PROJECT REPORT ON FINANCIAL ANALYSIS WITH

RESPECT TO VARIOUS RATIOS

INTRODUCTION

Published financial statements are the only source of information about the activities and
affairs of a business entity available to the public, shareholders, investors and creditors, and the
governments. These various groups are interested in the progress, position and prospects of such
entity in various ways. But these statements howsoever, correctly and objectively prepared, by
themselves do not reveal the significance, meaning and relationship of the information contained
therein. For this purpose, financial statements have to be carefully studied, dispassionately
analyzed and intelligently interpreted. This enables a forecasting of the prospects for future
earnings, ability to pay interest, debt maturities both current as well as long-term, and probability
of sound financial and dividend policies. According to Myers, “financial statement analysis is
largely a study of relationship among the various financial factors in business as disclosed by a
single set of statements and a study of the trend of these factors as shown in a series of statements”
Thus, analysis of financial statements refers to the treatment of information contained in the
financial statement in a way so as to afford a full diagnosis of the profitability and financial position
of the firm concerned. The process of analyzing financial statements involves the rearranging,
comparing and measuring the significance of financial and operating data. Such a step helps to
reveal the relative significance and effect of items of the data in relation to the time period and/or
between two organizations. Interpretation, which follows analysis of financial statements, is an
attempt to reach to logical conclusion regarding the position and progress of the business on the
basis of analysis. Thus, analysis and interpretation of financial statements are regarded as
complimentary to each other.
TYPES OF FINANCIAL ANALYSIS

A distinction may be drawn between various types of financial analysis either on the basis
of material used for the same or according to the modus operandi or according to the objective of
the analysis.

ACCORDING TO NATURE OF THE ANALYST

1. External Analysis It is made by those who do not have access to the detailed records of
the company. This group, which has to depend almost entirely on published financial statements,
includes investors, credit agencies and governmental agencies regulating a business in nominal
way. The position of the external analyst has been improved in recent times owing to the
governmental regulations requiring business undertaking to make available detailed information
to the public through audited accounts.

2. Internal Analysis The internal analysis is accomplished by those who have access to the
books of accounts and all other information related to business. While conducting this analysis,
the analyst is a part of the enterprise he is analysing. Analysis for managerial purposes is an internal
type of analysis and is conducted by executives and employees of the enterprise as well as
governmental and court agencies which may have regulatory and other jurisdiction over the
business.

ACCORDING TO MODUS OPERANDI OF ANALYSIS

1. Horizontal Analysis: When financial statements for a number of years are reviewed and
analyzed, the analysis is called ‘horizontal analysis’. As it is based on data from year to year rather
than on one date or period of time as a whole, this is also known as ‘dynamic analysis. This is very
useful for long term trend analysis and planning.

2. Vertical Analysis:

It is frequently used for referring to ratios developed for one date or for one accounting period.
Vertical analysis is also called ‘Static Analysis’. This is not very conducive to proper analysis of
the firm’s financial position and its interpretation as it does not enable to study data in perspective.
This can only be provided by a study conducted over a number of years so that comparisons can
be effected. Therefore, vertical analysis is not very useful.

METHODS OF FINANCIAL ANALYSIS

The analysis of financial statements consists of a study of relationship and trends, to

determine whether or not the financial position and results of operations as well as the financial
progress of the company are satisfactory or unsatisfactory. The analytical methods or devices,
listed below, are used to ascertain or measure the relationships among the financial statements
items of a single set of statements and the changes that have taken place in these items as reflected
in successive financial statements. The fundamental objective of any analytical method is to
simplify or reduce the data under review to more understandable terms.

