Introduction of the topic

Finance is that business activity that is concerned with the organization and
conversion of capital funds in meeting financial needs and overall objectives of a business
enterprise.

Financial Analysis can be defined as a study of relationship between many factors as

disclosed by the statement and study of the trend of these factors. The basis for financial planning,
analysis and Decision-making is the financial information. Financial information is needed to
predict, compare and evaluate the firm’s earning ability. It is also required to aid in economic
decision-making investment and financial statement or accounting reports.

A financial statement communicates information relating to financial performance and

financial position of an organization to those interested in the business enterprise. Such financial
statement contains enough valuable information about various aspects of business and that can be
used for business decisions. Thus, the financial statement is an instrument that provides a summary
of the financial transactions and financial position of an organization. Financial statement serves
as a horoscope of a business as they enable readers to measure and predict the financial position
of a concern.

The analysis of financial statement is an important aid to financial decisions making. The
purpose of evaluation of financial statements differs among various groups interested in the result
and relationship reported in the financial statements. The information contained in these statements
if used by management, creditors, investors and others to form judgment about operating and
financial position of the firm the users of financial statement can set further insight about financial
strengths and weakness of the firm if they properly analyze information reported in these
statements.

An analysis of the financial statement enables one to understand whether the firm is sound
financially or not. Ratio analysis, Comparative statement analysis, Common size statement
analysis and Trend analysis are some of the techniques used for the analysis and interpretation of
an organization’s financial affairs and statements.
Introduction

Analysis of financial statement in simple term is called financial analysis. Thus, financial
analysis covers the meanings of both analysis and interpretation. First, we must understand the
meaning of financial statements afterwards let us understand the meaning of financial analysis and
interpretation.

Meaning of Financial statement

A financial statement communicates information relating to financial performance and

financial position of an organization to those interested in the business enterprise. Such financial
statement contains enough valuable information about various aspects of business that can be used
for business decisions making.
Thus, the financial statement be an instrument that provides a summary of the financial
transactions and financial position of an organization. Financial statement serves as a horoscope
of a business as they enable readers to measure and predict the financial position of a concern.

Definition
“Analyzing financial statements is a process of evaluating the relationship between
component of financial statements to obtain a better understanding of a firm’s position and
performance”. - Metcalf and Titard

Meaning of Financial analysis and Interpretation

Financial analysis refers to the process of determining financial strengths and weaknesses
of the firm by establishing strategic relationships between items of the balance sheet, profit and
loss account and other operative data.
Financial Statement Analysis involves a systematic and careful examination of the
information contained in the financial statement with a specific purpose. It is a detailed enquiry
into the financial data and evaluates concern’s performance, future risk and potential.

Interpretation
It means to explain the meaning and significance of the financial data in simplified manner.
Scope of Finance

What is finance? What are a firm’s financial activities? How are they related to the firm’ other
activities? Firms create manufacturing capacities for production of goods; some provide services
to customers. They sell their goods or services to earn profit. They raise funds to acquire
manufacturing and other facilities. Thus, the three most important activities of a business firm are:

Production.
Marketing.
Finance.

A firm secures whatever capital it needs and employs it in activities, which generate return on
invested capital.

Finance Functions

It may be difficult to separate the finance functions from production, marketing and other
functions, but the functions themselves can be readily identified. The functions of raising funds,
investing them in assets and distributing returns earned from assets to shareholders are respectively
known as financing decision, investment decision and dividend decision.
A firm attempt to balance cash inflows and outflows while performing these functions. This is
liquidity decision, and we may add it to the list of important finance decision or functions. Thus,
finance functions include:
Long-term asset-mix or investment decision.
Capital-mix or financing decision.
Profit allocation or dividend decision.
Sort-term asset-mix or liquidity decision.

A firm performs finance functions simultaneously and continuously in the normal course of
the business. They do not necessarily occur in a sequence. Finance functions call for skilful
planning, control and execution of a firm’s activities.

