A STUDY ON WORKING CAPITAL ANALYSIS OFA

PRICOL LIMITED

PROJECT REPORT

PROJECT REPORT SUBMITTED TO THE BHARATHIAR UNIVERSITY IN

PARTIAL FULFILLMENT OF THE REQUIRMENT FOR THE DEGREE OF

BACHELOR OF COMMERCE WITH PROFESSIONAL ACCOUNTING

SUMBITTED BY

(ABHILASH K.M.)

142AK0161

UNDER THE GUIDENCE OF

Mrs. V. Suganya M.Com., M.Phil.,

ASSISTANT PROFESSOR

KG COLLEGE OF ARTS AND SCIENCE

SARAVANAMPATTI , COIMBATORE – 641 035

OCTOBER – 2016

1
 DECLARATION

2
 DECLARATION
I hereby declare that the project entitled “A STUDY ON WORKING CAPITAL
ANALYSIS OF PRICOL LIMITED”. By ABHILASH K.M. reg. no 142AK0161 in partial
fulfillment of requirement for the award of degree of B.Com(PA) submitted in the
department of Commerce with PA at KG COLLEGE OF ARTS AND SCIENCE. Under
Bharathiar University is an authentic record of my own work carried out under the
supervision of Mrs. V. Suganya M.Com., M.Phil., assistant professor commerce with PA.
The matter presented by me in any other university or institute for the award of
B.Com(PA).

-----------------------------

ABHILASH K.M.

142AK0161

This is to be certify that the above statement made by the candidate is correct to my
knowledge

---------------------------------

Guide’s name : Mrs. V. Suganya M.Com., M.Phil.,

Guide’s designation : Assistant professor

-------------------------------------

Head of the department

Department of Commerce with PA

3
 ACKNOWLEDGEMENT

4
 ACKNOWLEDGEMENT

I express my sincere thanks to Mr. ASHOK BHAKTHAVATSALAM and Mrs.

DIVYA ASHOK managing trustee and trustee, KG College of Arts and Science
for giving me an opportunity to undergo this course of study and undertake this
project work .

I extend my thanks and indebtedness to Dr. R. RAVICHANDRAN Secretary and

principal, KG College of Arts and Science for constant encouragement and valuable

guidance throughout the project.

I take this opportunity to acknowledge our thanks to Mrs. R. ANUJA, Principal, KG

College of Arts and Science for providing us necessary facilities in carrying out the
course of Bachelor of Commerce with Professional Accounting and also for the
valuable suggestion and to undergo this project.

I would also like to thank Mr. M.A. PRASAD, Head Of The Department of Commerce
PA for his constant encouragement.

Last but not least, I express my warmth filled thanks to my guide Mrs. V. SUGANYA
M.Com., assistant professor for her valuable guidance and support.

5
 CONTENTS

6
 CONTENTS

CHAPTER NO. TITLE PAGE NO.

I INTRODUCTION AND DESIGN OF THE
STUDY
1.1 Introduction
1.2 Review Of Literature
1.3 Objectives Of The Study
1.4 Scope Of The Study
1.5 Methodology
1.6 Limitations Of The Study
1.7 Chapter Scheme
II COMPANY PROFILE
2.1 Introduction
2.2 About The Company
2.3 Board Of Directors
2.4 Organization Chart
III ANALYSIS AND INTERPRETATION
DATA – I
3.1 Ratio Analysis
3.2 Working Capital
3.3 Trend Analysis
IV FINDING , SUGGESTIONS AND
CONCLUSION
4.1 Findings
4.2 Suggestions
4.3 Conclusion

7
 LIST OF TABLES

8
 LIST OF TABLES

S.NO TABLE PAGE NO.

1 Current Ratio

2 Liquid Ratio

3 Debtors Turnover Ratio

4 Inventory Turnover Ratio

5 Fixed Asset Turnover Ratio

6 Solvency Ratio

7 Trend Analysis I

8 Trend Analysis II

9
 LIST OF CHARTS

10
 LIST OF CHARTS

S.NO TABLE PAGE NO.