Analytical methods and devices used in analyzing financial statements are as follows:

1. Comparative Statements

2. Common Size Statements

3. Trend Ratios

4. Ratio Analysis

5. Cash Flow Statements

6. Fund Flow Statement.

RATIO ANALYSIS

Ratio analysis is used to evaluate relationships among financial statement items. The ratios
are used to identify trends over time for one organization or to compare two or more organizations
at one point in time. Ratio analysis focuses on three key aspects of a business: liquidity,
profitability, and solvency. Ratio Analysis is an important tool for any business organization. The
computation of ratios facilitates the comparison of firms which differ in size. Ratios can be used
to compare a firm's financial performance with industry averages. In addition, ratios can be used
in a form of trend analysis to identify areas where performance has improved or deteriorated over
time. Ratio is the symptoms like the blood pressure, the pulse or the temperature of an individual.
Just as in the case of an individual, a doctor or a valid by reading the pulse of a patient or by
studying the blood pressure or the temperature of a patient can diagnose the cause of his ailment,
so also a financial analyst through ration analysis of the employment of resources and its overall
financial position. Just as in medical science the symptoms are passive factors, to diagnose them
properly depends upon the efficiency and the expertise of the doctor, so also to derive right
conclusions from ratio analysis will depend upon the efficiency and depth of understanding of the
financial analyst.

GROSS PROFIT RATIO

Gross profit ratio expresses the relationship of gross profit to net sales or turnover. Gross
profit is the excess of the proceeds of goods sold and services rendered during a period over their
cost, before taking into account administration, selling and distribution and financing charges.
Gross profit ratio is expressed as follows:

Ratio analysis

Ratio analysis is the comparison of line items in the financial statements of a business.
Ratio analysis is used to evaluate a number of issues with an entity, such as its liquidity,
efficiency of operations, and profitability. This type of analysis is particularly useful to
analysts outside of a business, since their primary source of information about an organization
is its financial statements. Ratio analysis is less useful to corporate insiders, who have better
access to more detailed operational information about the organization.

There are several hundred possible ratios that can be used for analysis purposes, but only a
small core group is typically used to gain an understanding of an entity. These ratios include:

Current ratio.

Compares current assets to current liabilities, to see if a business has enough cash to
pay its immediate liabilities.

Days sales outstanding.

Determines the ability of a business to effectively issue credit to customers and be paid
back on a timely basis.

Debt to equity ratio.

Compares the proportion of debt to equity, to see if a business has taken on too much
debt.

Dividend payout ratio.

This is the percentage of earnings paid to investors in the form of dividends. If the percentage
is low, it is an indicator that there is room for dividend payments to increase substantially.

Gross profit ratio.

Calculates the proportion of earnings generated by the sale of goods or services, before
administrative expenses are included. A decline in this percentage could signal pricing
pressure on a company's core operations.

Inventory turnover.

Calculates the time it takes to sell off inventory. A low turnover figure indicates that
a business has an excessive investment in inventory, and therefore is at risk of having obsolete
inventory.
Net profit ratio.

Calculates the proportion of net profit to sales; a low proportion can indicate a bloated
cost structure or pricing pressure.

Price earnings ratio.

Compares the price paid for a company's shares to the earnings reported by the business. An
excessively high ratio signals that there is no basis for a high stock price, which could presage
a stock price decline.

Return on assets.

Calculates the ability of management to efficiently use assets to generate profits. A

low return indicates a bloated investment in assets.
RESEARCH TOOLS

STRATEGICAL TOOLS

The collected data were analysis with help of ratio analysis, comparative and column
charts.

COLLECTION OF DATA

Balance Sheet,
Profit and loss Accounts

OBJECTIVES OF FINANCIAL ANALYSIS

Financial statement analysis is very much helpful in assessing the financial position and
profitability of a concern. The main objectives of analyzing the financial statements are as follows:

1. The analysis would enable the present and the future earning capacity and the
profitability of the concern.

2. The operational efficiency of the concern as a whole as well as department wise can be
assessed. Hence the management can easily locate the areas of efficiency and inefficiency.

3. The solvency of the firm, both short-term and long-term, can be determined with the
help of financial statement analysis which is beneficial to trade creditors and debenture
holders.

4. The comparative study in regard to one firm with another firm or one department with
another department is possible by the analysis of financial statements.

5. Analysis of past results in respects of earning and financial position of the enterprise is
of great help in forecasting the future results. Hence it helps in preparing budgets.

6. It facilitates the assessments of financial stability of the concern.

 7. The long-term liquidity position of funds can be assessed by the analysis of financial
statements.

LIMITATIONS OF FINANCIAL ANALYSIS

1. Owing to the fact that financial statements are compiled on the basis of historical costs,
while there is a market decline in the value of the monetary unit and resultant rise in prices,
the figures in the financial statement loses its functions as an index on current economic
realities. Again the financial statements contain both items. So an analysis of financial
statements cannot be taken as an indicator for future forecasting and planning.