Comparative Financial Statement Analysis

Comparative financial statements are prepared by arranging financial data of two or more
financial years in two side by side columns. Any financial statement that contains data of two or
more consecutive accounting periods is known as comparative financial statements. Such
statement establishes relationship between items that appear on the same row of comparative
financial statement.
 It discloses changes in items of financial statements over time in both rupees and
percentage form. Thus, comparative statements explain the changes in various accounting figures
and ascertain the liquidity, solvency and profitability.

Types of comparative financial statement

1) Income statement or profit or loss account
2) Balance sheet

Income statement or profit or loss account: -

A comparative income is prepared in terms of numerical data as well as in terms of

percentage. This statement helps to analyses the cause of increase or decrease in the volume of
sales along with the increase or decrease of cost of sales, administrative expenses and selling and
distribution expenses.

Steps or guidelines for interpretations of income statements

1) The amount of gross profit should be analyzed.

2) Analysis of the operating profits.
3) Analysis of the net profits.
4) An opinion should be given about the overall profitability of the concern

Comparative Balance sheet

It helps to study the difference between the assets and liabilities of five years, reasons for
the difference and their short- and long-term financial implications. Comparative balance sheet
facilitates comparison between two or more accounting years by presenting the relevant
accounting figures for two or more years side by side and helps to understand the trends in
accounting figures relating to the working capital position, liquidity position, solvency position
and profitability of the business concern.

Steps for interpretations of comparative balance sheet

1) Analyze and interpret the current financial position and liquidity position.
Financial position - Increase in working capital indicates improvement in current financial
position of the concern.
Liquidity position – An increase in liquid assets position in a particular year as compare to
that of the previous year indicates an increase in liquidity position of an organization.
Analysis of long-term financial position - It is a detailed analysis of fixed assets, long term
liabilities and capital.
 2) Analysis of profitability – opinion about the financial position about improvement or
deterioration. The concluding remarks to should contain an opinion of the financial position
of the firm on a day as compared to that in the previous year. Opinion indicates whether
the position is improved or deteriorated in the current year.

Common Size Financial Statement Analysis

When the financial statements are shown in the shape of vertical percentages, it is known
as common size statements. Such statements provide readers with vertical analysis of the profit
and loss account and balance sheet. Generally, the figures are shown as percentages of total assets,
total liabilities, and total sales. The analyst is able assess the figures in relation to total values.
Common size statement may be prepared in the following way.
1) Total assets or liabilities are taken as 100
2) Individual assets are expressed as percentage of total assets that is 100 and different
liabilities are calculated in relation to total liabilities.

Types of common size statement

1) Common size income statement
2) Common size balance sheet

Common size income statement:

In common size income statement, the sales figures are taken to be 100 percent and all
other items of cost of goods sold or cost of sales are expressed as a percentage of sales.

Common size balance sheet:

Common size balance sheet shows the percentage relation to each item of assets to total
assets and each in item of liabilities total liabilities to and capital. It helps to understand the trends
and reasons for changes in different items, inter firm or inter industry comparison is also find out
the strength and weakness of a different firms.

Trend Analysis or Trend Ratio Analysis

Comparison of past data over a period with base year is known as trend analysis. In short
it is a technique of horizontal study of a financial statement. Trends of different accounting data
for a few years are placed side by side and a comparison is made.
The trend percentage helps the analyst to study the changes that have occurred during the
period. Such analysis indicates the progress of business by showing ups and downs in its activities.

Procedure for calculating trend analysis

 1) Selecting of base year. i.e., one year is taken as a base year, generally the first or last is
taken as base year.
2) The figures of base year are taken as 100
3) Trend percentages are calculated in relation to base year.

Computation of trend percentage

1) Some accounting principles and practices should be followed.
2) The base year should be clearly selected that is either first year or last year. Generally
earliest year is taken as the base year.
3) Every item in the base statements is stated as 100.
4) Trend percentage should be calculated only for items having logical relationship with one
another.
5) Trend percentage of cash item in another statement is calculated with the reference to the
same item in the base statement by using the following formula.

