AN ORGANIZATIONAL STUDY ON

PROFITABILITY ANALYSIS OF
TRAVANCORE COCHIN CHEMICALS LTD.
Report submitted to M G University
in partial fulfillment of the requirements
for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted By

LIGINA JALEEL
Reg. No. 32856

Under the guidance of

Mr. Burny Kunjappan
ASST.PROFESSOR
MUSALIAR INSTITUTE OF MANAGEMENT

MUSALIAR COLLEGE OF ENGINEERING AND

TECHNOLOGY
PATHANAMTHITTA 689 653, Kerala

MUSALIAR COLLEGE OF ENGINEERING AND

TECHNOLOGY
PATHANAMTHITTA

CERTIFICATE

This is to certify that this report is based on the

organization

study

conducted

by

Ligina

Jaleel

at

Travancore Cochin Chemicals Ltd. is in partial fulfillment

of

the

requirements

BUSINESS

for

the

ADMINISTRATION,

degree

of

degree

MASTER

OF

program

of

MAHATMA GANDHI UNIVERSITY, KOTTAYAM.

Signature of the Faculty Guide

Head of Department

Signature of the Examiner

Signature of the

DECLARATION
I

hereby

declare

that

Organizational Study on

this

project

report

entitled

Travancore Cochin Chemicals

Ltd. has been prepared by me during the year 2011-13,

under the guidance of Mr. Burny Kunjappan, Department
of Management Studies, Musaliar College of Engineering and
Technology, Pathanamthitta.

I also hereby declare that this project report has not

been submitted to any other University or institute for the
award of any degree or diploma.

Pathanamthitta
Ligina Jaleel
Date

ACKNOWLEDGEMENT
The elation and gratification of this organization study will be
incomplete without mentioning all who helped me to make it possible, whose
encouragement and guidance were valuable to me throughout conducting the
organizational study.
First and foremost I thank God Almighty for giving me the ability to do
this study and make the venture a success.
I express my sincere thanks to my guide Mr. K.J. Sabu (Accounts
Travancore Cochin Chemicals Ltd. for providing the

Officer)

necessary guidelines to conduct the study at the organization. I am also

thankful to all the department heads for their valuable suggestions and
constructive criticism throughout the preparation of the report. I am obliged to
my Guide for her valuable guidance and help throughout the completion of
the study.
I extend my thanks to all the lecturers and staff members of the
Department of Management studies

for their tireless help.

Last but not the least I express my sincere gratitude to my parents and
friends for their constant help and encouragement and valuable prayers
motivating me mentally for the successful completion of this organization
study.

Ligina Jaleel

CONTENTS

INTRODUCTION
Introduction
Research problem (Statement of the problem)
Significance of the study
Scope of the study
Objectives of the study
Research Methodology (Methodology)
Tools of analysis
Limitations of the study
INDUSTRIAL PROFILE & COMPANY PROFILE
REVIEW OF LITERATURE
ANALYSIS AND INTERPRETATION OF DATA
FINDINGS
CONCLUSION
SUGGESTIONS
BIBLIOGRAPHY

LIST OF TABLES
1
2
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.

Table of Current Ratios

Table of Liquid Ratios
Table of Debt Ratios
Table of Debt-Equity Ratios
Table of Proprietary Ratios
Table of Debt Service Coverage Ratios
Table of Inventory Turnover Ratios
Table of Debtors Turnover Ratios
Table of Average College period
Table of Net Asset Turnover Ratios
Table of Fixed Asset Turnover Ratios
Table of Working Capital Turnover Ratios
Table of Gross Profit Ratios
Table of Operating Ratios
Table of Cost of Goods sold Ratios
Table of Other Operating Expense Ratios
Table of Net Profit Ratios
Table of Return on Investment
Table of Return on Equity Capital
Table of Earnings per share

LIST OF FIGURES / CHARTS

1
2
3.
4.
5.
6.
7.
8.
9.
10
.
11.
12
.
13
.
14
.
15
.
16
.
17
.
18
.
19
.
20
.

Current Ratios Analysis

Liquid Ratios Analysis
Debt Ratios Analysis
Debt-Equity Ratios Analysis
Proprietary Ratios Analysis
Debt Service Coverage Ratios Analysis
Inventory Turnover Ratios Analysis
Debtors Turnover Ratios Analysis
Average College period Analysis
Net Asset Turnover Ratios Analysis
Fixed Asset Turnover Ratios Analysis
Working Capital Turnover Ratios Analysis
Gross Profit Ratios Analysis
Operating Ratios Analysis
Cost of Goods sold Ratios Analysis
Other Operating Expense Ratios Analysis
Net Profit Ratios Analysis
Return on Investment Analysis
Return on Equity Capital Analysis
Earnings per share Analysis

INTRODUCTION

INTRODUCTION

In todays world there is a realization that every society has limited financial
and managerial resources and those must be allocated effectively rather than wasted
away. Finance being life blood of business has to be effectively managed. The
profitability of every business depends on how well funds are being raised and
managed for the successful performance of any business, the optimum utilization of
scares financial resources especially in working capital management is closely
related with the profit planning of the firm.
A developing country requires an increasing volume of investments not only
in fixed assets but also in working capital. Because of the scarcity of the investable
resources, the rate of growth of such an economy depends to a great extent on the
effective utilization of working capital.
Every business needs funds for two purposes for its establishment and to
carry out its day-to-day operations. Every business needs some amount of working
capital. A new concern requires a lot of liquid funds to meet initial expenses like
promotion, formation, etc, greater the size of unit, generally, larger will the
requirement of working capital needed goes on increasing with the growth and
expansion of business till it attains maturity.
The funds require for carrying out current operations have been variously
called short term finance, short term funds and working capital. Fixed capital is that
part of resources invested in fixed or profit earning asset of the business. Working
capital represents that part of business, which make the business work.
The investors are interested in earning the maximum return on their
investment and to maximum their wealth. A firm on the other hand needs to provide
funds to finance its long term growth. By earnings we mean a companys reported
profits after all expenses including depreciation, interest and taxes have been
provided.

DETERMINATION OF PROFITS

The excess or revenues earned over expenses incurred for earning that
revenue is known as profits. Income statement or profit and loss account is prepared
to determine the profits. The determination of correct profit is of Immense
significance due to the following:
For correct reporting to the shareholders.
For declaration of dividends, the amount and trend of earnings or profits is

the starting point.

For ascertaining the operating efficiency of the company.
For deciding about the future expansion and growth.
For ascertaining the intensive use of capital
For determining credit worthiness of the firm.
For ascertaining the importance of the industry in the national economy.

SOURCES OF PROFITS
The following are the main sources of earning profits:
I. Income from business
Income from operations of the business is the main source of profits. Selffinancing or sloughing back of profits depends mainly on this source of income.
Generally higher the income from business, the larger would be the reserves or
retained earnings.
II. Income from other sources
Other sources refer to those sources which are allied to the main objects of
the firm. Income from such subsidiary sources should be shown
Separately while preparing the income statement because of uncertainties of
such Income.
III. Income from investments
Sometimes, the surplus funds of a company are invested in purchase; of
outside investments, such as government securities, bonds, shares and debentures of

other companies etc. income from such investments should also be shown
separately.
RESEARCH PROBLEM
The project study made an attempt to analyze the profitability of the
company. The study reveals the various aspects of it .Business is conducted
primarily to earn profits. The amount of profit earned measures the efficiency of a
business. The greater the volume of profit, the higher is the efficiency of the
concern. The profit of a business may be measured and analyzed by studying the
profitability of investments attained by the business. Profitability is the measure of
efficiency of business. Therefore, the present study made an attempt to analyze the
profitability of the company.
SIGNIFICANCE OF THE STUDY
It ensures that firm is able to continue its operation and that it has sufficient
ability to satisfy both manufacturing short term debt and upcoming
operational expenses.
It focuses on three main issue come under the working capital management
such as: holding cash, float and managing cash.
It is useful to financial position analysis in assessing the operational
efficiency of the concern.
SCOPE OF THE STUDY
This study helps to understand the profitability and liquidity position of
Travancore Cochin Chemicals Limited, Cochin.
The study would help the industry to create awareness about their financial
condition and know the strength and weakness of their financial
performance.
The study can provide better suggestion for improving their financial
performance.

OBJECTIVES OF THE STUDY

Primary objective:
The primary objective of the research study is to study the impact of liquidity and
profitability Analysis of TCC Ltd.
Secondary objectives:
To measure, test and evaluate the liquidity position of TCC Ltd
To determine the profitability position of TCC Ltd and risk
associated with it
To analyze the operating efficiency of the company
To analyze the financial soundness of the organization
To ascertain overall performance of the company

METHODOLOGY
A comparative and analytical study is undertaken to study the impact of
liquidity position and profitability of TCC Ltd. The study required data to be
collected from secondary sources.
Secondary data is gathered through last 5 year annual reports from finance
department of the company, books, magazines and newspapers, business journals
and internet.
TOOLS OF ANAYSIS
Ratio analysis.
Ratio analysis is a widely used tool of financial analysis. It is defined as the
systematic use of ratio to interpret the financial statements so that the strength and
weaknesses of a firm as well as its historical performance and current financial
condition can be determined. The term ratio refers to the numerical or quantitative
relationship between two variables.

 Comparative balance sheet.

Statement showing financial data for two or more than two years, placed side by
side to facilitate comparison is called Comparative balance sheet. Comparative
balance sheet not only show the absolute figures of different years but also provide
columns to indicate the increase or decrease in these figures from one year to
another. In addition, these statements also show changes in percentage form.
Trend analysis.
Trend Projection Analysis is used to find out the trend values for the coming
years based on the past years trend values. The study will show the trend or
direction of movement over a long period of time and from this direction one can
get a better view of future trend value or the performance.
Correlation.
A measure of the strength of linear association between two variables.
Correlation will always between -1.0 and + 1.0. If the correlation is positive, we
have a positive relationship. If it is negative, the relationship is negative
n (xy) (x) (y)
r

=
[n x2 (x2)] [ny2 - y)2]

N = Number of values
X = First score
Y = Second score
For the purpose of profitability analysis, the profit and loss account and balance
sheet of the company have been analyzed with the help of the data obtained in the
financial statements, financial ratios have been calculated.

LIMITATION OF THE STUDY

The study has been limited to a period of five years only and the inferences
derived on period may not represent the true position of the concern.
The time period provided for the study was in efficient.
The market analysis was based on the feedback collected by the company.
The study is mainly based on secondary data.
CHAPTER SCHEME
The project report consist of 5 chapters
The first chapter is introduction and design of the study, which includes
introduction, research problem, significance of the study, scope of the study,
objective of the study, research methodology, tools of analysis, limitations of the
study and the chapter scheme.
The second chapter consists of profile of the study area which includes industry
profile and company profile.
The third chapter exhibits the review of literature and theoretical frame work.
The fourth chapter consists of analysis and interpretation of data.
The fifth chapter consists of findings, conclusion, and suggestions

INDUSTRIAL PROFILE
&
COMPANY PROFILE

INDUSTRY PROFILE & COMPANY PROFILE

INDUSTRY PROFILE

Chemicals are essential to millions of consumer goods, enabling hi-tech

advances in industries as diverse as aerospace, computing and telecommunications.
The chemical industry comprises companies engaged in the conversion of raw
materials; oil, natural gas, air, water, metals, that are then used to make a wide
variety of consumer goods, as well as input for agriculture, manufacturing,
construction and service industries.
The chemical industry consists of company engaged in the processing and
refinement of agricultural and industrial chemicals as well as gases. Chemicals are
used to make a wide variety of consumer goods, besides being necessary in the
agriculture, manufacturing, construction, and service industries. The European
Union and the US are home to the worlds largest chemical companies.
The chemical industry comprises the companies that produce industrial
chemicals. Central to the modern world economy, it converts raw materials (oil,
natural gas, air, water, metals and minerals) into more than 70,000 different
products. These products include petro chemicals, agro chemicals, ceramics,
polymers, and rubber, oleo chemicals (oil, fats, and waxes), explosives, fragrances,
and flavors. The chemical industry is, thus, central to the modern world economy.
The Chlor-alkali industry forms a significant part of chemical industry. The
Chlor-alkali process is an industrial process for the electrolysis of sodium chloride
solution (brine). Depending on the method several products beside hydrogen can be
produced. If the products are separated, chlorine and sodium hydroxide are the
products; by mixing, sodium hypochlorite or sodium chlorates are produced,
depending on the temperature.
Globally, the chemical industry is mainly concentrated in three areas of the
world: Western Europe, North America, and Japan. The European community is the
largest producer, followed by the US and Japan. The chemical industry, one of the
largest in the US is an enterprise worth $674 billion.