2. Analysis of financial statements is a tool which can be used profitably by an expert

analyst but may lead to faulty conclusions if used by unskilled analyst. So the result cannot
be taken as judgments or conclusions.
 DATA ANALYSIS AND INTERPRETATION

TABLE - 1

CURRENT RATIO

Formula:

Current ratio = Current assets / Current liabilities

YEAR Current Current Current

Assets Liabilities Ratio
2017-2013 48,31,10 18,46,31 2.62
2013-2014 46,70,80 15,93,66 2.93
2014-2015 51,08,39 21,62,32 2.36
2015-2016 53,98,08 21,28,19 2.53
2016-2017 58,48,21 21,36,02 2.72

Source: Secondary Data

The above table shows that current ratio for all years are average of 2.5 %.
 CHART - 1
CURRENT RATIO

Current Ratio

2.93
2.72 2.53 2.62
2.36

2017-2016 2015-2016 2014-2015 2013-2014 2012-2013

 TABLE - 2

LIQUID RATIO

Formula:

Liquid ratio = Quick assets /Quick liabilities

YEAR Quick Quick Liquid

Assets Liabilities Ratio
2012-2013 19,56,14 1,78,23 1.97
2013-2014 21,80,67 1,59,36 1.36
2014-2015 23,01,01 21,62,32 1.06
2015-2016 24,01,30 21,28,19 1.12
2016-2017 29,11,31 21,36,02 1.36

Source: Secondary Data

The above table shows that the liquid ratio for all years is nearly 1.5 % averagely.
 CHART – 2

LIQUID RATIO

Liquid Ratio

1.97

1.36 1.36
1.12 1.06

2016-2017 2015-2016 2014-2015 2013-2014 2012-2013

 TABLE – 3
PROPRIETORY RATIO

Formula:

Proprietary ratio =Shareholders fund / (Fixed assets + current liabilities)

YEAR Proprietary Total Proprietary

fund fund ratio
2012-2013 21,09,10 49,71,24 42.42
2013-2014 21,29,69 52,82,53 40
2014-2015 21,55,19 57,38,17 37.55
2015-2016 22,42,59 66,14,92 33.90
2016-2017 24,14,91 66,70,05 36.20

Source: Secondary Data

The above table shows the proprietary ratio is nearly an average of 35 %.
 CHART – 3
PROPRIETARY RATIO

Proprietary Ratio

40 42.42
36.2 37.55
33.9

2016-2017 2015-2016 2014-2015 2013-2014 2012-2013

 TABLE – 4

STOCK WORKING CAPITAL RATIO

Formula:

Stock working capital ratio = Stock /Working Capital

YEAR Stock Working Stock working

Capital capital ratio
2012-2013 19,12,55 29,84,79 64.07
2013-2014 19,09,77 30,77,14 62.06
2014-2015 19,02,79 29,46,07 64.58

2015-2016 21,46,20 32,69,89 65.63

2016-2017 19,32,88 37,12,19 52.06

Source: Secondary Data

The above table shows that the stocking work capital ratio is high during the year of
2015-2016 of 65.63 %.
 CHART – 4
STOCK WORKING CAPITAL RATIO

Stock Working Capital Ratio

65.63 64.58 64.07

62.06

52.06

2016-2017 2015-2016 2014-2015 2013-2014 2012-2013

 TABLE – 5

CAPITAL GEARING RATIO

Formula:

Capital gearing ratio = (Preference capital+ secured loan) /

Equity capital & reserve & surplus

YEAR Secured loan Equity capital & Capital

reserves & surplus gearing ratio
2012-2013 11,15,95 21,09,10 52.91
2013-2014 12,13,48 21,29,69 56.97

2014-2015 10,27,56 21,55,19 47.67

2015-2016 11,38,36 22,42,59 50.78

2016-2017 1,72,312 2,41,491 71

Source: Secondary Data

The above table shows that the capital gearing ratio is very high during the year of 2016-
2017 of 72 %.
 CHART – 5
CAPITAL GEARING RATIO

