Ratio Analys

Critical analysis of Financial Position at CHL Ltd.
SUMMER TRANING REPORT

Ratio Analysis At Capusegul Health care Pvt. Ltd.
Submitted in partial fulfillment of requirements for the award of the degree of Masters in Business Management
Session : 2012-2014
Under Supervision of: by: Mrs. Shalu Juneja HOD & Assistant Professor H.I.M.T., Rohtak
Submitted Mohit Talwar MBA (3rd sem Roll no-3218823
HINDU INSTITUTE OF MANAGEMENT &TECHNOLOGY
MAHARSHI DAYANAND UNIVERSITY, ROHTAK
DECLARATION
I, Mohit Talwar, Roll No. 06 of MBA Semester 3RD of Hindu Institute of Management & Technology, Rohtak, hereby declare that the project entitled Analysis of Working Capital Management is an original work and the same has not been submitted to any other institute for award of any other degree. The interim report was presented to the supervisor on and the pre-submission presentation was made Of. The feasible suggestions have been duly incorporated in consultation with the supervisor.
Signature of the Candidate
Counter signed
Mrs.Shalu Juneja

HOD & Asst. Professor, HIMT
ACKNOWLEDGEMENT
Gratitude is not a thing of expression; it is more a matter of feeling. There is always a sense of gratitude which one express for others for their help and supervision in achieving the goals. We too express my deep gratitude to each and everyone who has been helpful to us in completing the project report successfully. We would like to thank almighty God for blessing showered on us during the completion of Dissertation Report. We give our regards and sincere thanks to Mrs. Shalu Juneja(HOD in MBA Deptt.)and (Project guide) who has devoted her precious time in guiding us & helping us complete it within time. We feel self-short of words to thanks our parents and friends who had directly or indirectly instrumental in the completion of the project. We are indebted to all respondents for their time passion during the long conversations.
Mohit Talwar
TABLE OF CONTENT
Preface Acknowledgement Chapter-A Introduction-CHL Mission & objectives Different Section of finance Department Accounting of Assets Audit in the organization Chapter-B Review of literature Ratio Analysis Common size P/L A/C Common size Balance sheet Comparative Balance sheet 18-25 1-17 i ii

Comparative Balance sheet Trend Analysis Chapter-C Research Methodology Chapter-D Data Analysis & Interpretation Chapter-E Conclusion Limitation of financial Analysis Suggestion BIBLIOGRAPHY 49-54 31-48 26-30
Chapter-A Introduction-CHL
EXECUTIVE SUMMARY
The avenues and scope of finance has changed drastically from the last ten years. There has been major shift from accounts to finance, which is visualized in most of the organizations. An Accountant to finance manager, from recording to management of whole system of accounting procedure determines the worth of management of finance in the organizations. A Finance manager occupies a key position in the management of cash inflows and cash outflows for achieving optimum level in the organization. It is his prime responsibility to enhance the organization position in the most efficient and effective manner. What are the requirements, what is the real worth of the requirements would help the organization to increase the value of organization in the competitive market.
INDUSTRY PROFILE
Pharmaceutical industry in India has been a pioneer industry. Indias industrialization in other fields has mainly been achieved on the back of the resources generated by the industry. However, from the early seventies to the introduction of liberalization in 1992, the industry tended to be neglected as measures taken by the government with the apparent objective of protecting the large labour force and the consumers have continuously eroded its profitability. The recent liberalization measures have presented the industry with a golden opportunity to region its last glory. The process has begun but a lot of work remains to be done with the active help and encouragement from the government.
BACKROUND OF THE COMPANY

Capsugel has emerged as a global leader creating innovative dosage forms for the pharmaceutical and dietary supplements industries. Companies look to our leadership to help them formulate new products, enhance existing product lines, bring new products to market faster, and ensure their clinical trials are conducted without bias. Initially part of the Parke-Davis Company, Capsugel is now a division of Pfizer Inc., a Fortune 100 global pharmaceutical company, and has numerous global locations to support customers on every major continent. Capsugel Healthcare limited (a division of Pfizer is pharmaceutical company that manufactures empty hard gelatine capsules. In India its plant is located at Dharuhera, Haryana. Capsugels customers span the globe. Consequently, its manufacturing and business centres also cover the world. With multiple production

and business facilities worldwide, capsugel offers unmatched certainty of supplies. Drawing on years of experience & successful outcomes, Capsugel is adept at offering their customers custom solutions that precisely address their specific needs. Capsugel with 10 global manufacturing facilities, produces two-piece gelatine capsules, and vegetarian capsules for the neutraceutical, pharmaceutical, OTC (Over the counter markets). Capsugel manufacturing operations rely on sophisticated, often automated monitoring systems to achieve high levels of liquid gelatine consistency when producing empty gelatine capsules. The formation of the empty capsule shape itself utilize a precision machine set of molds, to which the liquid gelatine adheres forming both the cap & body sections of the gelatine Capsules. High-speed machinery, custom design by Capsugel specifically for empty gelatine capsules, GMP guidelines that are followed in Capsugel Healthcare assure that the gelatine shell layers are removed cleanly from the molds and then joined, printed & packed under stringent manufacturing controls.
Market Segment Served

Capsugel customers include leading pharmaceutical company and dietary supplements manufacturers & marketers.
About Pfizer
CHL Philosophy could be summarizes into five points:
A WINNING PHILOSOPHY
Quality Determination Diversification Dynamism Profitability
SOCIAL ACCOUNTABILITY
CHL is sincerely committed to workers and communities CHL has a well defined Social Accountability Code of Conduct All CHL facilities are fully compliant with Social Accountability Standards

CHL is approved by several world class buyers for Social Compliance Use of only eco-friendly chemicals & materials Effluent treatment plant in each facility to protect the environment CHLS Social Accountability initiatives include Legal Compliance, Safety measures, Continuous Workers Training Canteens, Interest Free Loans.
OBJECTIVES OF CHL LIMITED.
TO SERVE THE NATIONAL INTEREST

CHL Limited. Is having the very first objectives of serving the national interest in pharmaceutical sector and other related sectors in accordance and consistent with the government policies.
TO ENSURE AND MAINTAIN FUNCTIONING

CHL Industrys second objective is to ensure and maintain continuous and smooth satisfaction supplies of capsules by way of different kinds and marketing activities and to provide and appropriate assistance to the customers
TO EARN REASONABLE RATE OF INTEREST

To work towards the achievement of self sufficiency in the field of pharma industry by setting up adequate capacity and building up expertise in manufacturing of it and make a reasonable rate of interest on investments.
TO CREATE STRONG BASE

CHL has main objective for creating a strong research and development base in pharmaceutical field and stimulate the development of new product formulation with a view to minimize their imports and to have next generation products.