1 Current Ratio

2 Liquid Ratio

3 Debtors Turnover Ratio

4 Inventory Turnover Ratio

5 Fixed Asset Turnover Ratio

6 Solvency Ratio

7 Trend Analysis I

8 Trend Analysis II

11
 CHAPTER-I

INTRODUCTION AND DESIGN OF THE STUDY

12
 CHAPTER-I

INTRODUCTION AND DESIGN OF THE STUDY

INTRODUCTION

Finance is the life blood of business. Finance measures the goods and services mostly.
The activating element in business which may be on industrial or commercial
undertaking is the finance. It is the process of plan a financial policies in relation to
procurement, investment and administration of funds in an enterprise. Business finance is
the provision and management of funds in satisfactory conduct of a business. There are
three types of objectives of finance.

 Firstly, adequate supply of needs.

 Secondly, to conserve and increase of capital though better management.
 Thirdly, to make a profit for use of funds.

Finance is the base and basic needs of business. Because the base of the
business should be strong in finance and the human needs like food, shelter, cloth can’t
use without finance.

A financial statement is an organized collection of data according to logical and consist

according procedures. Its purposes is to convey an understanding of some financial
aspects of a business firm. It may how a position at a moment of time as in the case of a
balance sheet or may reveal a serious over a given period of time in the case of an income
statement.

According to Myres, “Financial statement analysis is a study of the relationship among

the various financial factors in a business as disclosed by a single set of statement and a
study of the trend these factors as shown in a series of statement”.

13
REVIEW OF LITERATURE

Literature review is indispensable part of the project. Because it represents the whole
range of research in the past on the topic selected by the researcher on the basis of which
research design of a study is formulated. Literature review gives better insight and helps
bridge gap for the research to be undertaken.

Efforts have been made to present a common scheme of various facts and issues relating
to this empirical studies carried out in past at the national and international stage in
different companies. Some important conclusions and research gap have been drawn
from the review of some research papers, articles, theses and textbooks available in the
accessible libraries and internet sources.

Verma (1989) examined working capital management in Tata Iron and Steel Company
Ltd. (TISCO), Steel Authority of India Ltd. (SAIL) and Indian Iron and Steel
Company(IISCO) during the period from 1978-79 to 1985-86 by using the financial tools
and statistical techniques. The study revealed that Tata Iron and Steel Company Limited
had better working capital management in comparison to Steel Authority of India
Limited and Indian Iron and Steel Company. Results also revealed that all the three firms
under study had made excessive use of bank borrowings to finance the working capital
requirements.

Vijay Kumar and Venkatachalam (1996) have made efforts to do in depth study of
Tamilnadu Sugar Corporation for the period of 1985-86 to 1993-94. Results indicate that
the corporation has maintained moderate level of working capital, less amount from long
term-funds has been used for meeting short term liabilities and due to excess liquidity,
profitability was affected during the period of study.

14
Bansal (2001)has studied working capital management in Himachal Pradesh Agro
Industries Corporation Limited for the period from 1985-86 to 1994-95 with the help of
financial tools. The study reveals that the corporation under study has adopted
conservative policy of financing current assets which resulted in inadequate working
capital. Cash, Inventory, receivable and production capacity have not been managed
properly by the company under study.

Garg (2001) studied working capital trend and liquidity of 8 Haryana Government owned
industrial enterprises in Haryana during the period from 1978-79 to 1987-88 with the
help of accounting tools and statistical techniques. The study reveals that due to high
investments in current assets most of the enterprises had experienced shortage of funds
for buying raw material and paying other liabilities. Blockage of fund in current assets
has also adversely affected the operating efficiency of the enterprises under study.

Pathania (2001)studied working capital management in Himachal Pradesh State

Cooperative Agricultural and Rural Development Bank for the period starting from 1990-
91 to 1994-95 with the help of ratio analysis. The study reveals that the Bank under study
has not used cash efficiently and effectively which resulted in decrease in profitability.

Mohanlal (2004)studied the working capital management in five non-profit

organizations from Durban South Area-Chatsworth with the help of case study
methodology. The researcher found that financial managers of the non-profit
organizations under study were inadequately trained to manage the working capital due to
which they did not implement the policies of the management to achieve the goals of the
organizations.