Capital Gearing Ratio

71
56.97 52.91
50.78 47.67

2016-2017 2015-2016 2014-2015 2013-2014 2012-2013

 TABLE – 6
DEBT EQUITY RATIO

Formula:

Debt equity ratio =Total long term debt /Total shareholders fund

YEAR Long term debt Shareholders Debt Equity

fund Ratio
2012-2013 16,56,09 21,09,10 0.78
2013-2014 15,81,47 21,29,69 0.74

2014-2015 14,80,70 21,55,19 0.68

2015-2016 16,97,15 22,42,59 0.75
2016-2017 22,60,01 24,14,91 0.93

Source: Secondary Data

The above table shows that the slight increase in the ratio of 0.93 % during the year 2016
-2017
 CHART – 6
DEBT EQUITY RATIO

Debt Equity Ratio

0.93
0.75 0.74 0.78
0.68

2016-2017 2015-2016 2014-2015 2013-2014 2012-2013

 TABLE – 7
GROSS PROFIT RATIO

Formula:

Gross profit ratio = (Gross profit/ Net sale)* 100

YEAR Gross Net sales Gross

profit profit Ratio
2012-2013 22,45,48 42,26,30 53.13
2013-2014 24,54,48 43,45,46 56.48
2014-2015 37,65,90 51,02,37 73.80
2015-2016 45,57,45 68,76,89 66.27
2016-2017 42,37,52 68,09,78 62.22

Source: Secondary Data

The gross profit ratio is very high during the year of 2014-2015 of 73.80 %.
 CHART – 7
GROSS PROFIT RATIO

Gross Profit Ratio

73.8
62.22 66.27
56.48 53.13

2016-2017 2015-2016 2014-2015 2013-2014 2012-2013

 TABLE – 8

OPERATING RATIO

Formula:

Operating ratio = (COGS+ operating expenses / Net sales) *100

YEAR COGS + Net sales Operating ratio

Operating
expenses
2012-2013 19,74,36+ 42,26,30 61.44
2,35,42+
3,86,91
2013-2014 18,90,98+ 43,45,46 61.88
2,21,37+
5,76,71
2014-2015 21,96,32+ 51,02,37 63.27
2,69,98+
7,62,23
2015-2016 28,33,02+ 68,76,89 59
3,07,51+
9,17,94
2016-2017 2,57,226+ 6,80,978 54.16
27,141+
84,478

Source: Secondary Data

During the year of 2014-2015 the operating ratio is very high of 63.27 % according to the
source of the above table.
 CHART – 8

OPERATING RATIO

Operating Ratio

63.27
61.88 61.44
59

54.16

2016-2017 2015-2016 2014-2015 2013-2014 2012-2013

 EXPENSE RATIO

The ratio of each item of expense or each group of expense to net sales is known as
“Expense ratio”. The expense ratio brings out the relationship between various elements of
operating cost & net sales. Expense ratio analyzes each individual item of expense or group of
expense& expresses them as a percentage in relation to net sales.
 TABLE – 9

MANUFACTURING EXPENSES

Formula:

Manufacturing expense ratio = (Manufacturing expenses / Net sales) *100

YEAR Manufacturi Net sales Manufacturi

ng expenses ng expenses
ratio
2012-2013 2,35,42 42,26,30 5.5

2013-2014 2,21,37 43,45,46 5

2014-2015 2,69,98 51,02,37 5.29

2015-2016 3,07,51 68,76,89 4.47

2016-2017 2,71,41 68,09,78 3.98

Source: Secondary Data

The expense ratio is of average of 5 % for three years and nearly comes to 3.98 % during
the year of 2016-2017.
 CHART – 9
MANUFACTURING EXPENSE RATIO

Manufacturing Expense Ratio

5.29 5.5
5
4.47
3.98

2017-2016 2015-2016 2014-2015 2013-2014 2012-2013

 TABLE – 10
OTHER EXPENSES

Formula:

Other expense ratio = (Other expenses/ Net sales) *100

YEAR Other Net sales Other

expenses expenses ratio
201-2013 5,36,21 42,26,30 12.68
2013-2014 5,76,71 43,45,46 13.2
2014-2015 7,62,23 51,02,37 14.93