TO MAKE MAXIMUM UTILISATION
Every step is made with keeping in mind this objective to make maximum utilization of the existing facilities in order to improve efficiency and increase productivity and to optimize utilization of its
Finishing capacity and contributing in making minimum exchange outgo.
TO ENHANCE DISTRIBUTION NETWORK

To make enhancement of distribution network for providing service to customers throughout the country through expansion of seller- network as per marketing plan.
FINANCIAL MISSION OF FINANCE DEPARTMENT

To provide high quality financial staff support for decision making & control to all levels of management corporate divisional, unit & location to enable the achievement of overall corporate objectives goals. To play a lead role in scanning the domestic & international financial environment, the formulation and implementation of all financial policies & plans different time spans consistent with & conductive to the business plans for expansions, diversification, productivity etc. To interact pro-actively with the government agencies on pricing & investment & with financial institution, depositors & creditors, with sensitivity & promptness, for mobilization and provision of funds for uninterrupted operations and project execution optimal costs. To maintain review & update all accounting records, system and procedures for discharging the responsibilities and enabling compliance with statutory obligations. To inculcate financial awareness, cost benefit attitudes and system orientation in the entire organization. To develop the human resources, systems & techniques of finance for

continuing innovation & contribution towards CHL Industries excellent.
FINANCIAL OBJECTIVES OF FINANCE DEPARTMENT

To ensure adequate return on capital employed and maintained a reasonable annual dividend on its equity capital. To ensure maximum economy in expenditure
To generate sufficient internal resources for financing partly/ wholly expenditure on new capital projects.
To develop long term corporate plans to provide adequate growth of the activities of the corporation.
To continue to make an effort in bringing reduction in the cost of production of products by means of products by means of systematic cost control measures.
To endeavor to complete all plan projects with in stipulated time and within stipulated cost estimates.
DEPARTMENTS OF COMPANY
There are 16 departments in CHL Industry. These are following Accounts Department Documents Department EDP Department Production Department Maintenance Department Marketing Department P & A Department Purchase Department Sampling Department Research & Development Department
All the departments of CHL are inter related and coordinated among themselves for achieving the mission by way of filling the objectives of CHL Industries. As every department has its own importance and its way of functioning to fulfill the need and requirements of its existing.
OBJECTIVES OF PERSONNEL DEPARTMENT

The primary objectives of personnel department are to: 1. Design and develop an organizational structure with well-defined relationships with the business plans & corporate strategies. 2. Promote and develop cooperative attitude, amongst employees for harmonious relation at all levels and create sense of belongings. 3. Evolve progressive & pragmatic personnel policies, procedures and practices and ensure its uniform interpretation & judicious implementation. 4. Develop the capability & proficiency of employees & their advancement through appropriate training & continuous knowledge updating to face corporate challenges & new technologies. 5. Promote & inculcate the culture of employees participation in management to achieve higher productivity and harmonious relations with smooth workings.

6. Inculcate productivity consciousness among the employees.
FUCTIONING OF PERSONNEL DEPARTMENT A Planning manpower requirements

Estimating vacancies Recruitment to seek and attract potential qualified applicants (candidates) to fill vacates.
B Organizing the manpower resources

Organizational planning to determine the organizational structure & manpower needed to effectively meet the company objectives. Selection Classification of employees
C Staffing Induction B- familiar of few employees with organization Transfer & promotions

Manpower planning Training
D Motivation
Job analysis Recreation Communication Employees discipline Performance evaluation Employee counseling Safety Medical Precautions & security
VARIOUS SECTION OF FINANCE DEPARTMENT AT CHL INDUSTRIES CHL
1 GELATINE SECTION
The Gelatine movement and storage section in the CHL is responsible for handling of receipt, storage and dispatch transactions for Gelatine & product made with help of it. Gelatine accounting section handles the following function: Accounting of the Gelatine receipts. Accounting of the customs duty of Gelatine. Accounting of finished product receipts. Accounting of dispatch of products. Material balance.

Production statistics.
2) CUSTOM SECTION :
Customs section became the part of finance department in 1996; earlier it was the part of production department. 3 types of custom duties are also available: -
1. 2. 3.
Basic custom duty Additional custom duty or countervailing customs duty. Special Additional duty.
3)MAIN SECTION
Main section of CHL Industries is responsible to prepare the financial statements of the unit. Preparation of financial statements Financial statements (Profit & Loss A/c and Balance sheet) are prepared quarterly as suitable and smooth can be carried on. Annual Accounts are prepared with the proper way by following guidelines of all laws strictly in preparation of annual accounts. Before to close of each year, a time schedule are drawn by Head office in consultation with the units for preparation, finalization and audit

of annual accounts by all units.
4) PURCHASE SECTION
Various function of purchase section are given below :1. 2. 3. 4. 5. 6. 7. Security and concurrence of purchase proposals Deposits and advance payment of suppliers. Passing of bills for supplier received. Pricing of Goods Receipt Notes. Accounting of cash purchase made by material department. Arrangement for insurance of transit risk. Maintenance of books of accounts.
6) STORE SECTION :
This section is the most responsible for the CHLs success because Finance management is mostly applicable in this section.
7) CASH SECTION
Cash section of the init is responsible for:1) Receipts of cash,cheque & bank draft. 2) Payment by cash, cheque and bank draft 3) Handling of bank deposits/withdrawal, custody of cash and transfer of

funds. 4) Security arrangement for cash handling. 5) Safe custody of valuables and documents. 6) Petty cash imprest. 7) Maintenance of subsidiary cash credit account and special current account. 8) Maintenance of cash book and bank book.
AUDITS IN THE ORGANISATION
There are 5 different types of audit in the organization as:1. Statutory Audit 2. Internal Audit 3. Technical Audit 4. Compliance of foreign buyess Audit 5. Tax Audit
STATUARY AUDIT
The statutory auditors/ branch (charted Accountants) are appointed by the company