INDUSTRY-GLOBAL SCENARIO
If we refer back to the world chemical industries we will be astonished by the
fact that use of chemicals and chemical process is started in 7000 B.C. in those early
days of civilization, some artisans from Middle East refined Alkali and Limestone
for producing glass. After them, people from China invented black powder which
was nothing but Chemical Explosive. In 1635, different chemicals were produced
for tanning in Massachusetts.
But, the large scale world chemical industries with proper from and
infrastructure came in to existence in 19 th century. The last half of 19 th century
experienced tremendous advancement in the field of Organic Chemistry which gave
the world chemical industry massive boost. The world chemical industry started
their journey of development in real terms.
In 1850, world chemical industries were managed to produce synthetic dyes
which were being used in the textile industries. In 1890, production of
SULPHURIC Acid, Caustic Soda and Chlorine started at a mess level by the world
chemical industries. Then came to revolutionary chemical products, the first one
was Rayon which was made from wood fiber and which changed the total scenario
of Textile Industry. The second ones impact was even larger. It was synthetic
fertilizers which led to green revolution in agriculture resulting in drastic
improvement in agricultural crop yield.
Chemical industry is nearly a $3 trillion global enterprise. Globally, the
chemical industry is mainly concentrated in three areas of the world: Western
Europe, North America and Japan. The European community is the largest producer,
followed by the US and Japan.
The recession had hit the chemical industry hard. Shying from a lack of demand,
chemical companies shelved their growth strategies, with plants idled or running at
historically low rates, company looked for avenues to streamlines operations and
increase productivity. The global chemical industry is, however, recovering from the
recession-hit lows.

Demand for chemicals tracks global industrial production and global GDP
very closely. The chemical industry was particularly affected by the weak industrial
demand in the second half of 2008 and in the first half of 2009. The draw in
production in the chemical industry has been almost in sync with low production in
the key customer industries of housing, construction, automotive, electrical,
furniture, and paper.
The global Chlor-alkali industry saw improvements in pricing and production
during the first half of 2010, much to the relief of major players that had watched
operating rates worldwide fall to the their lowest levels in a decade after the crash of
late 2008. Global caustic soda demand plummeted in the first half of 2009 after
reaching record highs in late 2008.
Over the past three years, the global CHLOR-alkali industry has experienced
one of the most volatile periods in history. The swing from a record growth year in
2007 to the dramatic contraction in 2008 and 2009 demonstrates the risks and
challenges the industry has been forced to navigate. Currently, the global industry is
again on a growth path and demand is poised to surpass the peak demand period of
2007 by the end of the year. However, the recovering pattern varies by region and
there are different drivers affecting the outlook for key markets. Wild the most
challenging period appears to be over for now, certain risks remain. The issue of
over capacity will put pressure on industry margins in some regions, while costadvantaged derivatives will derive expansions elsewhere.
Caustic soda prices are currently rising globally as tight inventories in the
European and US markets support higher regional prices and pull price upwards in
the regions. The tight inventories reflect the uneven demand recovery for chlorine
and Caustic across regions. As trade flows have become more dynamic, caustic
prices have become more globalized and supply or demand imbalances in one
region affect other regions more quickly than ever before.
China will continue to be the driver of global CHLOR-alkali capacity expansion,
adding the most capacity. Regional demand growth, particularly in china, is

expected to consume much of this regions production. The global economy

recovery will stimulate demand growth for both chlorine derivatives and caustic
soda.

INDUSTRY-INDIAN SCENARIO
The Chlor-alkali industry forms a significant part of the Indian chemical
industry. The key chemicals in the Chlor-alkali industry are
Caustic Soda
Chlorine (including liquid chlorine)
Soda ash
Majority of soda ash is used in the glass industry which accounts for 45% of
total consumption. Chemicals and soaps and detergents are other major end uses,
accounting for 25% and 11% of global soda ash consumption respectively. Soda ash
can also replace caustic soda in certain industries like pulp and paper, water
treatment and certain sectors in chemicals.
The main drivers for the expert of Alkali chemicals are Flakes of Sodium
hydroxide (caustic soda), Disodium Carbonate light (soda ash), Sodium Hydroxide
in Aqueous solution (soda lye) and other Disodium Carbonate. This year India has
exported mainly to UAE, Sri Lanka, USA, Oman, Kenya, and Bangladesh.
Indian caustic soda industry has been largely able to meet entire requirement
of caustic soda in India. The Indian industry was self-sufficient in its requirement
over since 1975. Caustic soda has been in the list of imports permitted under OGL
particularly for actual users since 1980-81. The imports were, however, limited
because of the pricing policy of the Indian industry. The capacities installed by the
producers in Chinese Taipei, Indonesia, and EU (excluding France) are far higher
than the requirement in their own country. Further, with the imposition of antidumping duties on a number of other countries, the producers in the subject
countries are finding it lucrative to export top India. The excess capacities in these

countries have put tremendous pressure on the producers to look for markets in
these countries. Resultantly, the exporters from Chinese Taipei, Indonesia, and EU
(excluding France) have quoted very low prices for export to India. It would also be
relevant to point out that the producers in these countries have at times not directly
offered for supplies to India, substantial volumes have been offered by traders in
third countries for supply of caustic soda originating in these countries. The offers
being by traders, naturally, these traders have taken can of their margins also. The
prices quoted by the producers in these countries are, therefore, still lower. The
petitioners believe that the prices offered are far below the associated cost of
production. Thus, the exporters from Chinese Taipei, Indonesia, and EU (excluding
France) have restored to dumping of caustic soda in the Indian market.
The chemical industry is a significant component of Indian economy with
revenues at approximately US$ 28 billion. It constitutes 6.7% of Indias GDP and
10% of total exports. The total production of caustic soda in the country during the
year was around 23.26lakhs MT registering and increase of approximately 6%.

INDUSTRY-STATE SCENARIO
The chemical industry touches our lives in many different ways. Whether it is
thermoplastic furniture we use or a synthetic garment we wear or a drug we
consume we are inextricably linked to it. The industry is a vital part of the
agricultural and industrial development in India and has key linkages with several
others downstream industries such as automotive, consumer durables, engineering,
food processing, etc.
Keralas chemical industry improved its performance by increasing production and
sales by 10 -25% and 15-20% respectively.
Caustic soda is one of the basic inorganic chemicals manufactured from common
salt. There are basically four products manufactured from common salt and are
caustic sodas, chlorine, hydrochloric acid, and sodium hypochlorite (by-product).

In Kerala only a few companies are engaged in the production of caustic

soda. About

300

TPD caustic soda is produced by these companies. These are

used in the manufacturing of soap, textile, plastic, etc. in the view of the high
transportation cost and hazardous natural of chemicals transported, the caustic soda
industry in the state is more localized and the consuming units have come nearer to
the manufacturing unit. Also, because of the high transportation cost, it is not
possible to export caustic soda in large volume from the state.
COMPANY PROFILE
INTRODUCTION TO THE COMPANY
The TCC Ltd is a state public sector undertaking owned by the Government
of Kerala, situated at Udyogamandal in Cochin, the industrial belt in the state. The
factory and registered office is located 20 km away from the Cochin international
airport and 15km from Ernakulum Railway station. TCC is located in the banks of
river Periyar, one of the finest water ways in Kerala and is recognized as an artery of
costal trade and commerce. TCC is a heavy chemical industry engaged in the
manufacture and marketing of caustic soda and allied chemicals.

Chairman & Managing Director

Mr. Subramanian

Company Secretary

Smt. Susan Abraham

HISTORY OF THE COMPANY

In 1950, FACT started their ammonia plant. They wanted to produce
Ammonium Chlorate which is a fertilizer, using ammonia from their newly installed
ammonia plant. For that they required HCl gas. Fact at that time was purely a
fertilizer unit and HCl gas was a chlor alkali industry product, they wanted to install
a separate chlor alkali unit for supply of HCl gas to FACT. In 1950 a joint venture
was registered by fact and their technology supplies M/s. Mettur chemical and
industrial corporation, under the name Travancore Mettur Chemicals (TMC). As the

period was post war II, TMC could not raise sufficient fund. As the plant
equipments ordered started arriving at Cochin airport, TMC could not take delivery
by payment. By that time knowing that a chlor alkali industry is being installed at
Udyogamandal two other companies. M/S. HIL and M/S. IRE started setting up
their plants at Udyogamandal with the idea of using chlor- alkali products for their
production process. TMC represented them Travancore-Cochin state Government
regarding their financial problem. The Government came to know that with the
closing down of TMC, two other companies at a major plant of FACT have to be
shut down. So the Travancore-cochin Government gave massive financial assistance
to TMC and with that company renamed as TCC (Travancore Cochin chemicals).
Commercial production in 1954 is 20 tons per day production capacity. The
production process employed was electro sis and the technology used was Mercury
Cell Technology. TCC has been the pioneer producer of Rayon grade caustic soda in
the country. The production capacity was gradually raised to 160 TDP in 1975.
In 1997 TCC started a 100 TDP caustic soda plant employing membrane cell
technology which is energy efficient and environment friendly Technology. The
plant was supplied by M/S. Asahi Glass Company, Japan. In 2002 the capacity of
AGC plant was increased to 125 TDP. In 2005 and 2006 a 25 TDP caustic soda
plant each employing membrane cell technology were installed. The plant was
supplied by M/S. UHDE, Germany. In 2004, TCC stopped operations of its last
mercury cell plant. At present TCC has 175 TDP caustic soda production capacities
employing the latest membrane cell technology.
PRESENT SITUATION
TCC is the only chlor-alkali unit in Kerala. In India there are about forty
chlor-alkali units as competitors. TCC owns 109 acres of land and around 690
people are working in TCC in three shifts. The plants are functioning utilizing full
capacity.
LOCATION

The Travancore-Cochin Chemicals Limited (TCC) is a State Public Sector

Undertaking owned by the Government of Kerala situated at Udyogamandal in
Cochin industrial belt. The factory and registered office is located 20 KM from the
Cochin International Airport and 15 KM from the Ernakulum railway station.
MISSION
TCC is committed to supply quality chemicals at competitive prices
to customers. Customer satisfaction, Concern for Environment and Safety are our
priorities.
We intend to achieve:

Utmost level of conservation of all resources including energy.

Cost effectiveness in all the operations.