2015-2016 9,17,94 68,76,89 13.34

2016-2017 8,44,78 68,09,78 12.40

Source: Secondary Data

From the above table it is known that the other expense ratio is between 12 % to 14 %
averagely from the comparative years.
 CHART – 10
OTHER EXPENSE RATIO

Other Expense Ratio

14.93
13.34 13.2 12.68
12.4

2017-2016 2015-2016 2014-2015 2013-2014 2012-2013

 TABLE – 11

NET PROFIT RATIO

Formula:

Net profit ratio =NPAT / Net sales * 100

YEAR NPAT Net sales Net profit

ratio
2012-2013 20,14 42,26,30 0.47
2013-2014 20,98 43,45,46 0.48
2014-2015 82,94 51,02,37 1.6
2015-2016 1,72,94 68,76,89 2.5
2016-2017 2,75,78 68,09,78 4.04

Source: Secondary Data

The net profit ratio is very high during the year 2016-2017 of 4.04 % from the above
table.
 CHART – 11
NET PROFIT RATIO

Net Profit Ratio

4.04

2.5
1.6

0.48 0.47

2017-2016 2015-2016 2014-2015 2013-2014 2012-2013

COMPARITIVE TABLE FOR THE YEAR 2012-2013
2011-2012 2012-2013 Increase Decrease Percentage

SOURCES OF FUNDS
SHAREHOLDERS FUND
Share capital 5,00,00 5,00,00 0 0 0

Reserves and surplus 16,09,10 16,29,69 2059 0 1.26

TOTAL 21,09,10 21,29,69

LOANS
Secured 11,15,95 12,13,48 9753 0 8.03

Unsecured 5,40,14 3,67,99

TOTAL 16,56,09 15,81,47

DEFFERED TAX LIABILITY 94,21 1,06,85 1264 0 11.82

(NET)

TOTAL 38,59,40 38,18,01

APPLICATION OF FUNDS
FIXED ASSETS
Gross block 18,20,12 15,90,33
Less: depreciation 11,95,82 10,32,96
Net block 6,24,30 5,57,37
Capital work in progress 14,92 54,36
TOTAL 6,39,22 6,11,73 0 2749 4.49

INVESTMENT 1,40,14 1,22,32 0 1782 14.56

CURRENT ASSESTS, LOANS

&
ADVANCES
Inventories 19,12,55 19,09,77
Sundry debtors 19,20,36 18,49,35 0 7101 3.83

Cash & bank balances 3,26,91 3,31,32 441 0 1.31

Loan & advances 6,71,28 5,80,36 0 9092 15.66

TOTAL 48,31,10 46,70,80

CURRENT LIABLITIES &
PROVISIONS
Current liabilities 17,32,21 15,36,09
Provisions 1,14,10 57,57
TOTAL 18,46,31 15,93,66
NET CURRENT ASSESTS 29,84,79 30,77,14 9235 0 3.00

MISCELLANEOUS 5,42 6,84 142 0 20.76

EXPENDITURE
TOTAL 38,59,40 38,18,01
OPERATING INCOME 481919 596222 114303 0 19.17

OPERATING EXPENSES 498164 579150 80986 0 13.98

EMPLOYEE COST 99504 106396 6892 0 6.47

INTERESTS 26022 23657 0 2365 9.99

AVAILABLE FOR 2069 8295 6226 0 75.05

APPROPRIATION
INTERPERATION

In the year 2012-2013 there is no change in the share capital. The reserve and surplus
percentage increase 1.26 % during this year and secured loans also increase 8.03 %. The deffered
tax liabilities increase 11.82 % during the year and fixed assets decrease to 4.49 % between these
years. The investments decrease about 14.56 % according to the table at this year and sundry
debtors also decreases 3.83 % from this table. The cash and bank balance increases up to 1.31 %
from the table and loan and advances decrease to 15.66 % according to the table. The net current
assets increases up to 3.00 % and miscellaneous expenditure increases to 20.76 % from the knowledge
of the table. The operating income increases to 19.17 % during this year and other income decrease 4.35
% according to the table. There is a 13.98 % increase in the operating expenses and 6.47 % increase in the
employee cost. The interest decreases up to 9.99 % and available for appropriation increases to 75.05 %
according to the source of table.
COMPARITIVE YEAR FOR 2013-2014
2012-2013 2013-2014 Increase Decrease Percentage