Law Board in consultation with the Audit General of India of the companies Act, 1956 for conducting the audit in accordance with the prestigious of the companies ACT. All important points raised by the auditors during the course of audit will be brought to the notice of head of finance Department by the concerned officers and stored out before completion of audit. Whenever, the comments are raised by the statutory auditors involving a policy decision either on presentation of accounts or to accounting of a transaction, the same should be advised to HO for immediate examination and decision at corporate level. The audit is made an yearly basis.
INTERNAL AUDIT
Internal audit examines independently the final accounts and attached schedules to the balance sheet and profit & loss A/C concurrently with finalization of Annual Accounts. Any point of finance Department considers acceptable for modification of the accounts may be accepted and changes made in accounts. However, comments but Internal Audit should be offered before the finalization of the accounts at the unit level. This type of audit is made by periodical basis.
TECHNICAL AUDIT
Technical audit cell works directly under the technical service department. In discharge of its functions duties, any information required but technical audit, if available with the finance department is provided to the cell. Apart from that if any expert advice sought by the Technical Audit from time to time on financial matters is also provided but the finance department. This audit is made time to time basis.
COMPLIANCE OF FOREIGN BUYERS AUDIT

This is an important audit for CHL Industries which is an order base company. Foreign buyers audit about proper salary, proper training, cleaning atmosphere

about workings by the employees and workers. They check the applicability of Industrial Laws, factory act is respect of child labour, safety, health and welfare conditions. They audit in every unit of the company and after fulfilling this audit they place orders to CHL Industries.
TAX AUDIT
This audit is mandatory according to income tax act 1961. Tax audit report is required to be submitted & filled along with the return of Income by 31st December data for tax. Audit gets complied simultaneously along with the closing of accounts.
Chapter-B Review of literature
WHAT MEANING DOES FINANCIAL ANALYSIS HOLDS :

Financial statements provide a summarized view of the financial position and operation of a firm of company. Therefore, much can be learnt about a firm from a careful examination of its financial statement as invaluable documents/Performance reports. The critical analysis of financial statements is thus, an important aid to financial analysis. The focus of financial analysis is on key figure in the statements of financial nature and the significant relationships that exist between them. The analysis of financial statements to obtain a

better understanding of the companys position and performance. In brief, financial analysis is the process of SELECTION RELATION EVALUATION
The methodology, I have adopted for my study is the various tools, which basically analyse critically financial position of to the organization: I. II. III. IV. V. VI. COMMON-SIZE P/L A/C COMMON-SIZE BALANCE SHEET COMPARTIVE P/L A/C COMPARTIVE BALANCE SHEET TREND ANALYSIS RATIO ANALYSIS
The above parameters are used for critical analysis of financial position. With the evaluation of each component, the financial position from different angles is tried to be presented in well and systematic manner. By critical analysis with the help of different tools, it becomes clear how the financial manager handles the finance matters in profitable manner in the critical challenging atmosphere, the recommendation are made which would suggest the organization in formulation of a healthy and strong position financially with proper management system.
I sincerely hope, through the evaluation of various percentage, ratios and comparative analysis, the organization would be able to conquer its in efficiencies and makes the desiredchanges.

FINANCIAL ANALYSIS OF CHL INDUSTRIES FINANCIAL STATEMENTS :
Financial statement is a collection of data organized according to logical and
consistent accounting procedure to convey an under-standing of some financial aspects of a business firm. It may show position at a moment in 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 the two statements: (1) (2) The position statement or Balance sheet. The income statement or the profit and loss Account.
OBJECTIVES OF FINANCIAL STATEMENTS:

According to accounting Principal Board of America (APB) states The following objectives of financial statements: 1. To provide reliable financial information about economic resources and obligation of a business firm. 2. To provide other needed information about charges in such economic resources and obligation. 3. To provide reliable information about change in net resources (recourses less obligations) missing out of business activities. 4. To provide financial information that assets in estimating the learning potential of the business.

LIMITATIONS OF FINANCIAL STATEMENTS:
Though financial statements are relevant and useful for a concern, still they do not present a final picture a final picture of a concern. The utility of these statements is dependent upon a number of factors. The analysis and interpretation of these statements must be done carefully otherwise misleading conclusion may be drawn.
Financial statements suffer from the following limitations: 1. Financial statements do not given a final picture of the concern. The data given in these statements is only approximate. The actual value can only be determined when the business is sold or liquidated. 2. Financial statements have been prepared for different accounting periods, generally one year, during the life of a concern. The costs and incomes are apportioned to different periods with a view to determine profits etc. The allocation of expenses and income depends upon the personal judgment of the accountant. The existence of contingent assets and liabilities also make the statements imprecise. So financial statement are at the most interim reports rather than the final picture of the firm. 3. The financial statements are expressed in monetary value, so they appear to give final and accurate position. The value of fixed assets in the balance sheet neither represent the value for which fixed assets can be sold nor the amount which will be required to replace these assets. The balance sheet is prepared on the presumption of a going concern. The concern is expected to continue in future. So fixed assets are shown at cost less accumulated deprecation. Moreover, there are certain assets in the balance sheet which will realize nothing at the time of liquidation but they are shown in the balance sheets. 4. The financial statements are prepared on the basis of historical costs Or original costs. The value of assets decreases with the passage of time current price changes are not taken into account. The statement are not prepared with the keeping in view the economic conditions. The balance sheet loses the significance of being an index