Regular up gradation of technologies used in processing.

Compliance with laws and statutory regulation.

CORPORATE OBJECTIVES

Produce and market chemicals and caustic soda economically and in an

environmentally sound manner.

To maintain optimum levels of efficiency and productivity and to secure

optimum returns on investment.

To maximize profits from projects taken up.

To continuously upgrade the quality of human resource of the company and to

promote organization development.

To continuously improve the plant operational safety and to confirm statutory

pollution control standards.

To ensure corporate growth by expansion and diversification.

To care for community around.

The Growth Stages of TCC

1956-

A continuous caustic fusion plant with a capacity to upgrade 20 tons

of caustic soda/day was installed.

1958-

A chlorine liquefaction plant was added mainly to meet demand from

the new DDT plant of Hindustan Insecticides Ltd, Ernakulum

1960-

Production of caustic soda was raised to 30 tons/day.

1963-

The caustic soda capacity was raised to new level of 40 TDP. The
company

established new units for the manufacture of sodium

hydro-sulphate with rated capacity 30 TDP.

1967-

The capacity of caustic soda plant was raised to 60 TPD as per third
stage of expansion.

1970-

A 60 TPD caustic soda concentration plant (CCF) was set up.

1975-

Forth stage of expansion: a 100 TPD caustic soda plant was set up

1976-

The company set its own water pumping and purification station.

1980-

Export of hydrochloric acid to gulf countries

1983-

Installed an indigenously developed plant to recover mercury from effluents.

1987-

Installed hydrogen firing system in continuous caustic fusion plant.

1988-

Replaced graphite anodes by titanium anodes.

1990-

Brine De- chlorination unit commissioned.

1992-

Research and development department was set up

1994-

The company planned to set up a plant employing membrane cell

technology for the production of caustic soda in collaboration with
ASAHI GLASS Company of Japan with a capacity of 100 TPD.

1997-

The company commissioned the new membrane technology plant in

July with 100MT capacity.

2000-

The company set up a brine purification plant.

2002-

Capacity of AGC plant increased from 100 TPD to125 TPD caustic soda.

2005-06-

Two 25 TDP each UDHE plant were installed which utilizes

membrane cell technology, each making an overall capacity of
175TPD.

ACHIEVEMENTS OF TCC
TCC is always in the forefront to adopt and incorporate the latest technology
in its plants. Several innovative and advanced technologies were implemented to
achieve higher production, energy conservation, environmental control and
economy in inputs. The company has been dynamic to be proactive to market and
thus to come out as a profitable public sector undertaking. TCC has been bestowed
with various awards for excellent performance with regard to production,
productivity, energy conservation and environmental protection, which is considered
as an award for commitment rather than for efficiency.
1981 -

Best Performance Award for Safety in the State from Directorate of

Factories & Boilers, Government of Kerala.

1987 1988-89-

Award for best performance in safety in India under chemical industries.

Best Pollution Control Award under group Heavy Inorganic
Industries" in Kerala, from Kerala State Pollution Control Board

1989 -

Award for Best Performance in Safety in India under

"Chemical industrial From National safety council

1989-90

Prize for Productivity from Kerala State Productivity Council.

1993 -

Best Performance award for Energy Conservation in the State of

Kerala under group "Chemical & Fertilizers above 3000 KVA" from
Government of Kerala.

1994-95 -

Best Performance award for the Productivity in the State of Kerala

under group Large Industries from Kerala State Productivity
Council.

1995-96

Best Performance award for Productivity in the State of Kerala under

Large Industries" from Kerala State Productivity Council.

1996 -

Best performance award for energy conservation in the state of Kerala

under Major industries group from Energy Management Centre,
Government of Kerala.

1998 -

Best performance award for Energy Conservation in the State of

Kerala under group "Major Industries from Energy Management
Centre, Government of Kerala.

1998 -

Performance award for Energy Conservation under group "Chloralkali Sector", Ministry of Power, and Government of India.

2003 -

Kerala State Energy Conservation Award (2000) in the category of

large Scale Industry.

2005 -

National Energy Conservation award under Chlor-Alkali

Sector.

2006

Kerala State Energy Conservation Award.

2008 -

Pollution Control award from Kerala State Pollution

Control Board.

DEPARTMENTAL STRUCTURE

TCC

PRODUCTION

MATERIAL
S
PURCHA
SE
INVENTO
RY

STORES

MARKETING

ADMINISTRATIO
N

PERSONNEL

ACCOUNTS

COSTIN
G
BILLS

MARKETI
NG
ESTABLIS
HMENT

GENERA
L
CASH &
FINANCE
PROVIDE
NT FUND
INTERNA
L AUDIT

DEPARTMENTAL STRUCTURE
MAJOR CUSTOMERS OF TCC
TCC has large number of customers using its products far and near.
CAUSTIC SODA
Customers: Hindustan Newsprint Ltd, Kottayam; Travancore Rayons Ltd,
Perumbavoor; FACT Ltd, Udyogamandal; HLL, Cochin; India Rare Earth Ltd,
Cochin; Mysore Paper Mills Ltd; Tamil Nadu Newsprint and Paper Ltd; etc.
CHLORINE
Customers: Hindustan Insecticides, Cochin; Mysore Paper Mills Ltd; Kerala
Minerals and Metals, Kollam; Hindustan Newsprint.
HYDROCHLORIC ACID
Customers: Kerala Minerals and Metals, Kollam; Kerala Chemicals and
Proteins; Indian Rare Earth Ltd, Cochin; Hindustan Newsprint Ltd, Kottayam;
FACT Ltd, Udyogamandal; Minerals and Rutiles Ltd; Asia Glues and Chemicals.
SODIUM HYPOCHLORITE
India Rare Earth Ltd, Cochin
MAJOR COMPETITORS
TCC is the only chlor alkali unit in the public sector in India.
Some of the major competitors are:

1.

Atul Ltd, Ahmedabad

2.

Bilt Chemicals, New Delhi

3.

Century Rayon, New Delhi

4.

Chem Fab Alkalies, Pondicherry

5.

Champlast Sanmat Ltd, Mumbai

6.

PCW Ltd, Mumbai

7.

Grassini Industries, Nagda, Madhya Pradesh

8.

Gujarat Alkalies and Chemicals, Gujarat

9.

Gujarat Heavy Chemicals, Ahmedabad

10. Hukumchand Jute and Industries, Kolkata

11.

Indian Petrochemicals Corporation, Gujarat

12. India Rayon and Industries, Mumbai

13. Jayshree Chemicals, Orissa
14. Kothari Petrochemicals, Chennai
15. Saurashtra Chemicals, Gujarat
16. Southern Petrochemical Industries Corporation, Chennai
17. Sree Rayalaseema Alkalies and Allied Chemicals, Kurnool,
Karnataka
18. Tata Chemicals, Gujarat
19. The Andhra Sugars, Andhra Pradesh
20. The Tuticorin Alkali Chemicals and Fertilizers, Tuticorin
FUNCTIONAL DEPARTMENTS/DIVISIONS
There are two main divisions at TCC Production & Administration
Divisions.
The Administration department is classified into 4 subsidiary departments:

Materials
Marketing
Personnel
Accounts

Materials Department
Materials department deals with the procurement of all materials required for
the day to day functions of the company. Under materials department there are three
sections
1. Purchase Section This section deals with:
Purchase of stock items as required by inventory control
Purchase of maintenance items required by the maintenance planning and plat

sections
Purchasing of raw materials required for the process
Purchase of bulk consumable for the process
Purchase of demanded items
Payment against delivery through bank

2. Stores Section - Store section deals with:

Maintaining a minimum stock of items required by various departments
Issuing of stock items required by various departments according to the
materials requests.
3. Inventory Control
Inventory Control is an essential function of stores department. It helps to
reduce cost and increase profit of the organization. Codification of material is done
by manager inventory control. For controlling the inventory, certain levels of
inventory such as maximum, minimum and re-order level is prepared. When the
stock reaches the re-order level, purchase request is made.
Marketing Department
Marketing department deals with sale of all the finished products. Its main
functions include finding out customers, price fixation, terms of delivery and
payment fixation, etc.
Personnel Department

Human Resource is considered as the most vital asset of an organization.

TCC has a well-defined employee power. It helps the organization to perform well
in the market. The functions of the Personnel department include:
Identifying the training needs.
Implementing the required training.
Maintaining training records
This department is further divided into human resource, general, protection and
medical departments.
Accounts Department
The accounts department is further sub-divided into eight subsidiaries:
1. Costing Department The costing department of the company helps the
management to fix the cost of production and fix the price of finished goods. Its
functions include budget preparation, budgetary control and cost analysis.
2. Bills section The bills section deals with maintaining all records, books of
accounts, ledgers and statutory forms in connection with the purchase of all
materials. The main function is to maintain sundry creditors ledger.
3. Marketing Accounts section This section deals with maintenance of accounts
relating to the sales of all finished goods. The main function is to maintain sundry
debtors ledger.
4. Establishment section This section maintains all accounts in connection with the
payment of wages, salaries, overtime wages, short leave, increments, etc. of
employees.
5. General Accounts section This section deals with the preparation of final
accounts and all the adjustment entries in connection with the preparation of final
accounts.
6. Cash & Finance section This section deals with the cash flow analysis, i.e.,
sending Cheques for collection, issue of Cheques to parties and watching the cash
position all the time.
7. Provident Fund The PF department maintains all accounts related with the
collection of PF contribution from employees and employer, collection of voluntary
PF contribution, sanctioning of such loans, etc.

8. Internal Audit This section is a part of accounts department, but not under the
control of accounts department. The main function of internal audit section is the
verification of accounts if there is a financial commitment.
FUTURE PLANS
TCC is in process of setting up a power project on its own. Electricity is one
of the raw materials for the company. It contributes to about 60% of the production
cost. The company would like go for cheaper source of power and insulate itself
from the future tariff hikes of the electric supply utility. A hydel power project is
under consideration at present.
Due to the high demands of the projects, the company is planning to increase
the production capacity 50 tons per day. In addition to the usual products TCC is
planning to produce sodium chlorite and sponge iron. These products have high
demand in market. The main products of the company are hydrogen. TCC is
planning supply this hydrogen to FACT. The company is also planning to start a
distilled water system within the company.
The IT sector of the world is developing in the fast way. TCC is going to
become a part of it. The company is going to start a park and community centre with
the corporation of the panchayat authority. The construction works are in progress.
Two projects-hidal and coal based are under consideration at present.
In 1992, the R&D of the company started working on a project to
manufacture synthetic rutile along with the regional laboratories setup a pilot plant
to manufacture synthetic rutile. It succeeded in developing the technology. It is now
ready for commercialization and the company has proposed a plant in the district.

PROBLEMS AND CHALLENCES FACED BY THE COMPANY.

 TCC is a public undertaking, the political condition of the state affect the
management of the company.
The major decision of the company has to be approved by the Government which
delays the implementation of plants and thereby causing organizational inflexibility.
TCC is a heavy consumer of electricity and in recent past electricity tariff increased
many folds.
As the environment consciousness is very high in Kerala, it may require increase in
the investment in pollution.
The infrastructure of the company is obsolete compared to other.

REVIEW OF
LITERATURE

REVIEW OF LITERATURE
THEORETICAL OVERVIEW
Metcalf and Titard : "Analysis of financial statements a process of
evaluating the relationship between component part of a financial statement to
obtain a better understanding of a firm's operation and performance ".