SOURCES OF FUNDS
SHAREHOLDERS FUND
Share capital 5,00,00 5,00,00 0 0 0

Reserves and surplus 162969 16,55,19 2550 0 1.54

TOTAL 21,29,69 21,55,19

LOANS
Secured 12,13,48 10,27,55 0 18593 18.09

Unsecured 3,67,99 4,53,16

TOTAL 15,81,47 14,80,71
0 1964 22.52
DEFFERED TAX LIABILITY 1,06,85 87,21
(NET)

TOTAL 38,18,01 37,23,11

APPLICATION OF FUNDS
FIXED ASSETS
Gross block 15,90,33 17,40,97
Less: depreciation 10,32,96 11,40,93
Net block 5,57,37 6,00,04
Capital work in progress 54,36 29,74
TOTAL 6,11,73 6,29,78 1811 0 2.87

INVESTMENT 1,22,32 1,47,26 2494 0 16.93

CURRENT ASSESTS, LOANS

&
ADVANCES
Inventories 19,09,77 19,02,79
Sundry debtors 18,49,35 19,05,76 5641 0 2.95

Cash & bank balances 3,31,32 3,95,25 6393 0 16.17

Loan & advances 5,80,36 8,98,62 31826 0 65.41

TOTAL 46,70,80 51,02,42

CURRENT LIABLITIES &
PROVISIONS
Current liabilities 15,36,09 20,41,46
Provisions 57,57 1,20,76
TOTAL 15,93,66 21,62,32
0 13704 4.66
NET CURRENT ASSESTS 30,77,14 29,40,10

MISCELLANEOUS 6,84 5,97 0 87 14.57

EXPENDITURE
TOTAL 38,18,01 37,23,11
OPERATING INCOME 596222 739047 142825 0 19.32

OTHER EXPENSES 579150 720097 140947 0 19.57

EMPLOYEE COST 106396 129447 23051 0 17.80

INTERESTS 26022 24630 973 0 3.95

AVAILABLE FOR 2069 17298 9003 0 52.04

APPROPRIATION
INTERPERATION

In the year 2013-2014 there is no change in the share capital. The reserve and surplus
percentage increase 1.54 % during this year and secured loans also decrease 18.09 %. The deffered
tax liabilities decrease 22.52 % during the year and fixed assets increase to 2.87 % between these
years. The investments increase about 16.93 % according to the table at this year and sundry
debtors also increase 2.93 % from this table. The cash and bank balance increases up to 16.17 %
from the table and loan and advances increase to 65.41 % according to the table. The net current
assets decrease up to 4.66 % and miscellaneous expenditure decrease to 14.57 % from the knowledge of
the table. The operating income increases to 19.32 % during this year and other income increase 0.52 %
according to the table. There is a 19.57 % increase in the operating expenses and 17.80 % increase in the
employee cost. The interest increases to 3.95 % and available for appropriation increases to 52.04 %
according to the source of table.
COMPARITIVE TABLE FOR THE YEAR 2013-2015

2013-2014 2014- Increase Decrease Percentage

2015
SOURCES OF FUNDS
SHAREHOLDERS FUND
Share capital 5,00,00 5,00,00 0 0 0

Reserves and surplus 16,55,19 17,42,59 8740 0 5.01

TOTAL 21,55,19 21,55,19

LOANS
Secured 10,27,55 11,38,86 11131 0 9.77

Unsecured 4,53,16 5,58,29

TOTAL 14,80,71 14,80,71
812 0 8.51
DEFFERED TAX LIABILITY 87,21 95,33
(NET)

TOTAL 37,23,11 40,35,07

APPLICATION OF FUNDS
FIXED ASSETS
Gross block 17,40,97 18,41,58
Less: depreciation 11,40,93 12,40,03
Net block 6,00,04 6,31,55
Capital work in progress 29,74 15,29
TOTAL 6,29,78 6,29,78 0 1300 2.10

