
INTERPRETATION:
· In current ratio the larger is the amount of rupee of current asset available per rupee of current liability,the more is the firms ability to meet current obligations and the
greater is the safety of funds of short term creditors.
· During the last five years the current ratio is below 1. The decrease of current asset will adversely affect the ability of firm to meet its obligation.
100
90
80
70
60
50 Current Assets
40 Current Liabil-
30 ities
20 Current Ratio
10
0
2012 2013 2014 2015 2016
- - - - -
2013 2014 2015 2016 2017
B.LIQUID RATIO:
Liquid ratiois also termed as "Liquidity Ratio","Acid Test Ratio" or "Quick Ratio". The true liquidity refers to the ability of a firm to pay its short term obligations.It is a liquidity
indicator that further refines the current ratio by measuring the amount of the most liquid current assets there are to cover current liabilities. The liquid ratio is more conservative than the
current ratio because it excludes inventory and other current assets, which are more difficult to turn into cash.
Formula:
LIQUID RATIO = LIQUIDASSETS/ CURRENT LIABILITIES
YEARS LIQUID ASSETS CURRENT LIQUID RATIO
(RUPEES IN LIABILITIES
CRORES) (RUPEES IN
CRORES)
2012-2013 37.62 59.11 0.64
2013-2014 41.45 63.89 0.65
2014-2015 49.21 67.56 0.73
2015-2016 52.42 80.75 0.65
2016-2017 58.32 84.49 0.69
INTERPRETATION:
· One defect of the current ratio is that it fails to convey any information on the composition of the current asset of a firm. A rupee
of cash is more readily available to meet current obligations.
· The liquid ratio is a more rigorous and penetrating test of the liquidity position of a firm.
· During the last five years the large part of the current assets of the firm is tied up in slow moving and unsaleable inventories and
slow paying debts.the firm would find it difficult to pay its current liabilities.
90
80
70
60
50
Liquid Asset
Current Liabilities
40
Liquid Ratio
30
20
10
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
C.ABSOLUTE LIQUID RATIO:
Absolute liquidityis represented by cash and near cash items. It is a ratio of absolute liquid assets to current liabilities. The
absolute liquid assets are cash, bank and marketable securities. It is to be observed that receivablesare eliminated from the list of
liquid assets in order to obtain absolute liquid assets since there may be some doubt in their liquidity.
Formula:
ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUIDASSETS/ CURRENTASSETS
ABSOLUT
YEARS E CURRENT ABSOLUTE
LIQUID LIQUID
ASSETS LIABILITIES RATIO
(RUPEES
IN (RUPEES IN
CRORES) CRORES)
2012-
2013 4.21 59.11
0.07
2013- 0.0
2014 4.43 63.89 7
2014- 0.0
2015 4.57 67.56 7
2015- 0.0
2016 4.79 80.75 6
2016- 0.0
2017 4.91 84.49 6
INTERPRETATION:
· During the last five years the
absolute liquid ratio is below one.
· It means that liquidity of the company is not satisfactory.As all the creditors are not expected to demand cash at
the same time and then cash may also be realized from debtors and inventories.
90
80
70
60
50
Absolute liquid asset
Current liabilities
40
Absolute liquid ratio
30
20
10
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
D.INTERVAL MEASURE:
Comparison of current asset and current liabilities, the liquidity position of a firm may be examined to measure whether the liquid assets are sufficient relative to the firm’s daily cash
requirements for operating expenses.such a measure of liquidity is called interval measure or the defensive interval ratio.
Formula:
INTERVAL MEASURE= LIQUID ASSET/AVG DAILY CASH OPERATING
EXPENSES
INTERPRETATION:
· The interval measure is based on past expenditure and future plans.The ratio measures the timespan a firm can
operate on present liquid assets.
· During 2012-2013 170 days indicates that the firm has liquid assets which can meet the operating cash
requirements of business for 170 days without resorting to future revenues.
· In 2012-2013 170 days is considered to be low ratio its weakness indicated by low current and liquid ratios.