of Current economics realities. Similarly, the profitability shown by the income statements may be represent the earning capacity of the concern. 5. There are certain factors which have a bearing on the financial position and operating result of the business but they do not become a part of these statements because they cannot be measured in monetary terms. The basic limitation of the traditional financial statements comprising the balance sheet, profit & loss A/c is that they do not give all the information regarding the financial operation of the firm. Nevertheless, they provide some extremely useful information to the extent the balance sheet mirrors the financial position on a particular data in lines of the structure of assets, liabilities etc. and the profit & loss A/c shows the result of operation during a certain period in terms revenue obtained and cost incurred during the year. Thus, the financial position and operation of the firm. Therefore, to know a firm form a careful analysts point of view a careful examination of its financial statements is, thus, an important aid to financial analysis.
FINANCIAL ANALYSIS
Financial analysis is the analysis and interpretation of Financial statements, It is the process of determining Financial strength and weakness of the firm by establishing relationship between the items of balance sheet, profit & loss a/c and other operative data. Thus financial statement is basically a study Financial statements in such a way so that Financial strength and weaknesses of the Organization can be find out. Financial analysis can be undertaken by management of the firm, or by parties outside the firm,
Objectives of financial analysis :

The focus of financial analysis is on key figure on the financial statements and the relationship that exist between them. The analysis of financial statements is a process of evaluating relationship between component parts of financial statements to obtain a better understanding of the firm position and performance.

Under this study, financial statements of the organization Are being analysed so as to find out the financial soundness of the organization. The objective of the financial analysis is to diagnose the information contained in the financial statements so as to judge the profitability and financial soundness of the organization.
RATIO ANALYSIS BASES ASP / L & B / S
Balance Sheet Ratio
Income Statement & Income Statement/ Balance sheet Ratios
Financial Leverage(debt) Ratios shows the extent to which the firm is financed by debt
Coverage ratios relate the financial charges of a firm to its ability to service or cover them
Liquidity ratio measure a ability to meet short term obligations
Activity ratios measure how effectively the firm using its assets
Profitability ratio relate profit to sales & investment
Coverage ratio also shed light on significance of the firms use of financial

leverage (debt) b Receivables and inventory based activity ratio also shed light on the liquidity of these
current assets. Ratios can be classified in to different categories depending upon the basis of classification The traditional classification has been on the basis of the financial statement to which the determination of ratios belongs.
CALCULATIONS OF RATIOS
Ratios are relationship expressed in mathematical terms between figures, which are connected with each other in some manner.
CLASSIFICATION OF RATIOS
These are:-
Profit & Loss account ratios Balance Sheet ratios Composite ratios or Inter statement ratios
RATIOS
Liquidity Ratios ____Current Ratio Ratio ____Liquid _____Creditors Ratio Ratio Leverage Ratios ____Debt-Equity Ratio ____ Debt Ratio Profitability Ratios _____Gross Profit Margin Ratio ____ Net Profit Ratio Velocity Activity Ratios _____Debtors Velocity

____Current Inventory Assets Ratio Ratio ____Working Capital Ratio Ratio Creditors Turnover Ratio _____ Inventory Turnover Ratio Fixed Assets Ratio _____Overhead Ratio _____ Velocity _____Debtors Turnover _____
Chapter-C
RESEARCH METHODOLOGY
Research Methodology
Research in a layman language means a search for knowledge. One can also define research as a scientific and systematic search for potential information on a specific topic. In fact Research is an art of scientific investigation. The dictionary meaning of Research is a careful investigation or inquiry especially through search for new facts in any branch of knowledge. Redman and Mory define Research as a systematized effort to gain new knowledge. Some people consider research as a movement from known to unknown. Research is as academic activity and as such the term must be used in a technical sense. Research is an original contribution to the existing stock of knowledge making for its advancement. It is the pursuit of truth with the help of study, observation, and experiment.

The systematic approach concerning generalization and formulation of theory. The purpose of Research is to discover answers to questions through the application of systematic procedure. The main aim of Research is to find out the truth which has been not discovered. According to Clifford Woody Research comprises defining and redefining problems, formulating hypothesis or suggested solutions, collecting, organizing and evaluating data, making deductions and reaching conclusions.
Research design:The Research problem having been formulated in clear cut terms, the Researcher will be required to prepare a Research design i.e. he will have to state the conceptual structure with in which Research would conducted. The preparation of such a design facilitates Research to be as efficient as possible yielding maximal information. Research design may group in four categories: Exploration Description Diagnosis Experimentation

NATURE OF RESEARCH:The research methodology adopted during the project is Descriptive in nature. A characteristic of research studies in business management is their reliance on secondary data source in particulars and primary data in general.
Descriptive Design:Descriptive Research studies are those studies which are concerned with describing the characteristics of a particular individual, or a group. Studies concerned with specific prediction, with narration of facts and characteristics concerning individual, group, or situation are all examples of descriptive Research studies. In a descriptive study the first step is to specify the relevant. The design must be rigid and not flexible and must focus attention of the following: Formulating the objective of study. Designing the methods of data collection. Selecting the sample Collecting the data. Processing and analyzing the data.
Report the findings.
DATA:
The data collected for the above problem is generally secondary in nature. The analysis has been done on the basis of past financial management of the company. The primary data has been collected after interviewing the officials of the company at various stages. The judgment sampling has been used, as the sample size is limited in case of different problems. The following methods are adopted for collecting informations: Observation. Special Record Searching.