Mycers: " Financial statement analysis is largely a study of relationship

among the various financial factors in a business as disclosed by a set of statements,
and a study of the trend of these factors as shown in a series of statements '.
Andre Luiz de Souza Guimaraes conducted a study about profitability. The
purpose of this study is to analyze the adequacy of a working capital management
normative model, in terms of profitability, liquidity and solvency. Through an
empirical and analytical research, the analysis of variance results (ANOVA) of a
sample containing financial information from 621 healthcare insurance companies
for the year 2006, show that different working capital structures are associated with
different levels of profitability, liquidity and solvency, suggesting a preference order
different from the one theorized by Fleuriet / Braga. The results indicate that a
certain structure - where financial current assets exceed onerous current liabilities,
and cyclical current assets exceed cyclical current liabilities - is associated with
higher levels of profitability, liquidity and solvency. In addition, the study reiterates
the importance of efficient management of working capital to the performance and
survival of health care insurance companies. Among the most important strategic
decisions of managers are those involving the financing of the company (Barton e
Gordon, 1987). Nevertheless, organizational research has produced few works in
this area (Mizruchi e Stearns, 1994). This study supports the notion that effective
management of working capital is important for the financial health of healthcare
insurers.
The integration of strategic planning to the capital budget process, with
special attention to alternative working capital financing structures, may be useful
for companies of all. Sizes and should not be restricted to large corporations,
deserving greater attention from organizational researchers and practitioners.
Chakra Borty (2008) evaluated the relationship between. working capital
and profitability of Indian pharmaceutical companies. He pointed out that there were
two distinct schools of thought on this issue: according to one school of thought,

working capital is not a factor of improving profitability and there may be a

negative relationship between them, while according to the other school of thought,
investment in working capital plays a vital role to improve corporate profitability,
and unless there is a minimum level of investment of working capital, output and
sales cannot be maintained - in fact, the inadequacy of working capital would keep
fixed asset inoperative.
Weston and Brigham (1981) rightly notes that "the financial management
profit is the test of efficiency and a measure of control, to the owners a measure of
the worth of their investment, to the creditors the margin of safety, to the
government a measure of taxable capacity and a basis of legislative action and to the
country profit is an index of economic progress, national income generated and the
rise in the standard of living", while profitability is amount come out of profit.
PROFIT
Profit is an excess of revenues over associated expenses for an activity over a
period of time. Terms with similar meanings include earnings, income', and
'Margin'. Lord Keynes remarked that 'profit is the engine that drives the business
enterprise'. Every business should earn sufficient profits to survive and
Grow over a long period of time. It is the index to the economic progress,
improved national income and rising standard of living. No doubt, profit is the
legitimate object, but it should not be over emphasized. Management should try to
maximize its profit keeping in mind the welfare of the society. Thus, profit is not
just the reward to owners but it is also related with the interest of other segments of
the society. Profit is the yardstick for judging not just the economic, but the
managerial efficiency and social objectives also.
PROFITABILITY

Profitability means ability to make profit from all the business activities of an
organization, company, firm, or an enterprise. It shows how efficiently the
management can make profit'by using all the resources available in the market.
According to Harward & Upton, "profitability is the 'the ability of a given
investment to earn a return from its use."
However, the term 'Profitability' is not synonymous to the term 'Efficiency'.
Profitability is an index of efficiency; and is regarded as a measure of efficiency and
management guide to greater efficiency. Though, profitability is an important
yardstick for measuring the efficiency, the extent of profitability cannot be taken as
a final proof of efficiency. Sometimes satisfactory profits can mark inefficiency and
conversely, a proper degree of efficiency can be accompanied by an absence of
profit The net profit figure simply reveals a satisfactory balance between the values
receive and value given. The change in operational efficiency is merely one of the
factors on which profitability of an enterprise largely depends. Moreover, there are
many other factors besides efficiency, which affect the profitability.
PROFIT & PROFITABILITY
Sometimes, the terms 'Profit' and 'Profitability' are used interchangeably. But
in real sense, there is a difference between the two. Profit is an absolute term,
whereas, the, profitability is a relative concept. However, they are closely related
and mutually interdependent, having distinct roles in business. Profit refers to the
total income earned by the enterprise during the specified period of time, while
profitability refers to the operating efficiency of the enterprise. It is the ability of the
enterprise to make profit on sales. It is the ability of enterprise to get sufficient
return on the capital and employees used in the business operation.
As Weston and Brigham rightly notes "to the financial management profit
is the test of efficiency and a measure of control, to the owners a measure of the

worth of their investment, to the creditors the margin of safety, to the

government a measure of taxable capacity and a basis of legislative action and
to the country profit is an index of economic progress, national income
generated and the rise in the standard of living", while profitability is an
outcome of profit. In other words, no profit drives towards profitability .Firms
having same amount of profit may vary in terms of profitability. That is why R. S.
Kulshrestha has rightly stated, "Profit in two separate business concern may be
identical, yet, many a times, and it usually happens that their profitability
varies when measured in terms of size of investment".
PROFITABILITY ANALYSIS
Profitability analysis is a component of enterprise resource planning that
allows administrators to forecast the profitability of a proposal or optimize the
profitability of an existing project. Profitability analysis can anticipate sales and
profit potential specific to aspects of the market such as customer age groups,
geographic regions, or product types.
Profitability analysis can help key personnel in an enterprise to:
Identify the most and least profitable clients.
Identify the most and least profitable products or services. Discover which
sources of information offer the most reliable facts.
Optimize responses to changing customer needs.
Evolve the product mix to maximize profits in the medium and long term.
Isolate and remedy the causes of decreasing profit margins.

PROFITABILITY RATIO

 Definition of 'Profitability Ratios'

A class of financial metrics that are used to assess a business's ability to
generate earnings as compared to its expenses and other relevant costs
incurred during a specific period of time. For most of these ratios, having a
higher value relative to a competitor's ratio or the same ratio from a previous
period is indicative that the company is doing well.
Profitability ratios measure a companys ability to generate earnings
relative to sales, assets and equity. These ratios assess the ability of a
company to generate earnings, profits and cash flows relative to relative to
some metric, often the amount of money invested. They highlight how
effectively the profitability of a company is being managed.
Common examples of profitability ratios include return on sales, return on
investment, return on equity, return on capital employed (ROCE), cash return
on capital invested (CROCI), gross profit margin and net profit margin. All
of these ratios indicate how well a company is performing at generating
profits or revenues relative to a certain metric.
Different profitability ratios provide different useful insights into the
financial health and performance of a company. For example, gross profit
and net profit ratios tell how well the company is managing its expenses.
Return on capital employed (ROCE) tells how well the company is using
capital employed to generate returns. Return on investment tells whether the
company is generating enough profits for its shareholders.
For most of these ratios, a higher value is desirable. A higher value means
that the company is doing well and it is good at generating profits, revenues
and cash flows. Profitability ratios are of little value in isolation. They give
meaningful information only when they are analyzed in comparison to
competitors or compared to the ratios in previous periods. Therefore, trend

analysis and industry analysis is required to draw meaningful conclusions

about the profitability of a company.
Some background knowledge of the nature of business of a company is
necessary when analyzing profitability ratios. For example sales of some
businesses are seasonal and they experience seasonality in their operations.
The retail industry is example of such businesses. The revenues of retail
industry are usually very high in the fourth quarter due to Christmas.
Therefore, it will not be useful to compare the profitability ratios of this
quarter with the profitability ratios of earlier quarters. For meaningful
conclusions, the profitability ratios of this quarter should be compared to the
profitability ratios of similar

ANALYSIS AND
INTERPRETATION OF
DATA

ANALYSIS AND INTERPRETATION OF DATA

Financial Analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing relationship between the
items of the balance sheet and the profit and loss account. There are various
techniques used in analyzing financial statements, such as comparative
statements, common-size statements, trend analysis, fund flow and cash flow
analysis, cost volume-profit analysis and ratio analysis. Also known as

analysis and interpretation of financial statements, refers to the process

of determining financial strengths and weaknesses of the firm by establishing
strategic relationship between the items of balance sheets, profit and loss
account and other operative data. The purpose of financial analysis is to
diagnose the information contained in financial statements so as to judge the
profitability and the financial soundness of the firm.
This chapter contains the analysis and interpretation of data.

PROFITABILITY ANALYSIS OF THE TCC LTD

Profitability is the net result of a large number of policies and decisions. The
ratios examined thus provide some information about the way the firm
operating, but the profitability ratios shows the combined effects of liquidity,
asset management and debt management on operating results. In this
framework report the following profitability ratios are used.
Ratio Analysis
Ratio Analysis is powerful tool of financial analysis. In financial 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 relationship between two accounting figures, expressed mathematically,
is known as a financial ratio. Ratios help to summarize large quantities of financial
data and to make qualitative judgment about the firms financial performance.

Solvency Ratios
1. Current Ratio
Liquidity ratio
1. Liquid/Quick/Acid-Test Ratio
Leverage Ratios
1. Debt Ratio
2. Debt Equity Ratio

3. Proprietary Ratio
4. Debt Service Coverage Ratio

Activity Ratios & Turnover ratios

1. Inventory Turnover Ratio
2. Debtors Turnover Ratio
3. Average Collection Period (Days)
4. Net Assets Turnover Ratio
5. Fixed Assets Turnover Ratio
6. Working Capital Turnover Ratio
Profitability Ratios
1.
2.
3.
4.

Gross Profit Ratio (%)

Operating Ratio (%)
Cost of Goods Sold Ratio (%)
Other Operating Expenses Ratio (%)

5. Net Profit Ratio (%)

6. Return on Investment (ROI - %)
7. Return on Equity Capital (REC - %)
8. Earnings per Share (EPS in Rs)

Liquidity ratios
The most common ratios, which indicate the extent of liquidity or lack of
it, are: (i) Current ratio (ii) Quick ratio.
Current ratio
Current ratio is calculated by dividing current assets by current liabilities.
Current assets
Current ratio =
Current liabilities

Current assets include cash and those assets that can be converted into cash
within a year, such as marketable securities, debtors and inventories.

Prepaid

expenses are also included in current assets as they represent the payments that will
not be made by the firm in the future. All obligations maturing within a year are
included in current liabilities. Current liabilities include creditors, bills payable,
accrued expenses, short-term bank loan, income tax liability and long-term debt
maturing in the current year.
The current ratio is a measure of the firms short-term solvency. It indicates
the availability of current assets in rupees for every one rupee of current liability. A
ratio of greater than one means that the firm has more current assets than current
claims against them. As a conventional rule, a current ratio of 2 to 1 or more is
considered satisfactory. Table below shows current ratios of TCC Ltd. for the study
period.

Table of Current Ratios

Period of study
Current Assets
2007 2008
3457
2008 2009
3636
2009 2010
4007
2010 2011
3890
2011 2012
5308
Source: Annual Reports of TCC Ltd.

Current Liabilities
5474
4701
4898
5679
7859

Current Ratio
0.63
0.77
0.82
0.68
0.68

(Rs. in Lakhs)

A graphical representation of fluctuation in current ratios over the study period is

shown in the Figure below
Current Ratio Analysis

0.9
0.8
0.7
0.6
0.5
Current ratio

0.4
0.3
0.2
0.1
0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
Period of ratio

Current Ratio Analysis

Interpretation
Standard current ratio of a sound business is two and TCCs current ratio is
below one in the study period. The highest ratio was 0.82 in F.Y. 2009 10 and the
lowest was in F.Y. 2007 08 i.e. 0.63. Therefore, it shows that the company is
suffering from inadequate working capital. That is they cannot meet their short term
obligations in time. The main reason for the decrease in current ratio is that, in all
the five years the current liabilities of the company are more than the current assets.
Liquid Ratio
Liquid ratio is also known as acid-test ratio or quick ratio or near money
ratio.