Value of item in other statement

Percentage = Value of the same item in base statement

SIGNIFICANCE OR ADVANTAGES OF RATIO ANALYSIS

1. Ratio analysis is exceptionally a very useful tool to judge the financial performance of the
enterprise over a period. It simplifies the financial statements and tells the whole story of
changes in the financial conditions of the business,
2. Ratio analysis helps the management in formulating sound financial policies and in easily
understanding the profit growth and wealth growth. It also assists the management in
planning and forecasting the business operations.
3. Ratio analysis provides the data for inter-firm comparison. It throws light on the
comparative growth of the firms under comparison. Ratios high-light the factors associated
with the successful and unsuccessful firms and reveal strong firms and weak firm as well
as over-valued firms and under-valued firms.
4. Ratio analysis makes intra-firm comparison possible. It helps the management to compare
the performance of different departments of the firm and decide their efficiency or
otherwise in the past and likely performance in future.
 Chapter 2
Company Profile
Established in the year 1997, we, Lakshmi Machine Tools, Bangalore, are an ISO
9001:2008 certified organization engaged in manufacturing and supplying a varied range of Fine
Blanking & Press Tools, Aluminum Die-casting Components, Aluminum Die Casting
Components, Precision CNC Machined Products, Plastic Components, Die Casting Dies,
Rubber Injection Molds, Rubber Injection Molds, Machine Tool, Fine Blanking Tools And
Turret Punches, CNC Precision Machined Components, Die Casting Dies And Components,
Pressure Die Casting Dies, Die-Casting Aerospace Connector, Aluminum Pressure Die
Casting Components, Pressure Die Casting Components, Die Casting Component and
Injection Molds and Components.

This range is known for its high performance, dimensional accuracy, high precision and
unmatched productivity. In addition, LMT also offer CNC EDM Wire Cutting Job Works to our
clients. The products offered by us are available at very economical prices and are no less than the
substitutes available in the market in terms of performance.

Since 1987, LMT has been Manufacturing Surface Plates and Metrology Products. We
have qualified and experience personnel to fulfill the customers’ requirement.

Company adopt a strict quality policy at our organization and use world-class machinery
to manufacture flawless quality products for our clients.

Intensive research work and market analysis is done to manufacture our products as per the
requirement, thereby, making it ideal to be used across auto mobile, defense, medical equipment,
electric powerhouse, agricultural equipment and other areas of application. TVS Motors Ltd.,
Sundaram Industries Ltd., Harita Seating Systems Ltd., IFB Industries Ltd., Avasarala
Technologies Ltd. and United Technologies Company are some of our reputed clients.

Under the dynamic leadership of our mentor, Mr. Harish, we have been constantly
growing and successfully meeting the varied requirements of our reputed clients. His in-depth
understanding of the related industry has enabled us to achieve a commendable position across the
nation.
Basic Information

Nature of Business Exporter

Additional Business Manufacturer

Company CEO Harish

Total Number of Employees 150 - 200 People

Year of Establishment 1997

Legal Status of Firm Partnership

Annual Turnover Rs. 7-8 Crore

OUR QUALITY ASSURANCE

Quality being our forte, we make sure that only finest quality products are delivered to our
clients. We focus to maintain highest quality standards and maximum client satisfaction through
our products and effective job works. A strict vigil is kept at every stage of manufacturing process
by our team of quality controllers.
These experts check our entire product range on several quality parameters and ensure that
it complies with international quality standards. We are committed to offer impeccable products
to our clients spread across the domestic market.