Collection of data:
The task of data collection begins after a Research problem has been defined and Research design/plan chalked out. The collection of data is done to support tour findings and interpret the result whether the result you havefound is according to yourhypothesis or not. The data can be collected by various methods. These are broadly classified into two ways, as follows: Primary data. Secondary data.
Primary data:Primary data are those which are collected a fresh and for the first time and thus happen to be original in character. We collect primary data during the course of doing experiments in an experimental Primary research. It is the first hand Primary data and nobody else has collected this before. There are various ways of collecting primary data, they are as follows:
Secondary data:Secondary data means data that are already available i.e., that refer to the data which have already been collected and analyzed by someone else. When the research utilizes secondary data, then he has to look into various sources form where he can obtain them. In this case certainly he is not confirmed with the

problem that is usually associated with collection of original data. Annual report Books M.I.S Other material and report published by company This report is based on the secondary data collected. Data has been collected by the various documents available in the finance department. The theory has been collected from the detail available on the net and old project reports available in company.
RESEARCH OBJECTIVES :The following are the general problems of the research: To study of Financial management of the Company. The system of holding cash and expenses. Cost effectiveness in various operations of the company. The coordination of Inventory management objectives with organizational objective.
Chapter-D Data Anaysis
CALCULATION OF LIQUIDITY RATIO

The importance of adequate liquidity in the sense of the abierty of a firm to meet current/ short term obligations when they become due for payment can be hardly be overstressed. The liquidity ratios are:1) Current Ratio = Current Assets . Current Liabilities Inventories + Sundry Debtors + Cash & Bank Balances
Current Assets =
+Bank Balances + Loan & Advances + Other Current Asset
Current Liabilities = Current Liabilities + Provision (Excluding Gratuity) + Secured Loans + Unsecured Loans (Short Terms) Years 2006 2007 2008 Ratios 2558 = 1.603:1 1596 2962 1506 = 1.79:1 4226 = 1.79:1 2588
INTERPRETATION OF CURRENT RATIO OF CHL INDUSTRIES: The current Ratio of CHL of the years 2006,2007 & 2008 are 1.603:1 , 1.971:1 & 1.79:1 respectively. From the above, it can be seen that ratio is showing fluctuating trend. Ideal 2:1 is considered as good. If ratio of three years are analyzed they are ok but they to reach their ideal point. From the above analysis it appears that year 2008 is having more satisfactory about Current Assets & Liabilities 2) Quick Ratio = Quick Assets Current Liabilities
Year 2006 2007
Ratios 1572 1596 =1603 :1
2962 1506 = 1.97:1 4226 2588 = 1.79:1 = 1.97 : 1
2008
INTERPRETATION OF QUICK RATIO OF CHL INDUSTRIES:The Quick Ratio or Acid Test Ratio of CHL for the last three years 2006, 2007 & 2008 are 0.985:1, 1.315:1 and 1.216:1 respectively from above it can be seen that ratio is showing trend. It has come to 1:1 ratio. Which are less or more 1:1 should more towards ideal ones. From the above analysis, it can be seen that the any company has maintain a good level of current assets which can be liquidated quickly (excluding inventories)

Working Capital Turnover Ratio = Sales . Working Cap.
Working Capital = Current Assets Current Liabilities
Year 2006 2007 2008
Ratios 8748 962 9014 1456 9542 = 9.1 :1 = 6.2 : 1 2038 = 4.7 :1
INTERPRETATION OF WORKING CAPITAL RATIO OF CHL INDUSTRIES:The working capital turnover ratio are 9.1:1, 6.2:1 & 4.7:1 respectively in the years 2006 ,2007 & 2008. These ratios can be concluded that the ratios are showing downward trend.(times per years)
4)
Current Assets Turnover Ratio =
Sales . Current Assets
Year 2006 2007 2008
Ratios 8748 1596 9014 1506 9542 2588 = 3.42 :1 = 3.04 : 1
= 2.06 :1
INTERPRETATION OF CURRENT ASSETS TURNOVER RATIO OF CHL INDUSTRIES:The current capital ratios for the last 3 years are 2006, 2007 & 2008 are 3042:1, 3.04:1 & 2.06:1 1 times for yearly respectively. These ratios are shown downward trend where the sales are generated with respect to current
PROFITABILITY RATIOS:5) Gross Profit Ratio = Gross Profit x 100 Sales .
Gross Profit = Sales Cost of goods sold
Year
2006 2007 2008
Ratios
1373 x100 8748 1913 x100 9014 2183 x100 9542 = 15.7% = 21.22% = 22.88%
INTERPRETATION OF GROSS PROFIT RATIO OF CHL INDUSTRIES:The gross profit ratios of CHL Limited. 15.7%, 21.22% & 22.88% in years 2006, 2007 & 2008 respectively. As gross profit having upward trend. It is beneficial for CHL Limited.
6)
Net Profit Ratio =
Net Profit after interest and tax x 100 Sales
Year 2006 2007 2008
Ratios 244.6 x100 = 2.8% 8748 1612 x100 9014 1888 x100 9542 = 17.88%
= 19.79%
INTERPRETATION OF NET PROFIT RATIO OF CHL INDUSTRIES:As like the gross profit ratios, the trend to net profit ratios are upward tend & maintaining same level. It is the position, which is going towards growth of the company. The net profit ratios are 2.8%, 17.88% and 19.79% in years 2006, 2007, &2008 respectively.

7) Overhead Ratio = Overhead (Expenses) Sales .
Year 2006 2007 2008
Ratios 1456 x100 8748 1202 x100 9014 1166 x100 9542 = 16.64% = 13.33%
= 12.22%
The Overhead Expenses are having downwards trend to it is good for CHL Limited.
ACTIVITY RATIOS:8) Inventory Turnover Ratio = Cost of goods sold = Average Inventory Goods) Year 2006 Cost of Goods Sold . Average Inventory
Sales Gross Profit = Average Inventor+ClosingInventory 2 Ratios 7375 399.3 7101 455.8 7359 408.4 = 18.5 . (Finished
2007 2008
= 15.6 = 18 (times per year)
9)
Inventory velocity Ratio =
Average Inventroy . Cost of Goods Sold

Year 2006 2007 2008 Ratios 399.3 x 365 399.3 = 20 days
455.8 x 365 = 23 days 455.8 408.4 x 365 = 20 days 408.4
INTERPRETATION OF INVENTORY TURNOVER VELOCITY RATIO OF CHL INDUSTRIES:-
&
The days in velocity period about inventory about inventory are quick proper as 20 days , 23 days and 20 days respectively in the years 2006, 2007 & 2008 respect truly & turnover ratio about inventories are is years 2006 , 2007, & 2008 are 18.5, 15.6, & 18 respectively.
10)
Debtors Turnover Ratio = Year 2006 2007
Sales (Credit) . Accounts Receivables Ratios 8748 970.4 9014 940.4 = 9.02 times = 9.58 times
2008
9542 1072.5
= 8.9 times
Debtors velocity Ratio =
Average Accounts Receivable x 365 Net Credit Sales Ratios
Year