15
Reference

1. Verma (1989) examined working capital management in Tata Iron and Steel
Company Ltd. (TISCO), Steel Authority of India Ltd. (SAIL) and Indian Iron and
Steel Company(IISCO) during the period from 1978-79 to 1985-86 by using the
financial tools and statistical techniques.
2. Vijay Kumar and Venkatachalam (1996) have made efforts to do in depth
study of Tamilnadu Sugar Corporation for the period of 1985-86 to 1993-94.
3. Bansal (2001) has studied working capital management in Himachal Pradesh
Agro Industries Corporation Limited for the period from 1985-86 to 1994-95 with
the help of financial tools.
4. Garg (2001) studied working capital trend and liquidity of 8 Haryana
Government owned industrial enterprises in Haryana during the period from
1978-79 to 1987-88 with the help of accounting tools and statistical techniques.
5. Pathania (2001) studied working capital management in Himachal Pradesh State
Cooperative Agricultural and Rural Development Bank for the period starting
from 1990-91 to 1994-95 with the help of ratio analysis.
6. Mohanlal (2004) studied the working capital management in five non-profit
organizations from Durban South Area-Chatsworth with the help of case study
methodology.

16
1.3 OBJECTIVES OF THE STUDY

 To analysis the overall operational efficiency and performance of Pricol Limited.

 To study the financial position of the company.
 To offer findings and suggestion to the company.

17
1.4 SCOPE OF THE STUDY

Financial viability, structure and utilizations of various assets of the company are analyzed for a
period of 5 years from 2011-2016. The analysis for the period of 5 years will help to know the
past activities and predict the future.

18
1.5 METHODOLOGY

The study covers the period from March 2011 to March 2016 which encompasses a time, span of
years and the methodology comprises the following components namely.

 Data collection
 Data analysis

DATA COLLECTION

This study is mainly based on secondary data. The required data collected from the annual
reports published by the Pricol Limited. Other relevant data used in the analysis were collected
from various secondary sources like books and journals.

DATA ANALYSIS

The collected data were statistically tested to arrive at conclusion. The objectives of the study
were kept in mind while deciding the tools analysis. The statistical tools like

 Ratio analysis
 Trend analysis

19
1.6 LIMITATIONS OF THE STUDY

 The study is based on the financial statement and information provided in the annual
reports therefore it may not be future indicates.
 There may be some fractional difference in the calculated ratio.
 This study is restricted to the analysis of working capital of Pricol Limited.
 This study is mainly carried out based on the secondary data provided in the financial
statement.

20
1.7 CHAPTER SCHEME

Chapter I : Introduction and design of the study

It deals with introduction, review of literature, objectives of the study, scope of the study,
statistical tools used, methodology, limitations of the study.

Chapter II : Profile of the company

It deals with a brief account that deals with a profile of the company.

Chapter III : Analysis and Interpretation of Data

It deals with ratio analysis.

Chapter IV : Findings, Suggestions and Conclusions

It deals with conclusions and findings made in the study.

21
 CHAPTER -II

COMPANY PROFILE

22
PROFILE OF THE COMPANY

INTRODUCTION

Pricol Limited is an automotive components and precision engineered products manufacturer

headquartered in Coimbatore, India. It was founded in 1972 by the late N. Damodaran and L. G.
Varadarajulu, but started production in 1975. It manufactures automotive components for
motorcycles, scooters, cars, trucks, buses, tractors and Off-road vehicles used in the construction
and Industrial segment. Pricol also manufacture sintered components and products for fleet
management solutions.