It establishes a relationship between quick or liquid assets and liquid

liabilities.

An asset is liquid if it can be converted into cash immediately or

reasonably soon without a loss of value. Cash is the most liquid asset. Liquid
assets consist of all current assets minus inventories and prepaid expenses.
Inventories are considered to be less liquid. Inventories normally require some time

for realizing into cash; their value also has a tendency to fluctuate.

Prepaid

expenses are not available to pay off current debts. Liquid liabilities consists of all
current liabilities minus bank overdraft. The quick ratio is found out by dividing
liquid assets by Liquid liabilities.
Quick or Liquid Assets
Quick / Liquid / Acid Test Ratio

=
Quick or Liquid liabilities

Generally, a quick ratio of 1 to 1 is considered to represent a satisfactory

current financial condition. Table below shows quick ratios of TCC Ltd. for the
study period.

Table of Liquid Ratios

Period of study
2007 2008
2008 2009
2009 2010
2010 2011
2011 2012

Liquid Assets
2439
2132
2375
3024
3176

Liquid Liabilities
5474
4701
4898
5679
7859

Quick Ratio
0.45
0.45
0.48
0.53
0.40

Source : Annual Reports of TCC Ltd.

(Rs. in Lakhs)
A graphical representation of fluctuation in Liquid ratios over the study
period is shown in Figure below.
Liquid Ratio Analysis

0.6
0.5
0.4
Liquid Ratio

0.3
0.2
0.1
0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
Period of study

Liquid Ratio Analysis

Interpretation
Liquid ratios of TCC Ltd. over the study period were below one and
therefore, it confirms that short term solvency of the firm is unsound in the study
period. Higher quick ratio was in F.Y. 2010-11 and lowest was in F.Y. 2011-12.
Leverage ratios
To judge the long-term financial position of the firm, financial leverage, or
capital structure ratios are calculated. The process of magnifying the shareholders
return through the use of debt is called financial leverage or financial gearing or
trading on equity. Leverage ratios may be calculated from the balance sheet items
to determine the proportion of debt in total financing. Leverage ratios are also
computed from the profit and loss items by determining the extent to which
operating profits are sufficient to cover the fixed charges. Several debt ratios may
be used to analyze the long term solvency of a firm.

Debt Ratio
The firm may be interested in knowing the proportion of the interest bearing
debt (also called funded debt) in the capital structure. It may, therefore compute
debt ratio by dividing total debt by capital employed or net assets.
Total Debt
Debt Ratio

=
Net Assets or Capital Employed
Table of Debt Ratios

Period of study
Total Debt
2007 2008
5209
2008 2009
5359
2009 2010
5621
2010 2011
5010
2011 2012
3768
Source: Annual Reports of TCC Ltd.

Capital employed
6541
6718
6331
5393
4229

Debt Ratio
0.80
0.80
0.89
0.93
0.89

(Rs. in Lakhs)

A graphical representation of fluctuation in changes in Debt ratios over the study

period is shown in the Figure below.
Debt Ratio Analysis
0.95
0.9
0.85
Debt Ratio

0.8
0.75
0.7
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
Period of study

Interpretation
The debt ratios of TCC Ltd. for the study period indicates that more than
80% of its net assets are financed by lenders or the stake of owners is quite low I the
total capital employed by the company. From the creditors point of view, the trend
is risky and undesirable.

Debt-Equity Ratio
Debt-equity ratio expresses the relationship between the external and the
internal equities or that between the borrowed capital and the owners capital.
Outsiders Fund
Debt Equity Ratio =
Shareholders Fund

Shareholders funds consist of preference share capital, equity share capital, capital
reserve, revenue reserve, reserve for contingencies, sinking fund for renewal of
fixed assets and redemption of debentures less fictitious assets. Outsiders funds
include all debt/liabilities to outsiders: long-term and short-term. The low ratio is
viewed as favorable from the long-term creditors point of view. Higher ratio is
unfavorable. Generally, a ratio of 1:1 is considered to be satisfactory.
Debt-equity ratios of TCC Ltd. for the study period.
Period of study
2007 2008
2008 2009
2009 2010
2010 2011
2011 2012

Outsiders fund
5209
5359
5621
5010
3768

Source : Annual Reports of TCC Ltd.

(Rs. in Lakhs)

Shareholders fund
2131
2131
2131
2131
2131

Debt-Equity Ratio
2.44
2.51
2.64
2.35
1.77

A graphical representation of fluctuation in Debt-Equity ratios over the study period

is shown in the Figure below.
Debt-Equity Ratio Analysis
3
2.5
2
1.5
1

Debt Equity Ratio

0.5
20
12
20
11
-

20
11
20
10
-

20
10
20
09
-

20
09
20
08
-

20
07
-

20
08

Period of study

Interpretation
The debt-equity ratios of TCC Ltd. for the study period indicate that lenders
contribution is more than 2 times of owners contribution in most of financial years.
From the creditors point of view, the trend is risky and undesirable.

PROPRIETARY RATIO
It is important in determining the long term solvency of the firm. Higher the
shareholders fund less is the possibility of insolvency. This ratio indicates the long
term solvency extent of trading or equity, protection, available to creditors. It is the
relationship between the shareholders fund and total assets.
Shareholders fund
Proprietary ratio

x 100

Total assets
PROPRIETARY RATIO
YEAR
2007 2008
2008 2009
2009 2010
2010 2011
2011 - 2012

SHAREHOLDERS
FUND
2131.19
2131.19
2131.19
2131.19
2131.19

TOTAL ASSETS

RATIO

12516.57
13127.22
12028.20
11460.53
11460.53

0.17
0.16
0.18
0.19
0.19

PROPRIETARY RATIO

Year

INTERPRETATION

20
12
20
11
-

-2
01
1
20
10

-2
01
0
20
09

-2
00
9
20
08

20
07

-2
00
8

Proprietory ratio

0.2
0.19
0.19
0.18
0.18
0.17
0.17
0.16
0.16
0.15
0.15

Higher the ratio or the share of shareholders in the total capacity of the
company better is the long term solvency of the company. From the analysis the
proprietary ratios in an increasing trend from the year 2008 2009
Debt Service Coverage Ratio
Debt service coverage ratio (DSCR) measures how effectively a companys
operations generated income is able to cover outstanding debt payments. The
DSCR is calculated by dividing a companys total net operating revenue during a
given period by its total required payments on outstanding debt in the same period.
Net Operating Revenue
Debt Service Coverage Ratio =
Total payments on outstanding debt

DSCR values greater than one is preferable and correlates more strongly with
a companys ability to repay its outstanding debts.
Debt Service Coverage Ratios
Period of study

Net Operating

Revenue
2007 2008
1392
2008 2009
1476
2009 2010
1332
2010 2011
1231
2011 2012
1881
Source : Annual Reports of TCC Ltd.

Total payments

Debt Service

outstanding on debt
289
790
660
727
611

Coverage Ratio
4.82
1.87
2.02
1.69
3.08

(Rs. in Lakhs)

A graphical representation of changes in Debt Service Coverage Ratios over

the study period is shown in the Figure below
Debt Service Coverage Ratio Analysis

6
5
4
3
2

Debt Service Coverage Ratio

1
20
12

20
11
-

20
11

20
10
-

20
10

20
09
-

20
09

20
08
-

20
07
-

20
08

Period of study

Debt Service Coverage Ratio Analysis

Interpretation
DSCRs of TCC Ltd are at acceptable level for the study period.

ACTIVITY RATIOS
Activity ratios are employed to evaluate the efficiency with which the firm
manages and utilize its assets. These ratios are also called turnover ratios because
they indicate the speed with which assets are being converted or turned over into
sales. Several activity ratios are calculated to judge the effectiveness of asset
utilization.
INVENTORY TURNOVER RATIO
Inventory turnover indicates the efficiency of the firm in producing and
selling its product. It is calculated by the cost of goods sold by average inventory.
Cost of Goods Sold
Inventory Turnover Ratio =
Average Inventory

Generally, a high inventory turnover is indicative of good inventory

management. A low inventory turnover implies excessive inventory levels than
warranted by production and sales activities, or a slow moving or obsolete
inventory.
INVENTORY TURNOVER RATIO
Period of study

Cost of goods sold

Average inventory

2007 2008
9570
2008 2009
10750
2009 2010
10244
2010 2011
11458
2011 2012
13971
Source : Annual Reports of TCC Ltd.

1018
1504
1632
866
1950

Inventory
turnover Ratio
9.40
7.15
6.28
13.23
7.16

(Rs. in Lakhs)

A graphical representation of changes in Debt Service Coverage Ratios over

the study period is shown in the Figure below
Inventory Turnover Ratio Analysis

14
12
10
8
6
Inventory Turnover Ratio

4
2
20
12

20
11
-

20
11

20
10
-

20
10

20
09
-

20
09

20
08
-

20
07
-

20
08

Period of study

Interpretation
Inventory turnover ratios of TCC ltd shows a highly fluctuating trend over the study
period. There are no standard norms for inventory turnover. A full assessment of
adequacy of inventory level can be done only after studying the inventory level of
similar firms or competitors of TCC Ltd and industry average.
Debtors Turnover Ratio
This ratio attempts to measure the collectability of debtors and other account
receivables. It shows the rate at which the trade debts are collected. Debtors
include the amount of bills receivables and book debts at the end of the accounting
period. If the firm has not been able to collect the debtors within a reasonable
period of time, its funds are unnecessarily locked up in receivables. Financial
analysis employ two ratios to judge the quality or liquidity of debtors: Debtor
turnover and average collection period. Debtors turnover is found out by dividing
credit sales by average debtors.

Credit Sales
Debtors Turnover Ratio =
Average debtors

Table of Debtors Turnover Ratios

Period of study

Credit Sales

Average Debtors

Debtors

1229
974
1130
1894
1806

Turnover Ratio
7.64
12.39
9.52
6.82
8.51

2007 2008
9390
2008 2009
12063
2009 2010
10752
2010 2011
12911
2011 2012
15374
Source: Annual Reports of TCC Ltd.
(Rs. in Lakhs)

A graphical representation of changes in in Debtors Turnover Ratios over the

study period is shown in Figure below
Debtors Turnover Ratio Analysis
14
12
10
8
6
Debtors turnover ratio

4
2
20
12
20
11
-

20
11
20
10
-

20
10
20
09
-

20
09
20
08
-

20
07
-

20
08

Period of study

The average number of days for which debtors remain outstanding is called the
average collection period (ACP) and can be computed as follows
360
Average collection period(ACP) =
Debtors turnover
The Average collection period of TCC Ltd

Table of Average collection period

Period of study

Debtors turnover

2007 2008
2008 2009
2009 2010
2010 2011
2011 2012
Source: Annual Reports of TCC Ltd.

Average
collection period
(days)
47
29
38
53
42

7.64
12.39
9.52
6.82
8.51

(Rs. in Lakhs)
A graphical representation of changes in average collection period over the
study period is shown in Figure below
Average collection period Analysis
60
50
40
30
Average Collection Period

20
10
20
12

20
11
-

20
11

20
10
-

20
10

20
09
-

20
09

20
08
-

20
07
-

20
08

Period of study

Interpretation
Debtors turnover ratios and average collection period of TCC ltd over the
study period look satisfactory. But a full assessment can be done only after knowing
the credit period granted by the firm and aging schedule of debtors.