2006 970.4 x 365 8748 = 40.5 days
2007 2008
940.4 x 365 = 38 days 9014 1072.5 x 365 = 41 days 9542
11)
Creditors Turnover Ratio = Year 2006 2007 2008
Net Purchase . Accounts Payable Ratios 4583 1010 3972 641 4327 739 = 4.54 times = 6.2 times
= 5.86 times
12)
Creditors velocity Ratio =
Average Accounts Payable x 365 Net Purchase (Credit)
Year 2006 2007
Ratios 1010 x 365 4583 641 x 365 3972 739 x 365 4372 = 80 days = 59 days
2008
= 62 days
INTERPRTATION OF DEBTORS & CREDITORS RATIOS:

As if Creditors velocity (periods) are observed it is concluded that velocity as they

are less in days. The turn over ratio of both debtors and creditors are fluctuating as debtors are about 9 times of sales (net) & creditors are about 5 or 6 times of net purchase.
13)
Fixed Assets Turnover Ratio = Net Fixed Assets Year 2006 2007 2008
Sales . Fixed Assets
= Fixed Assets - Depreciation Current Ratios 874766343 194081337 901365204 91423583 954198398 358198284 = 4.51:1 time = 4.71:1 times
= 2.66:1 times
INTERPRETATION OF FIXED ASSETS TURNOVER RATIO

The Fixed Assets Turnover ratio for the last three years 2006,2007 & 2008 are 4.51 ,4.71 & 2.66 (times per year) respectively. The assets turnovers ratio indicates the no. of times the assets have been rotated in process of doing business form the above ratio, it is concluded that in the year 2006,2007 & 2008 the sales are generated 4.51 , 4.71 &2.66 (times per year) for the fixed assets invested in it.
LEVERAGE RATIOS:14) Debt Ratio = Net Worth Total Debt . Total Debt + Net Worth
= Shareholders fund Preliminary Expenses Year 2007 2008 Ratios 1362 1362+3810 3023 3023+5450 = .26
= .36

Debt ratio used to analyse the long term solvency of the firm. 15) Debt Equity Ratio = Total Debt . Net Worth Ratios 1362 3810 3023 5450 = .36 = .55
Year 2007 2008
INTERPRETATION OF DEBT EQUITY RATIO OF CHL:Contribution for each rupees of the owners contribution is called debt equity ratio as year 2008, Debt equity ratio is .55:1 which is more as comparison with year 2007 in which the debt equity ratio is .36 :1.
COMMON SIZE STATEMENTS

Its one of the useful ways of analyzing financial statements is to convert then into common size statements by expressing absolute rupee amounts into percentages. When this method is pursued the income statement exhibits each expense item or group of expense items as a percentage of net sales are layer as 100 per cent. Similarly, each individual assets and liability classification is shown as a percentage of total assets and liabilities respectively. Statement Prepared in this way are referred to as
COMMON SIZE STATEMENTS. # COMMON SIZE P/L A/C

# COMMON SIZE BALANCE SHEET. Common size comparative statement for one firm over the years would highlight the relative change in each group of expenses, assets and liabilities. These statements can be equally useful for inter-firm comparisons.
COMMON SIZE P/L & B/S
As it is an analysis of 3 years as years as 2006,2007 & 2008 first sales is considered then it has an increasing trend and in common size P/L, they are supposed to be 100% in each year.
In increasing trend, the other expenses are increasing and it is (9.28%) in 2006, (13.45%) in 2007 & (13.49%) in 2008. The increasing % is made more between years 2006-2007
The expenses are going towards downwards in % so it is good indication for the company efficiency. The expenditure amortised are approximately same.
The profit before depreciation is in upwards trend & % increased in this profit is made between 2006-2007. The main reason is that there is increasing in other incomes with less expenses.
As it is company so due to more income and fixed assets maintained, the expenses become more in ascending years, so the ultimate net profit offer interest and taxes are in increasing trend & more % (different b/w 20062007) increase is made in year 2007 as increase in 2008 is made comparatively less due certain reasons.
It is an order based company. So, sales target are not achieved.

Reserve and surplus is increased in 2007 over 2006 as % increased is (17.204) which shows efficiency of the company. The loan taken (secured) is much & increased made in 2008 over 2007 so the company should make decrease & should manage its own capital & reserves. The company has made the current creditors decrease so it is good for company and other liabilities are the same. Provisions for wealth tax, proposed dividend and dividend tax are made but soon the company is maintaining them in 2008. Net fixed assets are in downwards trend and (4.29%) decrease in 2008 over 2007 and (.77%) decrease is made 2007 over 2006. Capital work in progress is fluctuating in percentage but investment has very proper trend as increasing year by year (11.476) and 2007 over 2006. Inventories in current assets have a downward trend in year 2008 (3.979) and 2007 over 2006. Sundry debtors are increasing trend but in 2008 the based on total assets are less year 2007
Cash & Bank Balances has increased in 2008 over 2007 as it is good indication to maintain cash & bank as comparison in year 2007 over 2006.
Loans & advances has increased in year 2007 over 2006 (2.759) but it is less increasing in year 2008 over year 2007.
These miscellaneous expenses are decreasing and the main reasons for their decreasing are: -