Various parameters for which our products are scrutinized are as follows:
• Surface Finish
• Dimensional wise accuracy
• Long Life
QUALITY
LMT is committed to its customers to deliver the best quality products at most competitive
price through continuous improvement in quality & production by total dedication of the
Management & Employees. Certified by ISO 9001: 2008

PRODUCT PORTFOLIO
We are one of the reliable ISO 9001:2008 certified manufacturers and suppliers of an
extensive range of Aluminum Pressure Die Casting Components used in Aero Space Industry &
Auto mobile Industry, Die Casting Dies, Plastic Injection Moulds& Plastic Components used in
Domestic Industry & Auto mobile Industry, Rubber Injection Moulds, Fine Blanking Tools.
Moreover, we also offer CNC, VMC, Turning & EDM Wire Cutting Job Works to our clients.

Our product range is heavily demanded in numerous application areas such as aero-space,
auto mobile, defence, medical equipment, electric powerhouse, agricultural equipment. This is
widely appreciated for high performance, dimensional accuracy, high precision and unmatched
productivity.
It encompasses:
• Aluminum Pressure Die Casting Components
• Plastic Components
• Aluminum Pressure Die Casting Dies
• Fine Blanking Tools & Turret Punches
• Rubber Injection Moulds
• Plastic Injection Moulds

OUR TEAM
Our skylarking success over the recent years is predominantly owing to the diligent efforts of our
professionals. We have employed a self-motivated & mission-oriented team of professionals that
works wholeheartedly. They work in tandem with our valued clients to understand their exact
requirements and offer a solution accordingly. Leveraging on their rich industry experience and
profound knowledge in the related business domain, we have been successfully catering to the
varied requirements of our rich client base.

Our team comprises of the following professionals:

 Engineers
 Technicians
 Procurement agents
 Quality controllers
  Sales and marketing team
 Skilled workers

OUR CLIENTELE
We are a quality centric organization and thus, adopt a customer-oriented attitude in all our
business processes. Our team of professional’s work in tandem with our clients to understand their
exact requirements and offer a solution accordingly. The optimum quality and performance of our
product range along with timely delivery schedules have enabled us to win the faith of our clients
within a short span of time.
Our ethical business policies, transparent business dealings and effective job works have
associated us with world renowned companies including:

WHY US?
Owing to our consistent quality delivery of Precision Machine Components, Die Casting Dies,
Molds and Tools and efficient services, we have been able gain a strong foothold in the industry.
Some of the key factors that are responsible for our success are as follows:
 World-class infrastructure
 Strict quality policy
 Budget-friendly prices
 Highly qualified and proficient professionals
 Extensive & comprehensive range of products
 Highly advance technology & modern machines
 An ISO 9001: 2008 certified company

LAKSHMI MACHINE TOOLS PRODUCTS DETAILS:

MACHINE TOOLS
We are one of the leading manufacturer and supplier of a wide range of Fine Blanking &
Press Tools, Aluminum Die casting Components, Precision CNC Machined Products, Plastic
Components, Die Casting Dies, Rubber Injection Moulds Machine Tool, Fine Blanking Tools And
Turret Punches, CNC Precision Machined Components, Die Casting Dies And Components,
Pressure Die Casting Dies, Die-Casting Aerospace Connector, Aluminum Pressure Die Casting
Components, Pressure Die Casting Components, Die Casting Component, Injection Molds and
Components, Rubber Injection Moulds, Plastic Injection Moulds And Components and
Automobile Rubber Injection Mould. Manufactured using modern age technology and
sophisticated machinery, our product range finds its application in aero-space, auto mobile,
defense, medical equipment, electric powerhouse and other application areas.
 Fine Blanking Tools and Turret Punches
We hold expertise in offering our clients a wide
range of fine blanking tools, spares & turret punches that are
widely acknowledged for their unique features. Designed as
per the specification detailed by the client, this range offers
high performance and productivity. Finest quality raw
materials are used in the production process keeping in
consideration the needs of our clients. This range includes a
multitude of products in various shapes, size and with
distinct functions. Our clients can avail this range at industry
leading prices within the stipulated time frame.