· A higher ratio in 2016-2017 it is 199 days would be favourable as it would reflect the ability to meet cash
requirement for a longer period of time.It provides a safety margin to the firm in determining its ability to meet
basic operating cost.
250
200
150
Liquid Assets
Average daily cash operating
expenses
100 Days
50
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
E.DEBTORS TURNOVER RATIO:
Debtors turnover ratio or accounts receivable turnover ratio indicates the velocityof debt collection of a firm. In simple words it indicates the number of times average debtors are turned
over during a year.
Formula:
DEBTORSTURNOVER RATIO = TOTAL SALES /DEBTORS
INTERPRETATION:
· The analysis of the creditors turnover ratio is an important tool of analysis as a firm can reduce its requirement of current asset by repaying to the suppliers.
· During the year 2006-2007,2008-2009, 2009-2010,2010-2011ratio is low it indicative of shorter time-lag between credit purchase and cash payment.
· But during the year 2007-2008,the ratio is high it shows that debts are not being payed rapidly.
120
100
80
20
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
F.CREDITORS TURNOVER RATIO:
In the course of business operations a firm has to make credit purchases and incur short–term liabilities. A supplier of goods i.e., c reditor is naturally interested in finding out how much
time the firm is likely to take in repaying its trade creditors.
Creditors Turnover 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. Same as debtors turnover ratio,creditors turnover ratio
can be calculated.
Formula:
CREDITORS TURNOVER RATIO = CREDIT PURCHASE / AVERAGE TRADE CREDITORS
INTERPRETATION:
· Debt equity ratio reflects the relative claims of creditors and shareholders against the assets of the firm.
· This ratio reflects the relative contribution of creditors and owners of business in its financing.
· Higher ratio in 2006-2007 as 2.17 it shows a large share of financing by the creditors of the firm.
· Low ratio in2009-2010 as 1.11 it implies a small claim of creditors.
· G.INVENTORY TURNOVER RATIO:
·
· Stock turnover ratio and inventory turnover ratioare the same. This ratio is a relationship between the cost of goods sold during a particular period of time and the
cost of average inventory during a particular period. It is expressed in number of times.Inventoryturn over ratio indicates the numberof time and evaluates the efficiency with
which a firm is able to manage its inventory. This ratio indicates whether investment in stock is within proper limit or not.
·
· Average inventory and cost of goods sold are the two elements of this ratio. Average inventory is calculated by adding the stock in the beginning and at the end of
the period and dividing it by two. In case of monthly balances of stock, all the monthly balances are added and the total is divided by the number of months for which the average
is calculated.
·
· Formula:
·
· INVENTORY TURNOVER RATIO = COST OF GOODS SOLD / AVERAGE INVENTORY AT COST
·
YEARS COST OF GOODS AVERAGE TIMES
SOLD INVENTORY AT
(RUPEES IN COST
CRORES) (RUPEES IN
CRORES)
2012-2013 91.25 15.02 6.08
2013-2014 94.19 15.85 5.94
2014-2015 100.35 17.12 5.86
2015-2016 114.20 17.65 6.47
2016-2017 99.63 20.56 4.85
INTERPRETATION:
· This ratio indicates how fast inventory is sold .during the year 2006-2007,2007-2008,2008-2009,the ratio is high is good from viewpoint of liquidity.
· During the year 2009-20110,2010-2011 the ratio is low would signify that inventory does not sell fast and stays on the shelf or in the warehouse for a long time.
·
·· 4.1.2 LONG TERM SOLVENCY RATIO
· Debt-equity ratio is another leverage ratio that compares a company's total liabilities to its total shareholders' equity. This is a measurement of how much
suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed.
·
· To a large degree, the debt-equity ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders'
equity, as opposed to total assets in the debt ratio. Similar to the debt ratio, a lower the percentage means that a company is using less leverage and has a stronger equity
position.