PRICOL LIMITED'S HISTORY

Year Event
1972 Founded
1975 Started Production
1979 First Dividend Declaration
1988 Set up second plant in Gurgaon, India
1993 Listed in Bombay stock exchange
1995 Listed in National stock exchange
1999 Set up Plant 3 and 4 in Coimbatore, India
2001 Launched disc brakes for two wheelers
2003 Started a new company Xenos technologies for vehicle security systems
2005 Opened manufacturing plant in Pune, India
2006 Opened branch office Detroit, USA and PT Pricol Surya
2007 Set up manufacturing plant 6 in Pantnagar, India
2008 Set up manufacturing plant 7 in Pantnagar, India
2012 Signed Joint Venture with Johnson controls 50:50
2014 Xenos technologies merged with Pricol Limited
2015 Acquired Brazil based auto component maker, Melling
Exits Joint venture with Denso and Acquired Johnson Controls' 50% stake in Joint
2015
Venture

23
PRODUCTS

Two Wheeler Parts

Auto Decompression Units ,Auto Fuel Cocks ,Chain Tensioners ,Fuel Level Sensors

Fuel Feed Pumps ,Instrument Clusters ,Oil Pumps ,Oil Level Switches ,Speed Sensors

Vehicle Security System

Four Wheeler

Analog Clocks ,Brake Light Switches .Cigarette Lighters ,EGR Valves ,Fuel Level Sensors
,Instrument Clusters ,Map Sensors ,Oil Pumps ,Power Sockets ,Speed Sensors Temperature
Sensors ,Top Dash Tachometers ,Vacuum Switching Valves ,Vehicle Convenience & Security
Systems ,Idle Speed Control Valves ,Windshield Washer Systems

Tractors, Construction & Industrial

Neutral Safety Switches ,Vacuum Switches ,Gauges ,Brake Light Switches ,Charge Pumps
,Cigarette Lighters ,EGR Valves ,Fuel Level Sensors ,Hour Meters ,Instrument Clusters ,Low Oil
Pressure Switches ,Neutural Safety Switches ,Oil Pumps ,Pressure Relief Valve ,Power Sockets
,Pressure Sensors ,Speed Sensors ,Temperature Switches Temperature Sensors ,Warning
Indicators

Commercial Vehicles

Vacuum Switches ,Road Speed Limiter(Speed Governor) ,Gauges ,Vehicle Tracking System
,Hydraulic Cab Tilt System ,Centralised Lubrication System ,Digital Tachograph Brake Light
Switches ,Fuel Level Sensors ,Instrument Clusters ,Oil Pumps ,Pressure Relief Valve ,Pressure
Sensors ,Speed Sensors

24
Domestic Customers

Two Wheelers

Yamaha, Honda, Hero Motors, Suzuki Motors, Bajaj, TVS Motors, Mahindra 2 Wheelers, Royal
Enfield

Four Wheelers

Toyota, Honda, Maruti Suzuki, Tata, Mahindra, Reva, Renault Nissan, Hindustan Motors,
General Motors

Commercial Vehicles

Ashok Leyland, Piaggio, Volvo, Tata, Eicher, Force Motors, Swaraj Mazda, Mahindra Navistar,
Daimler

Tractors

SAME ,Escorts ,John Deere ,Eicher ,New Holland ,Force Motors ,TAFE
,Sonalik,,Mahindra,Swaraj Mazda

Fleet Management

Ashok Leyland, Mahindra

Construction Equipment

Telcon Constructive Solutions, Terex, LT, JCB ,BEML ,CAT ,TATRA

Industrial

Ashok Leyland, Mahindra, Kirloskar, Cummins

Railways

SIEMENS, Indian Railways, Integral Coach Factory, EDM

25
AWARDS AND RECOGNITIONS

AWARDS AND RECOGNITIONS

Year Customer Awards

2009 Bosch Limited Maximizing value to customer

Tractors & Farm Equipment Best Supplier Award for significant contribution
2009
Ltd. towards TAFE's International Business Initiatives