Fine Blanking & Press Tools:

We are professionally managed company
engaged in manufacturing and supplying Fine Blanking
& Press Tools, Spares & Turret Punches. These products
have unique features and are designed according to
customer specification. High performance and productive
Fine Blanking Tools & Turret Punches are manufactured
using the finest quality raw materials to cater the exact
requirements of customers.

PRECISION CNC MACHINED PRODUCTS

We are a leading Exporter of CNC Precision Machined Components and Precision CNC
Machined Products from Bengaluru, India.

1. Precision Machined Components:

Our expertise in the industry had enabled us to

manufacture and export supreme grade CNC Precision
Machined Components. We offer various high-quality
CNC precision machined components such as turning
parts, electronic parts, industrial machine parts,
automotive parts, etc. in various finest grade materials
such as brass, Aluminum, stainless steel, steel and many
others. Our CNC precision machined components are
accurately and dimensionally fabricated based on
specifications using our modern machinery by our
highly talented craftsmen.

Features:
  Very robust
 Flawlessly fabricated
 Highly reliable and effective
 Customized according to specifications

2. Precision CNC Machined Products:

We are reckoned in the industry as the leading

manufacturer and supplier offering optimum quality
Precision CNC Machined Products, we also offer CNC
Vertical Machine Centre & CNC EDM Wire Cutting Job
Works to our clients. Being integrated with rich industry
experience and upgraded technology, we have developed
expertise in the related domain.
We have deployed a team of highly skilled
programmers and operators to offer highly effective
solution to our clients. Under their guidance, we
undertake job works of high precision components on highly sophisticated CNC wire cutting
machinery using 0.1mm wire diameter to 0.25mm wire diameter.
Some of the salient features associated with our job work are as follows:
 High accuracy and timely execution
 Use of world class technology
 Cost effective

PLASTIC COMPONENTS

1. Plastic Injection Moulds & Components:

Lakshmi Machine Tools manufactures and supplies a
wide variety of Plastic Injection Moulds & Components. We
offer customized solution to our valuable customer at highly
economic prices to meet their specific needs and
requirements. These Plastic Injection Molds & Spares are
designed and developed under the supervision of highly
qualified and experienced professionals to ensure its
outstanding performance.
These products are manufactured using an
amalgamation of supreme quality raw materials and
sophisticated machines. Our products are available in various designed and applicable in
Die Mould industry.
DIE CASTING DIES AND COMPONENTS

Pressure Die Casting Dies:

Avail from us high precision and productive

performance Aluminum Pressure Die Casting Dies, which is
manufactured using finest quality raw material, leveraging
on advanced technology, past technical experience and
expertise of our proficient professionals. Finest quality raw
material is procured from reliable vendors. We come up with
innovative design & solutions to ensure that all the
requirements at the clients' end are effectively met on time.
The range of high performing Pressure Die Casting Dies
offered by us is heavily used in several industries including:
 Aerospace
 Auto mobiles
 Defense
 Medical Equipment
 Agricultural Equipment and many more.

Aluminium Pressure Die Casting Components:

We have emerged as the leading manufacturer and

supplier of an elaboration range of Aluminum pressure die casting
components. This range is heavily used in aero-space, automobile,
defense and several other industries, owing to its superior
performance and durability.
Manufacturer using highly advance technology from
quality raw material on custom basis, this range meets the specific
needs and requirement of our valued customer. Offered at industry
leading prices, this range complies with international quality
standards.
2. Aluminum Pressure Die Casting Components:
Aluminum Pressure Die Casting Component
used in aerospace industry. We are the leading industry
for these die casting components.
Pressure die casting component is used in
automobile industry. We are one of the best
manufacturers and supplier of die casting components.