Net assets Turnover Ratio

The relationship between sales and net assets is called net assets turnover
ratio.
Sales
Net Asset Turnover =
Net assets

Table 10 below shows Net assets turnover of TCC Ltd for the study period .

Net Assets Turnover Ratios

Period of study
2007 2008
2008 2009
2009 2010
2010 2011
2011 2012

Credit Sales
9390
12063
10752
12911
15374

Average Debtors

Debtors Turnover

6554
6761
6563
5560
4657

Ratio
1.43
1.78
1.64
2.32
3.30

Source : Annual Reports of TCC Ltd.

(Rs. in Lakhs)

A graphical representation of changes in Net Assets Turnover Ratios over the

study period is shown in Figure below
Net Assets Turnover Analysis

3.5
3
2.5
2
1.5
Net Assets Turnover ratio

1
0.5
20
12

20
11
-

20
11

20
10
-

20
10

20
09
-

20
09

20
08
-

20
07
-

20
08

Period of study

Interpretation
Net assets turnover analysis of TCC Ltd. over the study period indicates an
increasing trend over the years. Sales revenue is steadily increasing over years. But
book value of fixed assets needs to be verified for full assessment of operating
performance of the company.

FIXED ASSETS TURNOVER RATIO

This ratio indicates the extent to which the investments in fixed assets
contribute towards sales. If compared with a previous year, it indicates whether the
investment in fixed assets has been judicious or not. The ratio is calculated as
follows.

Net Sales
Fixed assets turnover ratio =

x 100
Fixed Assets

FIXED ASSETS TURNOVER RATIO

YEAR

NET SALES

FIXED ASSETS

RATIO

2007 2008
2008 2009
2009 2010
2010 2011
2011 - 2012

11035.73
12539.43
9384.56
12061.25
10747.84

7998.21
9406.43
8558.10
7783.04
7221.63

1.38
1.33
1.10
1.55
1.49

FIXED ASSETS TURNOVER RATIO

20
12

20
11
-

-2
01
1

20
10

-2
01
0

20
09

20
08

20
07

-2
00
8

Fixed asset turnover ratio

-2
00
9

1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

Year

INTERPRETATION
Here all fixed assets to turnover ratio are above one. That means sales are
almost equal to the fixed assets. The highest ratio was 1.55 in the year 2010 2011
and the lowest was 1.10 in 2009 2010. There was an increasing trend for the past
years because of increase in sales and decrease in fixed assets. We can see that
increase or decrease in fixed does not results to increase or decrease in the sales.
Working Capital Turnover Ratio
Working capital Turnover ratio is computed by dividing sales by net working
capital.

Sales
Working Capital Turnover =
Net current assets

Working Capital Turnover of TCC Ltd. for the study period

Working Capital Turnover Ratios
Period of study

Credit Sales

2007 2008
9390
2008 2009
12063
2009 2010
10752
2010 2011
12911
2011 2012
15374
Source : Annual Reports of TCC Ltd.

Average Debtors
-2017
-1065
-891
-1789
-2551

Debtors Turnover
Ratio
-4.66
-11.33
-12.07
-7.22
-6.03

(Rs. in Lakhs)

A graphical representation of changes in Working Capital Turnover Ratios

over the study period is shown in Figure.
Working Capital Turnover Ratio Analysis

20
12

20
11
-

20
11

20
10

20
10
-

-4

20
09
-

20
08
-

20
07
-

-2

20
09

20
08

-6
Working Capital Tunrover ratio
-8
-10
-12
-14
Period of study

Working Capital Turnover Ratio Analysis

Interpretation
All working capital turnover ratios of TCC Ltd. over the study period are
negative, because of the negative working capital. Current liabilities exceed current
assets in the entire study period. Even though it is fluctuating, it shows an
improving trend from F.Y. 2010-11 onwards.

PROFITABILITY RATIO
Definition of 'Profitability Ratios'
A class of financial metrics that are used to assess a business's ability to
generate earnings as compared to its expenses and other relevant costs incurred
during a specific period of time. For most of these ratios, having a higher value
relative to a competitor's ratio or the same ratio from a previous period is indicative
that the company is doing well.
Profitability ratios measure a companys ability to generate earnings relative to
sales, assets and equity. These ratios assess the ability of a company to generate
earnings, profits and cash flows relative to relative to some metric, often the amount

of money invested. They highlight how effectively the profitability of a company is

being managed.
Profitability ratios are calculated to measure the operating efficiency of the
company. Generally, two major types of profitability ratios are calculated.
Profitability in relation to sales.
Profitability in relation to investment

GROSS PROFIT RATIO

This ratio establishes the relationship between gross profit and sales. It is calculated
by using the following formula:
Gross Profit
Gross Profit Ratio

x 100
Net Sales

GROSS PROFIT RATIO

Year

Gross Profit

Net Sales

2007-08

1392

9390

Gross Profit
Ratio
14.82%

2008-09

1476

12063

12.33%

2009-10

1332

10752

12.39%

2010-11
2011-12

1231
1881

12911
15374

9.53%
12.23%

Average GP ratio
Sources: annual report of the company

GROSS PROFIT RATIO

12.26%

6
5
4
3
2
Gross profit ratio
1

-2
01
1
20
10

-2
00
9

-2
01
0
20
09

-2

20
07

20
06

-1

20
08

-2
00
8

-2
00
7

-3
Year

Source: Annual Reports of TCC Ltd.

(Rs. in Lakhs)

INTERPRETATION
As per the above table it is found that the percentages of gross profit ratio are
14.82, 12.33, 12.39, 9.53 and 12.23 respectively. Greater gross profit is shown in the
year 2007-08. The average gross profit ratio is 12.26.

Operating Ratio
Operating ratio establishes relationship between the cost of goods sold, and
the other operating expenses and sales. The other operating expenses include the
cost of goods, administrative expenses, financial expenses and selling expenses.
Operating Cost
Operating Ratio

x 100
Net Sales
Or

Cost of goods sold + operating expenses

x 100
Net Sales
Operating Ratios
Period of study

Operating cost

2007 2008
9676
2008 2009
10864
2009 2010
10438
2010 2011
11553
2011 2012
14152
Source: Annual Reports of TCC Ltd.

Net Sales

Operating Ratio

9393
12063
10752
12911
15374

(%)
103.05
90.06
97.08
89.48
92.05

(Rs. in Lakhs)

A graphical representation of changes in Operating Ratios over the study period is

shown in Figure below
Gross Profit Ratio

105
100
95
Operating Ratio

90
85

20
12
20
11
-

20
11
20
10
-

20
10
20
09
-

20
09
20
08
-

20
07
-

20
08

80

Period of study

Interpretation
The operating ratios over the study period indicates that more than 90% of
the sales have been consumed by the operating cost and only less than 10% is left to
cover the interest charge, income tax payment, dividend and retention of profit as
reserves. In F.Y. 2007 08 operating cost crosses the total sales revenue which is a
severe condition.
Expenses Ratio
Expenses ratio is also known as supporting ratio to operating ratio. It
analyses each aspect of cost of sales and / or operating expenses in details just to
find out how offer the concern is able to save or making over expenditure in respect
of different items of expenses. For this, relationship of each item of expenses to
sales is established. There are many expenses ratio, some of which are

Cost of goods sold

Cost of Goods Sold Ratio =

x 100
Net Sales

Table of Cost of Goods Sold Ratios

Period of study

Cost of Goods sold

Net Sales

Cost of Goods

9390
12063
10752
12911
15374

Sold Ratio (%)

101.92
89.12
95.28
88.75
90.87

2007 2008
9570
2008 2009
10750
2009 2010
10244
2010 2011
11458
2011 2012
13971
Source : Annual Reports of TCC Ltd.
(Rs. in Lakhs)

A graphical representation of changes in Cost of Goods sold Ratios over the study
period is shown in Figure below
Cost of Goods Sold Ratio Analysis
105
100
95
90

Cost of Goods sold ratio (%)

85

20
12

20
11
-

20
11

20
10
-

20
10

20
09
-

20
09

20
08
-

20
07
-

20
08

80

Period of study

Other Operating Expenses

Other Operating Expense Ratio =

x 100
Net Sales

Selling and Administrative Expenses Ratios of TCC Ltd

Table of Cost of Goods Sold Ratios

Period of study

Other Operating

Net Sales

Other Operating

9390
12063
10752
12911
15374

Expenses Ratio (%)

1.13
0.95
1.80
0.74
1.18

Expenses
2007 2008
106
2008 2009
114
2009 2010
194
2010 2011
95
2011 2012
181
Source : Annual Reports of TCC Ltd.
(Rs. in Lakhs)

A graphical representation of changes in Other Operating Expenses Ratios

over the study period is shown in figure below
Table of Cost of Goods Sold Ratios

20
07
-

20
08
20
08
-2
00
20
9
09
-2
01
20
0
10
-2
01
20
1
11
-2
01
2

Other Operating Expense Ratio (%)

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

Period of Study

Interpretation
The changes of cost of goods sold ratios over the study period is same like
operating ratios but other operating expenses ratios shows a highly fluctuating
trends over the period. But it is less than 2% of the total sales revenue.
Net Profit Ratio

Net Profit is obtained when operating expenses, interest and taxes are
subtracted from the gross profit. Net profit ratio is calculated as
Net Profit
Net Profit Ratio =

x 100
Net Sales

Cost of Goods Sold Ratios

Period of study

Cost of Goods sold

2007 2008
28
2008 2009
-281
2009 2010
-249
2010 2011
-471
2011 2012
239
Source : Annual Reports of TCC Ltd.

Net Sales

Cost of Goods Sold

9390
12063
10752
12911
15374

Ratio (%)
0.30
-2.33
-2.32
-3.65
1.55

(Rs. in Lakhs)

A graphical representation of changes in Net Profit Ratios over the study

period is shown in Figure below.
Net Profit Ratio Analysis

2
1

20
12
20
11
-

20
11
20
10
-

20
10
20
09
-

20
09
20
08
-

-1

20
07
-

Net Profit Ratio (%)

20
08

-2
-3
-4
Period of study

Interpretation
Higher the ratio of net profit to sales better is the operational efficiency of the
concern. This ratio is used to measure the overall profitability and hence, it is very
useful to proprietors. Net Profit ratios of TCC Ltd. over the study period shows
fluctuating trend and most of F.Y. it have negative net profit.
Return on Investment (ROI)
The conventional approach of calculating return on investment (ROI) is to
divide PAT (Profit after taxes) by investment. Investment represents pool of funds
supplied by shareholders and lenders. But EBITDA (Earnings before interest, taxes,
depreciation and Amortization) represents a more general indicator of firms
financial performance by computing earnings from core business operations,
without including the effects of capital structure, tax rates and depreciation policies,
ROI of TCC Ltd is calculated based on EBITDA

EBITDA
Return on Investment =
Total Assets
Where, Total Assets = Net fixed assets + Current Assets

Return on Investment
Period of study
EBITDA
2007 2008
1392
2008 2009
1476
2009 2010
1332
2010 2011
1231
2011 2012
1881
Source: Annual Reports of TCC Ltd.