2008 Tata Motors Award for Excellence in Delivery

2007 Maruti Udyog Vendor Performance Award for Quality – 2005-06

Certificate of appreciation for outstanding

2007 Denso Haryana
performance in the category of Cost

2007 Toyota Kirloskar Motor Supplier of the year 2006 - Silver Award

Certificate for Achieving Targets in the Category of

2007 Toyota Kirloskar Motor
Quality – 2006

Certificate for Achieving Targets in the Category of

2007 Toyota Kirloskar Motor
Cost – 2006

Certificate for Achieving Targets in the Category of

2007 Toyota Kirloskar Motor
Delivery - 2006

Award for Achieving Quality & Delivery Targets for

2007 Honda Motorcycle & Scooter
2006-07

Award and Certificate in Recognition of Remarkable

2005 Denso Corporation
Contribution to DENSO Worldwidec

Certificate for Achieving Targets in the Category of

2005 Toyota Kirloskar Motor
Cost

2005 Toyota Kirloskar Motor Awards for Achieving Zero Defect Supplies

Certificate for Superior Performance in the field of

2004 Maruti Udyog
Quality

26
 Certificate for Achieving Targets in the Category of
2004 Toyota Kirloskar Motor
Cost

Certificate for Achieving Targets in the Category of

2004 Toyota Kirloskar Motor
Quality

Certificate for Achieving Targets in the Category of

2002 Toyota Kirloskar Motor
Delivery

Best Vendor Award and Certificate for the

2002 Yamaha Motor
Performance in Proprietary and Electricals

Award and Certificate for Overall Performance in

2002 Yamaha Motor
VA/VE Caravan Activity

Certificate for Achieving Targets in the Category of

2002 Toyota Kirloskar Motor
Cost

Certificate for Achieving Targets in the Category of

2002 Toyota Kirloskar Motor
Delivery

Supplier Award for Outstanding Performance in

2001 Honda Siel Cars
Delivery

Best Vendor Award and Certificate for the Overall

2001 Yamaha Motor
Outstanding Performance

2000 Maruti Udyog Vendor Award for VA / VE Performance

2000 Honda Siel Cars Outstanding Performance Award

1991 Kinetic Honda Motors Best Vendor Award

1990 Kinetic Honda Motors Best Vendor Award

1990 Hero Honda Motors Outstanding Quality Performance Award

1990 Hero Honda Motors Outstanding Indigenisation Performance Award

Automotive Component Mfrs. Bronze Trophy for Overall Excellence in

2007
Assn. of India Manufacturing

SAP ACE 2007 Award for customer Excellence, in

2007 SAP India
the Best Automotive Sector Implementation - Midsize

27
 Enterprises Category

Automotive Component Mfrs.

2005 Silver Trophy for Manufacturing Excellence Award
Assn. of India

Automotive Component Mfrs. Certificate of Honour for Outstanding Contribution to

2005
Assn. of India Technology Developed in India

Engineering Export Promotion Certificate of Merit for Outstanding Export

2004
Council,Southern Region Performance 2003 - 04

Ministry of Commerce &

2002 Export House Recognition
Industry

Automotive Component Mfrs.

2001 Technology Award
Assn. of India

Automotive Component Mfrs.

2000 Export Award
Assn. of India

1998 State Government Safety Awards for longest accident-free hours

1998 Ministry of Defence Best Indigenisation Award Certificate 1997 – 98

Engineering Export Promotion Certificate of Merit for Outstanding Export

1997
Council, Southern Region Performance 1994 - 95

28
BOARD OF DIRECTORS

Chairman Vijay Mohan

Suresh Jagannathan, C R Swaminathan, Sriya Chari, R Vidhya Shankar, G

Director
Soundararajan, K Murali Mohan

Managing
Vikram Mohan
Director

Vice Chairman Vanitha Mohan

Company
T G Thamizhanban
Secretary

29
 CHAPTER-III
ANALYSIS AND INTERPRETATION OF DATA-I

30
 CHAPTER-III

RATIO ANALYSIS AND INTERPRETATION OF DATA-I

3.1 INTRODUCTION

Several ratios calculated from the accounting date, can be grouped into various classes according
to financial activity or function to be evaluated. As stated the earlier the parties interested in
financial analyses are short and long-term creditors, owner and management.

Ratio analysis is a tool of management for measuring efficiency and guiding business policies.
The relationship between two figures expressed mathematically is called a ‘ratio’. Ratio analysis
is a technique of analysis and interpretation of financial statements. It is the process of
determination and interpretation of various ratios for helping in decision making.

A ratio is simple arithmetical expression of the relationship of one number to another. It may be
defined as the indicated quotient of two mathematical expressions.