·
·· Formula:
CRORES)
2006-2007 16.73 15.01 1.11
2007-2008 19.71 18.71 1.05
2008-2009 25.89 13.83 1.87
2009-2010 36.05 2.98 12.09
2010-2011 47.64 5.52 8.63
Formula:
INTEREST COVERAGE RATIO = NET PROFIT BEFORE INTEREST AND TAX /
FIXED INTEREST CHARGES
·
·· Formula:
· BEARING FUNDS
·
YEARS EQ.SHARE PREF CAPITAL + CAPITAL
CAPITAL + LONG TERM GEARING RATIO
RESERVES & DEBT
SURPLUS (RUPEES IN
(RUPEES IN CRORES)
D.PROPRIETORY RATIO:
Proprietary ratio is also known as Equity Ratio or Net worth to total assets or shareholder equity to total equity. It establishes relationship between proprietor's funds to total resources of
the unit. Where proprietor's funds refer to Equity share capital and Reserves, surpluses and to total assets.
Formula:
PROPRIETARY RATIO =SHAREHOLDER’S FUNDS / TOTAL ASSETS
INTERPRETATION:
· Proprietor’s fund ratio shows the general strength of the company.It is very important for the creditors because it helps them to find out the proportion of shareholder’s
funds in the total asset used in the business.
· Higher ratio indicates a secured position to creditors and lower ratio indicates greater risk to creditors.
· A ratio below 50% may be alarming for the creditors since they may also have to lose heavily in the event of the company’s liquidation o n account of heavy losses.
· In this firm the equity share are not issued to general public.during the last five years the ratio is below 50% .but it is quiet satisfactory.
E.FIXED ASSET RATIO:
Fixed asset ratioestablishes the relationship between long term fundsand fixed assets. Since
financial management advocates that fixed assets should be purchased out of long term funds only.
Formula:
FIXED ASSETS RATIO = NET FIXED ASSETS / LONG TERM FUNDS
INTERPRETATION:
· In 2006-2007,2007-2008,2008-2009 the fixed asset ratio is unsatisfactory ,but in 2009-2010 fixed asset utilization is better.
· In 2010-2011 the fixed asset ratio is slowly decline and it is satisfactory.
INTERPRETATION:
The standard fixed turnover ratio is 5 times means better utilization of asset .
In 2006-2007,2007-2008,2008-2009,2009-2010 it is lower ratio because it is below
5 times so it indicates under-utilisation of fixed assets.
During 2010-2011 the ratio is 5.15 it indicates better utilization of fixed assets.
During 2006-2007 the ratio is quit satisfactory but in 2010-2011 the ratio is below 2 it indicates that the asset areunder utilized
B.TOTAL ASSET TURNOVER RATIO:
The total asset turnover ratio measures the ability of a company to use its assets to efficiently generate sales. This ratio considers all assets, current and fixed. Those
assets include fixed assets, like plant and equipment, as well as inventory, accounts receivable, as well as any other current assets.
Formula:
TOTAL ASSET TURNOVER RATIO = NET SALES/TOTAL ASSETS
INTERPRETATION:
· Total asset turnover ratio of 2 times or more indicates that assets are utilized efficiently and a ratio below 2 indicates that the asset areunder-utilised.
C.WORKING CAPITAL TURNOVER RATIO:
Working capital turnover ratioindicates the velocity of the utilization of net working capital.This ratio represents the number of times the working capital is turned over
in the course of year.
Formula:
WORKING CAPITAL TURNOVER RATIO = CURRENT ASSET – CU RRENT
LIABILITIES
INTERPRETATION:
· Working capital ratio in 2006-2007the high ratio.so indicates the effient utilization of working capital .
· Lower ratio is 4.69 during 2007-2008 it implies that the firm has not utilized the working capital effiently.
4.1.4 PROFITABILITY RATIO
A). IN RELATION TO SALE
A.1.GROSS PROFIT RATIO:
Gross profit ratio is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between grossprofit and sales.
The basic components for the calculation of gross profit ratioare grossprofit and net sales. Net sales means that sales minus sales returns.
Grossprofit would be the difference between net sales and cost of goods sold.Cost of goods sold in the case of a trading concern would be equal to opening stock plus
purchases, minus closing stock plus all direct expenses relating to purchases.
Formula:
GROSS PROFIT RATIO= (GROSSPROFIT / NET SALES) × 100