Total Assets
12028
11462
11461
11239
12516

ROI (%)
11.57
12.88
11.62
10.95
15.03

(Rs. in Lakhs)
A graphical representation of changes in Return on Investment over the study
period is shown in Figure below.
Return on Investment
16
14
12
10
8
6

Return on Investment (%)

4
2
20
12

20
11
-

20
11

20
10
-

20
10

20
09
-

20
09

20
08
-

20
07
-

20
08

Period of study

Interpretation
This ratio is one of the most important ratios for checking the overall
efficiency of the firm. Analysis of ROI of TCC Ltd for the study period reveals that
it can maintain only an average of 12% return to the investment made over the years
and level of return was at its maximum in F.Y. 2011-12.
Return on Equity Capital (REC)

Shareholders are the owners of the company. In a company there are two types of
shareholders. Preference shareholders have a preference over ordinary shareholders
in the payment of dividend and capital. They get a fixed rate divided irrespective of
the amount of profit of the company. But the rate of dividend varies with the
availability of profit in the case of ordinary shares, and so, they are more interested
in the profitability of the company.
Net Profit after tax Preference Dividend
Return on Equity Capital =
Equity Share Capital (Paid-up)

Return on Equity Capital

Period of study
EBITDA
2007 2008
28
2008 2009
-281
2009 2010
-249
2010 2011
-471
2011 2012
239
Source : Annual Reports of TCC Ltd.

Total Assets
2131
2131
2131
2131
2131

ROI (%)
1.31
-13.19
-11.68
-22.10
11.22

(Rs. in Lakhs)

A graphical representation of changes in Return on Investment over the study

period is shown in Figure below.

15
10
5
20
12

20
11
-

20
11

20
10
-

20
10

20
09

20
09
-

-10

20
08
-

-5

20
07
-

Return on Equity Capital (%)

20
08

-15
-20
-25
Period of study

Return on Equity Capital Analysis

Interpretation
This ratio is meaningful to the equity shareholders, and the interpretation is
the higher the ratio, the better the result. Due negative net profit over most of the
years in the study period, TCCs REC is not attractive to shareholders.
Earnings per Share (EPS)
Earnings per share is calculated by dividing the net profit after taxes and
preferences divided by total number of equity shareholder.
Net Profit after tax Preference Dividend
Earning per share

=
No. of Equity Share

Earnings per Share

Period of study

Net Profit

No. of Equity

EPS

shares
21311900
21311900
21311900
21311900
21311900

0.13
-1.32
-1.17
-2.21
1.12

2007 2008
2767000
2008 2009
-28055000
2009 2010
-24917000
2010 2011
-47143000
2011 2012
23862614.28
Source : Annual Reports of TCC Ltd.
(Rs. in Lakhs)

Earnings per Share Analysis

1.5
1
0.5
20
12

20
11
-

20
11

20
10
-

20
10

20
09

20
09
-

-1

20
08
-

-0.5
20
07
-

Earning per Share (Rs.)

20
08

-1.5
-2
-2.5
Period of study

Interpretation
Due negative net profit over most of the years in the study period, TCCs
EPS is not attractive to shareholders. But some clear earnings are shown in F.Y.
2007 08 and 2011 12.

Summary of Ratio Analysis

Summary of Ratio Analysis for the Study Period
Item
Liquidity Ratios
Current Ratio

20072008

20082009

2009-2010

2010-2011

2011-2012

0.63

0.77

0.82

0.68

0.68

Liquid/Quick/Acid0.45
Test Ratio
Leverage Ratios
Debt Ratio
0.80
Debt Equity Ratio
2.44
Proprietary Ratio
18.32
Debt Service
4.82
Coverage Ratio
Activity Ratios
Inventory Turnover
9.40
Ratio
Debtors Turnover
7.64
Ratio
Average Collection
47
Period (Days)
Net Assets Turnover
1.43
Ratio
Fixed Assets
1.10
Turnover Ratio
Working Capital
-4.66
Turnover Ratio
Profitability Ratios
Gross Profit Ratio
-1.92
(%)
Operating Ratio (%)
103.05
Cost of Goods Sold
101.92
Ratio (%)
Other Operating
1.13
Expenses Ratio (%)
Net Profit Ratio (%)
0.30
Return on Investment
11.57
(ROI - %)
Return on Equity
1.31
Capital (REC - %)
Earning per Share
0.13
(EPS in Rs)
Source: Annual Report of oTCC Ltd.

0.45

0.48

0.53

0.40

0.80
2.51
13.61
1.87

0.89
2.64
10.36
2.02

0.93
2.35
4.70
1.69

0.89
1.77
9.40
3.08

7.15

6.28

13.23

7016

12.39

9.52

6.82

8.51

29

38

53

42

1.78

1.64

2.32

3.30

1.54

1.44

1.75

2.13

-11.33

-12.07

-7.22

-6.03

10.88

4.72

11.25

9.13

90.06
89.12

97.08
95.28

89.48
88.75

92.05
90.87

0.95

1.80

0.74

1.18

-2.33
12.88

-2.32
11.62

-3.65
10.95

1.55
15.03

-13.19

-11.68

-22.10

11.22

-1.32

-1.17

-2.21

1.12

(Rs. in Lakhs)

COMPARATIVE BALANCE SHEET

The comparative balance sheet analysis is the study of the trend of the same
items, group of items and computed items in two or more balance sheets of the same
business enterprise on different dates. The changes in periodic balance sheet items
reflect the conduct of a business. The changes can be observed by comparison of
the balance sheet at the beginning and the end of the period and these changes can
help in forming an option about the progress of an enterprise.
A comparative balance sheet has two columns to records the figures of the
current year and the previous year. A third column is used to show the decrease or
increase in figures. A fourth column may be added to giving percentage of increase
or decrease. In the balance sheet the emphasis is on status in the comparative
balance sheet it is on change.

Comparative balance sheet shows the assets,

liabilities and owners equity of business enterprises at the beginning and at the end
of the accounting period with increase and decrease in the absolute data in terms of
rupees and percentage. The single balance sheet focus on the financial status of the
firm as on a particular date, while the comparative balance sheet focuses on the
changes that have taken place in one accounting period. The changes in the balance
sheet items are the result of acquisition or sale of asset change in current asset and
current liabilities, issue of shares profit or loss etc.

COMPARATIVE BALANCE SHEET AS

31st MARCH 2007 2008

Particulars

2007

2008

Increase/
Decrease

Fixed Assets (Net)

Capital work in progress
Investments
Profit & Loss Account
Current Assets and Loans

6399
1915.16
0.30
1384.53
2588.75

7998.21
942.00
0.30
861.51
3376.06

1599.02
-973.16
-523.02
987.31

% of
Increase /
Decrease
24.99%
50.81%
37.76%
38.14%

& Advances
Total Assets
Share capital
Reserve & Surplus
Share holders fund
Loans: secured
Unsecured
Deferred Tax Liability
Current liabilities &

1228.93
2131.19
2131.29
5092.81
5063.93

13378.08
2131.19
2131.19
5387.47
5859.42

1090.15
294.66
795.49

8087%
5.79%
15.7%

Provisions
Total liabilities

12287.3

13378.08

1090.15

8.87%

INTERPRETATION
The current asset of the company has increased to Rs. 987.37 in the year
2007 at the rate of 38.14%, the current liability has also increased to Rs.

795.49 at a rate of 15.17% compared to the year 2006. The liquidity position
of the company was found satisfactory.
The fixed assets acquired by the company is Rs. 1599 lakhs at rate of 24.99%
only 5.79% of fixed assets are acquired through secured loans are the
remaining 19.2% is utilized from the working capital of the company.
The reserves account of the company is not satisfactory as the company has
not earned any profit in the year 2008.

COMPARATIVE BALANCE SHEET AS

31st MARCH 2008 2009
Particulars

2008

2009

Increase/

% of

Decrease

Increase /

7998.21
942.00
0.30
861.51
3576.06

9406.43
1.16
2.30
813
3717.35

1408.22
-940.84
2
-48.51
141.27

Decrease
17.61
99.88%
666.66%
5.63%
3.95%

& Advances
Total Assets
Share capital
Reserve & Surplus
Share holders fund
Loans: secured
Unsecured
Deferred Tax Liability
Current liabilities &

13378.08
2131.19
2131.19
5387.47
5859.42

13940.22
2131.19
2131.19
6225.70
5583.33

562.14
838.23
-276.09

4.20%
15.56%
4.71%

Provisions
Total liabilities

13378.09

13940.22

562.14

4.20%

Fixed Assets (Net)

Capital work in progress
Investments
Profit & Loss Account
Current Assets and Loans

INTERPRETATION
The current asset of the company has increased to Rs. 141.27 lakhs. Current
liabilities has decreased to Rs. 276.09 Lakhs compared to the year 2007. The
liquidity position of the company is satisfactory.

 The fixed assets acquired by the company is Rs. 1408.22 Lakhs and the
secured loans are increased by Rs. 838.23 lakhs the remaining is utilized
from the working capital
The financial position of the company is not satisfactory.

COMPARATIVE BALANCE SHEET AS

31st MARCH 2009 2010

(Rupees in Lakhs)

Particulars

9406.43
1.16
2.30
813
3717.35

8558.10
10.57
2.30
785.33
3457.23

-848.33
9.41
-27.67
-260.10

% of
Increase /
Decrease
9.02%
811.20%
3.40%
6.10%

& Advances
Total Assets
Share capital
Reserve & Surplus
Share holders fund
Loans: secured
Unsecured
Deferred Tax Liability
Current liabilities &

13940.22
2131.19
2131.19
6225.70
5583.33

12813.53
2131.19
2131.19
4836.46
372.05
5473.83

-1126.69
-1389.24
372.05
-109.50

8.08%
22.31%
1.96%

Provisions
Total liabilities

13940.22

12813.53

-1126.69

-8.08%

Fixed Assets (Net)

Capital work in progress
Investments
Profit & Loss Account
Current Assets and Loans

2009

2010

Increase/
Decrease

INTERPRETATION
The current asset of the company has increased to Rs. 260 lakhs. The current
liability is decreased to Rs. 109.5 Lakhs compared to the past year. The
liquidity position of the company is not satisfactory.
The amount of fixed assets acquired by the company is Rs. 8558 Lakhs and
the secured loans are also decreased by Rs.1389.24 lakhs. It reveals that the
fixed asset are sold and loans are paid.
The reserves account of the company is not satisfactory.

COMPARATIVE BALANCE SHEET AS

31st MARCH 2010 2011
(Rupees in Lakhs)
Particulars
2010
2011
Increase/
Decrease
Fixed Assets (Net)
Capital work in progress
Investments
Profit & Loss Account
Current Assets and Loans &
Advances
Total Assets
Share capital
Reserve & Surplus

8558.10
10.57
2.30
785.33
3457.23

7783.04
41.32
2.30
1065.88
3636.45

-775.06
30.75
280.55
179.22

% of
Increase /
Decrease
90.06%
290.92%
35.72%
5.18%

12813.53
2131.19
-

12528.99
2131.19
-

-284.54
-

2.22%
-

Share holders fund

Loans: secured
Unsecured
Deferred Tax Liability
Current liabilities &
Provisions
Total liabilities

2131.19
4836.46
372.05
5473.83

2131.19
5267.23
429.44
4701.13

420.77
57.39
-772.7

8.91%
15.43%
14.12%

12813.53

12528.99

-284.54

2.22%

INTERPRETATION
The current asset of the company has increased to Rs. 179.00 lakhs and
current liabilities has decreased to Rs. 772.7 Lakhs. The liquidity position of
the company is satisfactory.
The fixed assets of the company is decreased by Rs. 77.06 lakhs and long
term loans are increased by s. 430.77 lakhs. This shows that company use
loan to maintain working capital.
There is no reserve and surplus. The company have no profitability.
COMPARATIVE BALANCE SHEET AS
31st MARCH 2011 2012
(Rupees in Lakhs)
Particulars

Fixed Assets (Net)

Capital work in progress
Investments
Profit & Loss Account
Current Assets and Loans
& Advances
Total Assets
Share capital
Reserve & Surplus
Share holders fund
Loans: secured

2011

2012

Increase/
Decrease

7783.04
41.32
2.30
1065.88
3636.45

7221.63
229.93
2.30
1315.05
4006.67

-561.41
188.61
249.17
370.22

% of
Increase /
Decrease
7.21%
456.46%
23.38%
10.18%

12528.99
2131.19
2131.19
5267.23

12775.58
2131.19
2131.19
5248.91

246.59
-18.32

1.99%
0.35%

Unsecured
Deferred Tax Liability
Current liabilities &
Provisions
Total liabilities

429.44
4701.13

497.45
4898.03

68.01
196.9

15.845
4.19%

12528.99

12775.58

246.59

1.99%

INTERPRETATION
The current asset of the company has increased to Rs. 370.00 lakhs in the
year 2011. The current liabilities are also increased to Rs. 196.9 Lakhs. It
reveals that the working capital position of the company is satisfactory.
There is no money kept as reserve and surplus.
The fixed assets acquired by the company decreased to Rs. 561.41. The long
term loans are increased to Rs. 49.69. It reveals that the loan amount is
spend for maintain working capital.