Ratio analysis is the process of determining and presenting the relationship of items and group of
items in the statements. According to Batty J. Management Accounting “Ratio can assist
management in its basic functions of forecasting, planning coordination, control structure and
communication”. It is helpful to know about the liquidity, solvency, capital structure and
profitability of an organization. It is helpful tool to aid applying judgement, otherwise complex
situations.

Ratio provide clues to the financial position of the concern. These are the position or indicators
of financial strength, soundness, position or weakness of an enterprise. One can draw
conclusions about the exact financial position of a concern with the help of ratios.

LIQUIDITY RATIO

The liquidity refers to maintenance of cash, bank balance and those assets which are easily
convertible into cash in order to meet the liabilities as and men arising. So, the ratios study the
firm’s short-term solvency and it ability to pay of the liabilities.

31
3.2.1 CURRENT RATIO

Current ratio is defined as the relationship between current assets and current liabilities. This
ratio is also known as working capital ratio. It is measure of general liquidity and is mostly
widely used to make the analysis of a short-term financial position or liquidity of firm. It is
calculated by dividing current assets by current liabilities.

Current assets

Current Ratio=-------------------------------------------

Current liabilities

32
 TABLE NO:1

CURRENT RATIO

YEAR CURRENT ASSETS(IN CURRENT LIABILITIES(IN RATIO (IN

MILLION) MILLION) PROPORTION)

2012 3969.385 3637.053 1.091

2013 2835.432 3046.065 0.931

2014 2754.149 2478.18 1.111

2015 2946.087 2589.452 1.138

2016 3332.421 3016.498 1.105

SOURCE: consolidated report of pricol limited

INTERPRETATION:

From the above table it is inferred that the current ratio for 5 years is calculated. It is
concluded that the current ratio is increased from the year 2012-1.091.But in the year 2013 it was
decreased to 0.931 and the current ratio increased from 2014-1.111;2015-1.138. In the year 2016
it was decreased to 1.105.

33
 CHART NO:1

CURRENT RATIO

1.2

0.8
PERCENTAGE

0.6
RATIO (IN
0.4 PROPORTION)

0.2

0
2012 2013 2014 2015 2016
YEAR

34
3.2.2 LIQUID RATIO

Quick ratio also known as acid test (or) liquid ratio is a more rigorous test of liquidity then the
current ratio. The term “ liquidity” refers to the ability of a firm to pay its short-term obligations
as and when they become due.

Quick ratio may be defined as the relationship between quick liquid assets and current liabilities.

Acid test ratio is the ratio between quick between quick current assets and current liabilities and
is calculated by dividing the liquid assets by the current liabilities. The standard liquid is 1:1.

Liquid asset

Liquid ratio=----------------------------------

Current Liabilities

35
 TABLE NO:2

LIQUID RATIO

YEAR LIQUID ASSETS(IN CURRENT LIABILITIES(IN RATIO (IN

MILLION) MILLION) PROPORTION)

2012 1293.525 3637.053 0.356

2013 1772.976 3046.065 0.582

2014 1788.191 2478.18 0.722

2015 1861.171 2589.452 0.719

2016 1017.855 3016.498 0.337

SOURCE: consolidated report of pricol limited

INTERPRETATION:

From the above table it is inferred that the liquid ratio for 5 years is calculated. It is
concluded that the current ratio is increased from the year 2012-0.356; 2013-0.582; 2014-0.722
But in the year 2015 it was decreased to 0.719and in the year 2016 it was decreased to 0.337

36
 CHART NO:2

LIQUID RATIO

0.8
0.7
0.6
PERCENTAGE

0.5
0.4
RATIO (IN
0.3 PROPORTION)
0.2
0.1
0
2012 2013 2014 2015 2016
YEAR

37
3.2.3 EFFICIENCY RATIO

DEBTORS TURNOVER RATIO

Debtors turnover ratio is called ‘receivable turnover ratio’ or ‘debtors velocity’. A business
concern generally adopts different methods of sales. One of them is selling on credit. Goods are
sold on credit policy adopted by the firm. The customers who purchased on credit based on
credit policy adopted by the firm. The customers who purchased on credit are called trade
debtors or book debts.