Less in preliminary expenses. Less in deferred revenue expenditures in trend in years 2006,2007 & 2008
COMPARATIVE FINANCIAL STATEMENTS
In comparative financial statement technique, the financial data for 2 or more years are placed and presented in adjacent columns and there by the financial data is provided a time perspective in order to facilitate periodic comparison.
The comparative financial statement is based on the premises that a covering a period of a number of years is more meaningful and significant than for a single year only. As two comparative financial charts are as follows: COMPARATIVE P/L A/C COMPARATIVE BALANCE SHEET
INTERPRETATION OF COMPARATIVE P & L BALANCE SHEET
Sales of year 2008 is more as comparison to year 2007. In year 2008 is Rs. 9541 (in lakhs) with compare to sales amount of Rs. 9014(in lakhs)
Manufacturing expenses are increased in the year 2008 with compare to year 2007 but the gross profit is also higher and the comparative amount

is proper as showing the growth of the company. Other incomes which add the net profit of the company is higher in the year 2008 as compare to year 2007. Advertising & publicity expenses are important and increased these expenses in year 2008 (Rs.1.61 in lakhs) with compare to (Rs. .64) in the year 2007. It is beneficial for growth of the company. Interest paid a secured long terms loans more in the year 2008 but interest on other become decrease in year 2008 as compare to year 2007 Preliminary expenses and deferred reserve expenses become same in the years 2007 & 2008.
Net profit is also increasing trend in the year 2006 in compare to year 2007 as (Rs. 2303 in 2008 & Rs. 1923 in year 2000).
Reserve & surplus in the year 2008 is maintained very good in amount with compare to year 2007.
Loan (secured) is taken more Rs. 3023 (in lakhs) in year 2008 with comparison to year 2007 Rs. 1362 (in lakhs).
Current liabilities are much more in 2008 as compare to 2007 as result of provision of wealth tax, proposed dividend & dividend tax.
Net fixed assets are more in the year 2008 due to purchase of fixed assets in comparison of year 2007.
In current assets, inventories, sundry debtors, loans & advances are increased in year 2008 with compare to year 2007. But Cash & Bank

balances become reduction way in year 2008 with compare to year 2007. Miscellaneous expenditure is less in the year 2008 Rs. 1.17 (in lakhs) with comparison to Rs. 1.61 (in lakhs)
TREND ANALYSIS
In financial analysis the direction of changes over a period of years is of crucial importance. Times series analysis or trend analysis indicates direction of change. When a comparison of financial statements covering more than three years is undertaken, the year-to-year method of comparison may become too cumbersome. The best way to understand such long-term trend comparison is by means of index numbers. The competition of series of index number requires the choice of a base year that will for all item have an index amount of 100. An important use of this method is when we want to see how the variables of the particular statements are changing over a longer period of time. For eg. The index number trend series for CHL Limited. over last four years is given in the next pages makes over all picture of change at a glance then the actual balance sheet. In summary, an important value of trend analysis is that it can convey to analyst a better understanding of managements philosophies, policies and motivations or other wise that have brought about a changes revealed over the years. The more diverse the economic environments covering the periods comparison are the better a picture can be obtain by the analyst in which the company has came out and taken advantage of its opportunities.
SWOT ANALYSIS OF THE ORGANISATION

As everything has two sides of coin, one has strengths and other side has weakness too. CHL Industries has the following strength and weaknesses.

STRENGTHS:
1. CHL Industries Limited is a big concern with annual turnover of Rs. 90,00,00,000 which is achieved only in few years. 2. CHL is one of the biggest companies manufacturing and exporting the quality capsules. 3. It has captured the big share of international market with proper goodwill and quality of good products. 4. 5. CHL Industries provides welfare activities to its employees. CHL is a major supplier for various types of capsules like, Softgel Capsules, Li CAPS, VCAPS, NPCAPS, DBCAPS, SGCAPS, in international market. 6. 7. CHL has a huge capacity of manufacturing different capsules. CHL makes the full capacity utilization more than 100% as the annual through put of CHL is more than installed capacity. 8. It has a separate HRD section for maintaining its manpower recourses.
9.
It provides various loan facilities to its employees for different purposes.It has proper Industrial Relation section for maintaining Industrial relation.
10.
Canteen and Bus facilities are available for employees at different purposes.
11.
It provides insurance benefits for its employees.

12. Intensive measures have been undertaken for pollution control and environment protection. 13. Decision-making is smooth in process in CHL Industries Limited.
WEAKNESS
1. CHL avoids the community develop which is must for growing companies. 2. CHL should have more employees to get its work in more systematic & peaceful way. 3. About 8% to 12% sale is made in domestic basis. The % should be increased i.e focus should be give to domestic market. 4. Proper planning centres should be maintained so that wastage as scrap can be less in quantities. 5. The proper stock of colour & chemical should be maintained 6. The budgets (proper & periodical) are not prepared in reference of development of workers & employees. 7. CHL has a weakness of not possessing the workers & employees for a long time in the concern.
OPPORTUNITY
Larger market potential (Domestic and International)

Improve market goodwill Improve mind and heard share of individuals Consolidation over existing sales (export) and profits
THREAT
Comparative less growth Loss of market share Stiff competitors from transactional
Chapter-E Conclusion
LIMITATIONS OF FINANCIAL ANALYSIS

Financial analysis is a powerful mechanism of determining financial strengths and weakness of a firm. But the analysis is a based on the information available in the financial statements. Thus financial analysis suffers from the serious inherent limitations of financial statements some of the limitations of financial analysis are:1. It is only a study of interim reports. 2. Financial analysis is purely based upon the financial statements so any sort of manipulation, window dressing in financial statements cannot be detected through financial analysis. 3. Financial analysis is based upon only monetary information and nonmonetary factors are ignored. 4. Any change in the policy or procedure of the organization may lead to misleading results to the analyst till the time he is not familiar with the internal reasons of various policy changes. 5. Analysis is only means and not an end in itself. The analyst has to make interpretation and draw his own conclusions. Different people may interpret the same analysis in different ways.
SUGGESTIONS
Looking at the computation and analysis for the project the calculation of interest and inferences from the graphs lead to conclusions that there should be rationalization to the financial management, the position of an organization holds at present. The following suggestions are made to the CHL Industries Limited. CHL should try to cut operating cost as much as possible.
CHL Industries Limited should have better inventory management techniques for going the proper level as Economic order Quantity (EOQ), Re-order, safety point, safety stock, calculation of lead time so as to minimize the inventory cost of the organization.
Better classification of inventory must be done so that insurance items can be segregated from the less important items and according lead time materials should be procured. ABC analysis techniques of stock should be implied in CHL Industries Limited.
Various cost control techniques must be taken up so as to minimize the cost of production.
Time motion study should be applied in the processing at CHL
CHL and all units must make its financial statements in millions either than absolute figures as per international standards.
Proper fixed assets turnover ratio should be maintained by taking corrective

actions. Employees must be motivated to be more productive in the concern and higher effort to improve productivity and profitability of organization.
CHL should maintain the goodwill in domestic too.
To make proper planning with the help of various budgets and proper standards.
Proper provision for bad debts should be maintained by the company.
FINDINGS & CONCLUSIONS