TREND ANALYSIS
Comparing the past data over a period of time with a base year is called trend
analysis. Under this technique, information for a number of years taken up and one
year (usually the first year) is taken as taken as the base year. Each item of the base
year is taken as 100 and on that basis the percentage for the other years are
calculated. The object of calculating trend percentages is to show the direction of
the change upward or downward.

TREND ANALYSIS OF SALES

(Rs. in lakhs)
YEAR

SALES (Rs. in
lakhs)

TREND

2008
2009
2010
2011
2012

10877.30
12320.67
10850.53
13537.10
11617.63

100
113.27
99.75
124.45
106.81

TREND ANALYSIS OF SALES

INCREASE
OR
DECREASE
0
13.27
-0.25
24.45
6.81

140%
120%
100%
80%
60%
Trend percentage

40%
20%
20
12
20
11
-

20
11
20
10
-

20
10
20
09
-

20
09
20
08
-

20
07
-

20
08

0%

Year

INTERPRETATION
The above table shows the trend of sales in the study period, it also shows a
fluctuating trend. In 2008 2009 shows a increase trend, later it declined. Now
company shows are increasing trend. TCC has high amount of sales in 2010 2011

TREND ANALYSIS PROFIT

(Rs. in lakhs)
YEAR

PROFIT
(Rs. in lakhs)

TREND

2008
2009
2010
2011
2012

523.01
48.52
27.67
-280.55
-249.17

100
9.28
5.29
-53.64
-47.64

TREND ANALYSIS OF PROFIT

INCREASE
OR
DECREASE
0
-90.72
-94.71
-153.64
-147.64

120
100
80
60
40
Trend percentage

20
20
12

20
10

20
09

20
11

20
11
-

-60

20
10
-

-40

20
09
-

20
07
-

-20

20
08
-

20
08

-80
Year

INTERPRETATION
Trend of profit of TCC Company shows fluctuating trend. Compared to
2007 2008 company was not in better position now; last 2 years it shows loss and
decreasing trend.

Summary of TREND ANALYSIS

Item
Sales
Gross Margin
Net Profit
Net worth
Total

Trend Analysis on Balance Sheet and P & L Account Items

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
100
128.5
114.5
137.5
163.7
100
106.0
95.7
88.4
135.1
100
-1003.6
-889.3
-16872.10
853.6
100
79.2
60.7
25.7
43.3
100
112.3
107.9
119.4
146.3

expenditure
Capital

100

102.7

96.8

82.4

64.7

Employed
Current Assets
Current

100
100

105.2
85.9

115.9
89.5

112.5
103.7

153.5
143.6

Liabilities

Accumulated

100

135.6

167.3

227.2

196.9

Loss

Source : Annual Reports of TCC Ltd.

(Rs. in lakhs)

CORRELATION CO-EFFICIENT ANALYSIS

A measure of the strength of linear association between two variables.
Correlation will always between -1.0 and +1.0. If the correlation is positive, we
have a positive relationship. If it is negative, the relationship is negative.
Use the correlation transformer to determine the extent to which changes in
the value of an attribute (such as sales) are associated with changes in another
attribute (such as debtors). The data for a correlation analysis consists of two input
columns. Each column contains values for one of the attributes of interest. The
correlation transformer can calculate various measures of association between the
two input columns. You can select more than one statistic to calculate for a given
pair of input columns.
The data in the input columns also can be treated as a sample obtained from a
larger population, and the correlation transformer can be used to test whether the
attributes are correlated in the population. In this context, the null hypothesis

asserts that the two attributes are not correlated, and the alternative hypothesis assets
that the attributes are correlated.
FORMULA
n (xy) (x) (y)
r

=
[n x2 (x2)] [ny2 - y) 2]

N = Number of values
X = First score
Y = Second score

CORRELATION COEFFICIENT BETWEEN SALES AND PROFIT

(Rs. in lakhs)
YEAR
2007 2008
2008 2009
2009 2010
2010 2011
2011 2012

TOTAL

X
10877.30
12320.67
10850.53
13537.10
11617.63
59203.23

Y
-249.17
-280.55
27.67
48.52
523.01
69.48

X2
11831565.30
151798909.20
117734001.30
183253076.4
13496326.80
706070969

Y2
62085.69
48708.30
765.62
2354.19
2732539.46
417453.26

Where X = Sales, Y = Profit, N = Number of values

5 (866330.13) (59203.23) (69.48)
R=
[5 x 706070969) (59203.23)2] [5 x 417453.26)-(69.48)2

XY
-2710296.84
-3456563.90
300234.17
656820.09
6076126.67
866330.13

r = 0.03
INTERPRETATION
From the above it is found that the correlation co-efficient between sales and
profit is 0.03. It can therefore be inferred that there is a positive correlation between
sales and profit.

CORRELATION COEFFICIENT BETWEEN SALES AND WORKING

CAPITAL
(Rs. in lakhs)
YEAR

X
10877.30
12320.67
10850.53
13537.10
11617.63
59203.23

2007 2008
2008 2009
2009 2010
2010 2011
2011 2012

TOTAL

Y
-223.36
-1866
-2016.60
-1064.68
-891.36
-8121.40

X2
118315655.3
15198909.2
117734001.3
183253076.4
1349369326.4
706070969

Y2
5213732.89
3481956
4066675.56
133543.50
794522.65
1469043.06

Where X = Sales, Y = Profit, N = Number of values

(-944776511.06) (59203.23) (-8121.4)
R=
[5 x 706070969) (59203.23)2] [14690430.6)-(8121.4)2]
r = 0.61

XY
-24836791.73
-22990370.22
-2188178.80
-14412679.63
-1035490.68
94476511.06

INTERPRETATION
From the above it is found that the correlation co-efficient between sales and
working capital is -0.61. It can therefore be interfered that there is a negative
correlation between sales and working capital.

FINDINGS
FINDINGS

Major Findings
Under this project, the researcher can be found that the liquidity position and
profitability position of the TCC Ltd is not sufficient, because current liabilities of
this company more than current assets, Reason for that improper management of
current assets.
Other Findings
It is clear from the above table that TCC is able to turn over its net working
capital 3.31 times in 2007-08 and the next two year it is increased to 5.57 and
9.46 times. But in the next year it is decreased to 9.28 times. But in the last
year it is further increased. This shows the efficiency of the company in
generating more quantity of sales by utilizing lesser amount of working
capital.
The idle current ratio is 2:1. TCCs current ratio varies between 0.43 and
0.95 during the period. The company cannot get the standard ratio in each
accounting period. So it is found that the current ratio is not satisfy, because
the current liabilities more than current assets.
Liquid assets of the company showing a fluctuating trend, even though the
ratio of liquid assets to current liabilities of the company is not maintaining
the standard norm of 1:1 so this data gives the liquid ratio of the company is
not sufficient.
The study reveals that the average of absolute liquid ratio of TCC Ltd is
0.35:1 during the period of analysis. We can see that every year cash position
of the company is very weak excluding last year when we compare it with
current liabilities. Moreover the trend of last year TCCs cash position was
good to continuing trend of which shall positively affects its future
operations.

 The percentages of cash to current asset are 4.88, 3.97, 2.09, 2.32 and 7.70
respectively. Greater cash to current assets is shown in the year 2011-12. The
average of cash to current asset ratio is 4.19%.
Inventory is the largest component of the companys current assets. About
47.97% of its current assets constitute inventory. As far as a manufacturing
concern is concerned such level of investment in inventory is justifiable.
However conspicuous investment funds in inventory shall cause many
problems to working of an organization.
This study reveals the inventory turnover ratio indicates less inefficient .The
reason for that the improper management of inventory and stock.
The analysis of debtor turnover ratio supplements the information regarding
liquidity position. Five years of analysis reveals that the company is able to
collect its dues rapidly from its customers. It is indicative of credit
management. The average debtors turnover ratio during the period of five
years is 9.02.

CONCLUSION
CONCLUSION
The Travancore Cochin Chemicals Ltd is a state public sector undertaking
owned by government of Kerala. The last three decades have seen TCC emerging as
a leader in chemical industrial sector in the country.
This study concentrates on the impact of Profitability and liquidity position
of TCC Ltd; mainly based on the published annual reports of the company from the
period of 2007 to 2012. The analysis and findings about this topic will be indicators
of the weak points are more concentration should be made an inspiration to the
company for strengthening its position.
To conclude the report, TRAVANCORE COCHIN CHEMICALS LIMITED is
having a well vision over the future. With a strong commitment to customers and
product quality and being cost competition, TCC stands poised to meet new
challengers. It strives achieves its mission.

SUGGESTIONS
SUGGESTIONS

 The current ratio of the company is not sufficient for the past five years. It
leads to in efficiency of the liquidity position of the company. The excess of
current liabilities are the important reason for it. So the company tries to
reduce the current liabilities.
Cash position of the company is very weak in almost of the year, excluding
last year. Its cash balances are too small to meet its operating expenses in
time. So company should keep sufficient amount of cash with it to avoid the
short term insolvency.
In order to overcome the problems of under trading the company should
improve its sales promotion by designing attractive sales and credit policies.
At present the company is following a very stringent credit policy the
liberalization of which definitely helps the company to procure more volume
of sales.

BIBLIOGRAPHY
BIBLIOGRAPHY
Sl.

Author

Book Title

Publisher

Edition

No
.
1.

I.M. PANDEY

FINANCIAL

VIKAS PUBLISHING

5th EDITION

2.

PEERMOOHAMED S.

MANAGEMENT
RESEARCH

PASS PUBLICATIONS

2005th

AND

METHODOLOGY

EDITION

3.

SHAZULI IBRAHIM S.A.N.

PRASANNA CHANDRA

FINANCIAL

TATA MC GRAW HILL

4th EDITION

4.

C.K. KOTHARI

MANAGEMENT
RESEARCH

PUBLISHING
NEW AGE

2nd EDITION

5.

RICHARD I. LEVIN,

METHODOLOGY
STATISTICS FOR

INTERNATIONAL
PRENTICE HALL OF

7th EDITION

DAVID S. RUBIN

MANAGEMENT

INDIAN PVT. LTD.