INVESTMENT 1,47,26 1,48,34 108 0 0.72

CURRENT ASSESTS, LOANS

&
ADVANCES
Inventories 19,02,79 21,46,20
Sundry debtors 19,05,76 19,51,56 4580 0 2.34

Cash & bank balances 3,95,25 4,49,74 5449 0 12.11

Loan & advances 8,98,62 8,50,58 0 4804 5.64

TOTAL 51,02,42 51,02,42

CURRENT LIABLITIES &

PROVISIONS
Current liabilities 20,41,46 18,16,17
Provisions 1,20,76 3,12,02
TOTAL 21,62,32 21,62,32
32979 0 10.08
NET CURRENT ASSESTS 29,40,10 32,69,89

MISCELLANEOUS 5,97 0 0 0 0
EXPENDITURE
TOTAL 37,23,11 40,35,07
OPERATING INCOME 739047 742031 2984 0 0.40

OTHER EXPENSES 720097 700024 0 20073 2.86

EMPLOYEE COST 129447 135415 5968 0 4.40

INTERESTS 24630 0 3048 14.12 0

AVAILABLE FOR 17298 10287 0 37.29 10287

APPROPRIATION
INTERPERATION

In the year 2013-2015 there is no change in the share capital. The reserve and surplus
percentage increase 5.01 % during this year and secured loans also increase 9.77 %. The deffered
tax liabilities increase 8.51 % during the year and fixed assets decrease to 2.10 % between these
years. The investments increase about 0.72 % according to the table at this year and sundry debtors
also increase 2.34 % from this table. The cash and bank balance increases up to 12.11 % from the
table and loan and advances decrease to 5.64 % according to the table. The net current assets
increase up to 10.08 % and miscellaneous expenditure remains 0 % from the knowledge of the table. The
operating income increases to 0.40 % during this year and other income increase 0.24 % according to the
table. There is a 2.86 % decrease in the operating expenses and 4.40 % increase in the employee cost. The
interest decreases to 14.12 % and available for appropriation increases to 37.29 % according to the source
of table.
COMPARITIVE TABLE FOR THE YEAR 2014-2016

2014- 2015- Increase Decrease Percentage

2015 2016

SOURCES OF FUNDS
SHAREHOLDERS FUND
Share capital 5,00,00 5,00,00 0 0 0

Reserves and surplus 17,42,59 19,14,91 17232 0 8.91

TOTAL 22,42,59 24,14,91

LOANS
Secured 11,38,86 17,23,12 58426 0 33.97

Unsecured 5,58,29 5,36,89

TOTAL 16,97,15 22,60,01
0 331 3.59
DEFFERED TAX LIABILITY 95,33 92,02
(NET)

TOTAL 40,35,07 47,66,94

APPLICATION OF FUNDS
FIXED ASSETS
Gross block 18,41,58 21,64,89
Less: depreciation 12,40,03 13,43,05
Net block 6,31,55 8,21,84
Capital work in progress 15,29 -
TOTAL 6,16,84 8,21,84 20500 0 2.49

INVESTMENT 1,48,34 2,32,91 8457 0 36.31

CURRENT ASSESTS, LOANS

&
ADVANCES
Inventories 21,46,20 19,32,88
Sundry debtors 19,51,56 23,06,67 35511 0 15.39

Cash & bank balances 4,49,74 6,04,64 15490 0 25.61

Loan & advances 8,50,58 10,04,02 15344 0 15.28

TOTAL 53,98,08 58,48,21

CURRENT LIABLITIES &

PROVISIONS
Current liabilities 18,16,17 16,55,15
Provisions 3,12,02 4,80,87
TOTAL 21,28,19 21,36,02
44230 0 11.91
NET CURRENT ASSESTS 32,69,89 37,12,19