Debtors Turnover Ratio indicates the speed at which the sundry debtors are converted in the
form of cash. It indicates the number of times the debtors are turned over a year. It is the reliable
measure of receivables from credit sales. The higher the value the more efficient is the
management of debtors. Similarly, lower the ratio means inefficient management of debtors.

Net sales

Debtors Turnover Ratio=----------------------------

Debtors

38
 TABLE NO: 3

DEBTORS TURNOVER RATIO

YEAR NET SALES(INMILLION) DEBTORS(IN MILLION) RATIO(INTIMES)

2012 9670.866 1800.875 5.37

2013 8754.103 1639.644 5.34

2014 8947.708 1589.746 5.63

2015 9516.700 1644.743 5.79

2016 11335.092 2001.904 5.66

SOURCE: consolidated report of pricol limited

INTERPRETATION:

From the above table it is inferred that the current ratio for 5 years is calculated. It is
concluded that the current ratio is increased from the year 2012-5.37.But in the year 2013 it was
decreased to 5.34 and the current ratio increased from 2014-5.63;2015-5.79. In the year 2016 it
was decreased to 5.66.

39
 CHART NO:3

DEBTORS TURNOVER RATIO

5.9
5.8
5.7
PERCENTAGE

5.6
5.5
5.4 RATIO (IN TIMES)

5.3
5.2
5.1
2012 2013 2014 2015 2016
YEAR

40
3.2.4 INVENTORY TURNOVER RATIO

Inventory turnover is a measure of the number of times inventory is sold or used in a given time
period such as one year. It is a good indicator of inventory quality (whether the inventory is
obsolete or not), efficient buying practices, and inventory management. This ratio is important
because gross profit is earned each time inventory is turned over. Also called stock turnover.

Net sales

Inventory turnover ratio= ----------------------------

Inventory

41
 TABLE NO: 4

INVENTORY TURNOVER RATIO

YEAR NETSALES(INMILLION) INVENTORY(INMILLION) RATIO(INTIMES)

2012 9670.866 1337.930 7.23

2013 8754.103 1062.456 8.24

2014 8947.708 965.958 9.26

2015 9516.700 1082.816 8.79

2016 11335.092 1157.283 9.79

SOURCE: consolidated report of pricol limited

INTERPRETATION:

From the above table it is inferred that the liquid ratio for 5 years is calculated. It is
concluded that the current ratio is increased from the year 2012-7.23; 2013-8.24; 2014-9.26 But
in the year 2015 it was decreased to 8.79 and in the year 2016 it was increased to 9.79.

42
 CHART NO:4

INVENTORY TURNOVER RATIO

12

10

8
PERCENTAGE

6
RATIO (IN TIMES)
4

0
2012 2013 2014 2015 2016
YEAR

43
3.2.5 FIXED ASSET TURNOVER RATIO

Fixed asset turnover ratio compares the sales revenue a company to its fixed assets. The ratio
tells us how effectively and efficiently a company is using its fixed assets to generate revenues.
This ratio indicates the productivity of fixed assets in generating revenues. If a company has a
high fixed asset turnover ratio, it shows that the company is efficient at managing its fixed assets.
Fixed assets are important because they usually represent the largest component of total assets.

In increasing trend in fixed assets turnover ratio is desirable because it means that the company
in less money tied up in fixed assets for each unit of sales. A declining trend in fixed asset
turnover may mean that the company is over investing in the property, plant and equipment. This
ratio is usually used in capital-intensive industries where major purchases for fixed assets.

Net sales

Fixed Asset Turnover Ratio = ------------------------------------

Fixed Assets

44
 TABLE NO: 5

FIXED ASSET TURNOVER RATIO

YEAR NETSALES(INMILLION) FIXEDASSET(INMILLION) RATIO(INTIMES)

2012 9670.866 1913.161 5.06

2013 8754.103 1833.507 4.78

2014 8947.708 1809.799 4.94

2015 9516.700 1760.685 5.41

2016 11335.092 1804.560 6.28

SOURCE: consolidated report of pricol limited

INTERPRETATION:

From the above table it is inferred that the liquid ratio for 5 years is calculated. It is
concluded that the fixed asset turnover ratio is increased from the year 2012-5.06. But in the year
2013 it was decreased to 4.78 and in the year 2014 it was decreased to 4.94 . But in the year 2015
it was increased to 5.41 and in the year 2016 it was increased to 6.28.