3. Die-Casting Aerospace Connector

Along with our range of high-quality products,

we can manufacture and export premium quality Die-
Casting Aerospace Connector. With the use of modern
technology, we can fabricate very durable and high
tensile die-casting aerospace connectors which
efficiently connect and prevent leakage to keep
oxygen and other necessary atmospheric conditions on
the aircraft and various aerospace devices. These die-
casting aerospace connectors are finely threaded,
finished and tested to ensure excellent connections.
Features:
 Made from high quality materials
 Rust proof
 Connect securely
 Dimensionally accurate
INJECTION MOLDS AND COMPONENTS

Offering you a complete choice of products which include Rubber Injection Moulds, Plastic
Injection Moulds and Components, Automobile Rubber Injection Mould and Rubber Injection
Molds & Spares.

1. Rubber Injection Moulds:

We put forth a qualitative range of rubber injection
moulds, which is customized to meet the specific needs and
requirements of our clients. This range is economically priced
and is designed & developed to under the supervision of
highly proficient and experienced professionals. Superior
quality raw material and technologically advanced machinery
is used to manufacture this product range in different designs
to suite different applications in the die mould industry.

2. Plastic Injection Moulds and Components:

We manufacture plastic injection components which is

used is auto mobile industry, medical industry, domestic
industry. Further we are experts in manufacturing plastic
injection moulds and we had the design facility also. In last 1
year we had manufactured around 85 moulds.
 3. Automobile Rubber Injection Mould:

Rubber injection mould used in production of

automobile components supplied to M/S.
Bridgestone TVS India pvt ltd.

4. Rubber Injection Molds & Spares:

Lakshmi Machine Tools manufactures and

supplies a wide variety of Rubber Injection Moulds
& Spares. We offer customized solution to our
valuable customer at highly economic prices to meet
their specific needs and requirements.
These Rubber Injection Molds & Spares are
designed and developed under the supervision of
highly qualified and experienced professionals to
ensure its outstanding performance. These products
are manufactured using an amalgamation of supreme
quality raw materials and sophisticated machines.
Our products are available in various designed and
applicable in Die Mould industry.
New Items;
 Aerospace Components
 Automobile Spares
 Fine Blanking Tools
 Plastic Components
LOCATION
Lakshmi Machine Tools is manufacturing and supplying a varied range of Fine Blanking & Press
Tools, Aluminium Die-casting Components, Aluminium Die Casting Components in the
organization is located in the A- 99, Bommasandra Industrial Area, 1st Phase, Hosur Main Road,
Anekal Taluk, Bommasandra, Bengaluru-560099, Karnataka, India.

INFRASTRUCTURE & FACILITIES

OUR INFRASTRUCTURE
We have developed a state-of-the-art manufacturing facility that is technologically upgraded and
fully installed with world-class machinery. In addition, it is managed by a team of professionals
who are experts in their respective domains. The machinery installed at our premises is tested for
efficiency and performance. With the use of latest machinery and technology, we can maintain a
rapid rate of production along with flawless quality.
Some of the machines used in the manufacturing process are as follows:
 CNC Machining Centers
 CNC Turning Centers
 CNC Wire Cutting Machines
 CNC Sparking Machines
 Pressure Die Casting Machines

RESEARCH AND DEVELOPMENT

We carry out intensive research and development work to understand the varied requirements of
our clients and offer them cutting edge innovative solutions to meet and exceed their expectations.
Hence, we have a separate research and development department that is manned by a team of
highly qualified and experienced professionals. These professionals keep a close track on the
market and current market dynamics. Everyone at our organization is open to new ideas,
innovations & concepts and work towards product improvisation.

INFRASTRUCTURE
Die Casting Machines 120 ton - 3 no’s 2. Die Casting Machine 180 ton - 1 no 3. Plastic Injunction
Moulding -150 ton - 2nos 4. CNC - VMC - 3 nos 5. CNC - Turning censers - 4 nos 6. CNC - Wire
Cutting - 2 nos 7. EDM Sparking - 2 nos 8. All conversional Machines required for Tool Room.
9. Compressors - 2 nos 10. Generators - 125 kva & 200 kva.
 Chapter 3
Research and Methodology

Tittle of the Project

A Study on Financial Performance Analysis at Lakshmi Machine Tools, Bommasandra,

Bangalore.