MISCELLANEOUS 0 0 0 0 0
EXPENDITURE
TOTAL 40,35,07 47,66,94
OPERATING INCOME 742031 752145 10114 0 1.34

OTHER EXPENSES 700024 714524 14500 0 2.02

EMPLOYEE COST 135415 142563 7148 0 5.01

INTERESTS 21582 22563 981 0 4.34

AVAILABLE FOR 27585 31523 3938 0 12.49

APPROPRIATION
INTERPERATION

In the year 2014-2015 there is no change in the share capital. The reserve and surplus
percentage increase 8.91 % during this year and secured loans also increase 33.97 %. The deffered
tax liabilities decrease 3.59 % during the year and fixed assets increase to 2.49 % between these
years. The investments increase about 36.31 % according to the table at this year and sundry
debtors also increase 15.39 % from this table. The cash and bank balance increases up to 25.61 %
from the table and loan and advances increase to 15.28 % according to the table. The net current
assets increase up to 11.91 % and miscellaneous expenditure remains 0 % from the knowledge of the
table. The operating income increases to 1.34 % during this year and other income increase 0.20 %
according to the table. There is a 2.02 % increase in the operating expenses and 5.01 % increase in the
employee cost. The interest increases to 4.34 % and available for appropriation increases to 12.49 %
according to the source of table.
Findings
Gross profit and net profits are decreased during the period of study, which indicates that
firm’s inefficient management in manufacturing and trading operations.
Gross profit and net profits are increased during the period of 2012-13 which indicates that
firm’s efficient management in manufacturing and trading operations.
Liquidity ratio of the firm is not better liquidity position in over the five years. It shows that
the firm had not sufficient liquid assets.
The inventory of the firm in the first year has been sold very slow. And there is an increase
in the movement of the inventories but it slightly decreased in the last year. This may be a sign not
good to the firm.
The fixed assets turnover ratio of the firm has in 2012-13 the ratio is 0.85 and it increase in
the next 3years continuously and it again decrease in 2016-17.
The current assets turnover ratio is increasing during the period of 2004-06 and again it
decrease in the period of 2006-07. And again increase in next two year.
Direct Material cost ratio of the firm is has less material cost during the period of 2012-13
&2014-15 and it raised in the year of 2016-17
The cost of direct labour of the firm in the year of 2012-13 is 4.94%and it increasing up to
2015-16 and it decrease in the next year.
The cost of manufacturing overhead of the firm in the year of 2012-13 is 5.22% where it
compare to the next 3year it increase rapidly.
 SUGGESTIONS

 Management of the company would be interested in every aspect of the financial

analysis. It is their overall responsibility to see that the firm’s resources are most
effectively and efficiently utilized to ensure a sound financial position of the
company.

 The financial policy of working capital management policy of the company has to
be revised. The firm follows an aggressive policy as far as working capital
management is concerned. According to this policy, Risk and Profitability should
be increased and the liquidity should be reduced. Though the company has
increased risk and reduced liquidity, the profitability has not increased. This is an
area into which the management needs to look. Future forecasts of cash should also
be made effectively in order to meet unexpected requirements.

 As far as the inventory position is concerned, the company doesn’t have a sound
position. Better the quality, lesser would be the work-in-process. The rejected stock
has to go through further modifications until the quality department approves it.
This therefore remains as work-in-process and increases the value of the work-in-
process. Speeding up the quality checks can reduce the holding time of finished
goods.

 Efforts should be made to keep the norms up to date. Thus a quarterly review is
suggested. Norms should be as realistic as possible as to give a correct estimate of
the inventory levels. The firm should make consistent efforts to increase its earnings
in order to move towards the path of growth.

 It is suggested that the firm should neither have too high nor too low debtor turnover
ratio.
CONCLUSION

This project of Ratio analysis in the production concern is not merely a work of the project.
But a brief knowledge and experience of that how to analyze the financial performance of the firm.
The study undertaken has brought in to the light of the following conclusions. According to this
project I came to know that from the analysis of financial statements it is clear
that SHSSK Ltd. Have been incurring loss during the period of study. So the firm should focus on
getting of profits in the coming years by taking care internal as well as external factors.
BIBLOGRAPHY

1. M.Y. KHAN, P.K.JAIN (1981), Financial Management, and Cost Accounting (third
edition) New Delhi: McGraw – Hill publishing company limited.

2. I.M.PANDEY.Financial Management New Delhi Vikas publishing house private Ltd –

ninth addition 2004

3. Financial Statement