The overall analysis over the topic Critical analysis of financial position of CHL Industry Limited is making clear much about the financial management. The findings or conclusion based on studied are as under. As Balance sheet is mirror of any company. The capital of this company is fixed on the years. There is payment of attention of financial manager towards the more maintenance of reserves and surplus (as increasing in years 2006 ,2007 & 2008) but secured loans are taken much due to certain reasons as for purchasing the fixed assets but the effective utilization is not made as not much increased in fixed assets & investments are increased much and its percentage is an excellent. Inventory is maintained fluctuating trend, as the company is not adopting the economic order quality, safety point and certain inventory control technique, as ABC analysis of stock is not used. Provision of bad debts, wealth tax, dividend are not maintained as for making the future certainty at some cash & bank balances are increasing in amount yet there is sometimes not enough cash to pay immediate small payments. The appropriate options/measures should be later to be met with the loans and advances amount. The company is unable to pay its expenses and payments in year in which they are due. They are making carry forward in its burden for next years.

The cost of the products can be reduced but effective cost control techniques are not adopted by this company. The company has higher cost having a reason that the scrap is not able to sell, as it is having that must cost.
As the CHL is a growing concern but it has needed to improve more in its future and financial management of CHL Industries requires systematic, efficient, promote & corrective actions with proper management. The company has higher cost having a reason that the scrap is not able to sell, as it is having that must cost. As the CHL is a growing concern but it has needed to improve more in its future and financial management of CHL Industries requires systematic, efficient, promote & corrective actions with proper management.
Bibliography
Bibliography
BOOKS
Pandy, I.M., Financial Management, Vikas Publishing House, New Delhi Khan M.Y, and Jain P.K., Financial Management, Tata McGraw Hill, New Delhi Keown, Arthur J., Martin, John D., Petty, J. William and Scott, David F, Financial Management, Pearson Education Chandra, Prasanna, Financial Management, TMH, New Delhi Van Horne, James C., Financial Management and Policy, Prentice Hall of India Brigham & Houston, Fundamentals of Financial Management, Thomson Learning, Bombay. Kishore, R., Financial Management, Taxmans Publishing House, New Delhi Suggested Readings: Zikmund, Millian G., Business Research Methods , Thomson Learning , Bombay Cooper, Donald R- and Pamels Schindler, Business Research Methods , Tata McGraw Hills, New Delhi Geode, Millian J. & Paul K. Hatl, Methods in Research, McGraw Hills,

New Delhi Sekran, Uma, Business Research Method, Miley Education, Singapore Kothari, C.R., Research Methodology
WEBSITES

www.writercorporation.com
www.smallbusiness.chron.com www.Exec-appointments.com www.3imperical.ac.uk www.en.wikipedia.org www.tutor2u.net www.thebasicproject.org.uk www.ocas.org.uk
ANNUAL REPORTS
Annual report of CHL Annual report of CHL Annual report of CHL ------2009-2010 2010-2011 2011-2012

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Critical analysis of Financial Position at CHL Ltd.

SUMMER TRANING REPORT

Submitted Mohit Talwar MBA (3rd sem Roll no-3218823

HINDU INSTITUTE OF MANAGEMENT &TECHNOLOGY

MAHARSHI DAYANAND UNIVERSITY, ROHTAK

Critical analysis of Financial Position at CHL Ltd.

Signature of the Candidate

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

BACKROUND OF THE COMPANY

Critical analysis of Financial Position at CHL Ltd.

Market Segment Served

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

OBJECTIVES OF CHL LIMITED.

TO SERVE THE NATIONAL INTEREST

TO ENSURE AND MAINTAIN FUNCTIONING

TO EARN REASONABLE RATE OF INTEREST

TO CREATE STRONG BASE

Critical analysis of Financial Position at CHL Ltd.

Finishing capacity and contributing in making minimum exchange outgo.

TO ENHANCE DISTRIBUTION NETWORK

FINANCIAL MISSION OF FINANCE DEPARTMENT

Critical analysis of Financial Position at CHL Ltd.

FINANCIAL OBJECTIVES OF FINANCE DEPARTMENT

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

OBJECTIVES OF PERSONNEL DEPARTMENT

Critical analysis of Financial Position at CHL Ltd.

FUCTIONING OF PERSONNEL DEPARTMENT A Planning manpower requirements

B Organizing the manpower resources

Critical analysis of Financial Position at CHL Ltd.

VARIOUS SECTION OF FINANCE DEPARTMENT AT CHL INDUSTRIES CHL

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

AUDITS IN THE ORGANISATION

Critical analysis of Financial Position at CHL Ltd.

COMPLIANCE OF FOREIGN BUYERS AUDIT

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

Chapter-B Review of literature

WHAT MEANING DOES FINANCIAL ANALYSIS HOLDS :

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

OBJECTIVES OF FINANCIAL STATEMENTS:

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

Objectives of financial analysis :

Critical analysis of Financial Position at CHL Ltd.

RATIO ANALYSIS BASES ASP / L & B / S

Balance Sheet Ratio

Income Statement & Income Statement/ Balance sheet Ratios

Liquidity ratio measure a ability to meet short term obligations

Profitability ratio relate profit to sales & investment

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.

Critical analysis of Financial Position at CHL Ltd.