Introduction
The Performance Analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing relationships between the items of the balance
sheets and profit & Loss account. It is the study of the performance of the company and therefore,
it is aimed at the financial performance of the company. Financial performance analysis is the
process of determining and analyzing the operating and financial information of a firm from
accounting and its financial statements. The goal of such analysis is to determine the efficiency
and performance of firm’s management, as reflected in the financial records and reports.

Statement of the Problem

A firm should have an efficient financial management system to realize its goals and
objectives. The success in achieving the objectives lies with company’s investment and financial
decisions. The various techniques like common size statement, comparative statement analysis,
ratio analysis and trend analysis are the important tools of analysis of financial statements.
Financial performance indicates the soundness and position in an industry of a firm.

Needs of the Study

 To know about the financial performance of the Company.
 To get a feel and experience in analyzing financial statements.
 To find out the strengths and weaknesses of Lakshmi Machine Tools with the help of
financial statements available.
 To relate the theoretical knowledge of Ratio analysis, Comparative statement
analysis, and Trend analysis in analyzing the financial statements of Lakshmi
Machine Tools.

Objectives of the study:

The main objectives of the present work are to make a study on the overall financial
performance.
(i) To assess the short-term and long-term solvency,
(ii) To assess the liquidity and profitability position of the company,
(iii) To know about the efficiency of financial operations in the company and
(iv) To analyze and determining the behavior of liquidity and profitability.
Research Methodology
Descriptive Research is adopted for this study.

Tools for Data Collection

 Primary data: primary data which includes only the information got while doing
internship.
 Secondary data: secondary data which has been collected from the Annual Reports of the
Bank for last Five years; i.e. from
Annual Report for the year 2013-14
Annual Report for the year 2014-15
Annual Report for the year 2015-16
Annual Report for the year 2016-17
Annual Report for the year 2017-18

Limitations of the study

1. The study is limited to only Lakshmi Machine Tools.
2. No comparative analysis has been created between Lakshmi Machine Tools and other
company, because of non-availability of information and paucity of time.
3. The managers and other executives of Lakshmi Machine Tools were busy in
dealing/handling their routine works, So I was not able to get all the required information.
4. The present study is not exhaustive because of less time and resource constraints.
5.
LITERATURE REVIEW
Financial performance analysis is vital for the triumph of an enterprise. Financial
performance analysis is an appraisal of the feasibility, solidity and fertility of a business, sub-
business or mission. Altman and Eberhart (1994) reported the use of neural network in
identification of distressed business by the Italian central bank. Using over 1,000 sampled firms
with 10 financial ratios as independent variables, they found that the classification of neural
networks was very close to that achieved by discriminant analysis. They concluded that the neural
network is not a clearly dominant mathematical technique compared to traditional statistical
techniques.

Epp and Kumar (2008) incorporated the time “bias “factor into the classic business failure
prediction model. Using Altman (1968) and Ohlson’s (1980) models to a matched sample of failed
and non-failed firms from1980’s, they found that the predictive accuracy of Altman’s model
declined when applied against the 1980’sdata. The findings explained the importance of
incorporating the time factor in the traditional failure prediction models. Campbell (2008)
constructed a multivariate prediction model that estimates the probability of bankruptcy
reorganization for closely held firms.

Six variables were used in developing the hypotheses and five were significant in
distinguishing closely held firms that reorganize from those that liquidate. The five factors were
firm size, asset profitability, the number of secured creditors, the presence of free assets, and the
number of under-secured secured creditors. The prediction model correctly classified 78.5% of the
sampled firms. This model is used as a decision aid when forming an expert opinion regarding a
debtor’s likelihood of rehabilitation. No study has incorporated the financial performance analysis
of the central public sector enterprises in Indian drug & pharmaceutical Industry. Nor has any
previous research examined the solvency position, liquidity position, profitability analysis,
operating efficiency and the prediction of financial health and viability of public sector drug &
pharmaceutical enterprises in India.