45
 CHART NO:5

FIXED ASSET TURNOVER RATIO

5
PERCENTAGE

3
RATIO (IN TIMES)
2

0
2012 2013 2014 2015 2016
YEAR

46
3.2.6 SOLVENCY RATIO

Solvency refers to the family ability to meet its long term indebtedness. Solvency ratio the firm
ability to meet its long term obligations. The following are the important solvency ratios.

DEBT EQUITY RATIO

The debt-to-equity ratio is a financial ratio indicating the relative proportion of shareholders’
equity and debt used to finance a company’s assets. Closely related to leveraging, the ratio is also
known as Risk, Gearing or Leverage. The two components are often taken from the firm’s
balance sheet or statement of financial position (so -called book value), but the ratio may also be
calculated using market values for both, if the company’s debt and equity are publicly traded, or
using a combination of book value for debt and market value for equity financially. When used
to calculate a company’s financial leverage, the debt usually includes only the Long Term Debt
(LTD). Quoted ratios can even exclude the current portion of the LTD. The composition of
equity and debt and its influence on the value of the firm is much debated and also described in
the Modigliani-Miller theorem.

Debt equity is a measure of all of a company’s future obligations on the balance sheet relative to
equity. However, the ratio can be more discerning as to what is actually borrowing, as opposed
to each other types of obligations that might exist on the balance sheet under the liability section.

Total debt

Debt equity ratio =-------------------------------------

Net worth

47
 TABLE NO: 6

DEBT EQUITY RATIO

YEAR TOTALDEBT(INMILLION) NETWORTH(INMILLION) RATIO(INPROPORTION)

2012 4316.296 2450.239 1.762

2013 3125.308 2566.525 1.218

2014 2619.744 3207.820 0.817

2015 2916.319 2675.389 1.090

2016 3376.304 2993.268 1.128

SOURCE: consolidated report of pricol limited

INTERPRETATION:

From the above table it is inferred that the liquid ratio for 5 years is calculated. It is
concluded that the current ratio is increased from the year 2012-1.762. But in the year 2013 it
was decreased to 1.218 and in the year 2014 it was decreased to 0.817. In the year 2015 it was
increased to 1.090 and in the year 2016 it was increased to 1.128.

48
 CHART NO:6

DEBT EQUITY RATIO

2
1.8
1.6
1.4
PERCENTAGE

1.2
1
0.8 RATIO (IN
PROPORTION)
0.6
0.4
0.2
0
2012 2013 2014 2015 2016
YEAR

49
WORKING CAPITAL

MEANING AND DEFINITION

A part from investment in fixed assets, every enterprise has to arrange for adequate funds for
meriting day (operations) to keep it a concern. So originally speaking working capital refers to
the flow of funds, necessary for working of enterprise however these is no agreement among the
financial experts regarding the meaning of working capital. They define working capital in the
following ways.

ACCORDING TO MEAD MALLOT

“Working capital means current assets”

ACCORDING TO WESTON AND BRIGHAM

“Working capital refers to a firm investment in short term assets , cash, short
term securities, accounts receivables and inventories.”

50
CONCEPT OF WORKING CAPITAL

There are two concepts of working capital: gross and net.

The term gross working capital also referred to as a working capital means the total current
assets.

The term net working capital can be defined in 2 ways.

 The most common definition of networking capital is the difference between current
assets and liabilities.

 Alternate definition of net working capital is that portion of current assets which is
financed with long term funds.

The task of the financial manager in managing working capital efficiency is to ensure sufficient
liquidity in the operation of the enterprise. The liquidity of a business firm is measured by its
ability to satisfy short term obligations as they become due. The three basics measure of a firm’s
overall liquidity is

1) The acid test ratio

2) The networking capital
3) The current ratio

In brief, they are useful in inter firm comparison of liquidity. Net working capital as a of
measure liquidity is not very useful for comparing the performance of different firms, but it is
quite useful for internal control. The net working capital helps in comparing the same firm over
time.

51
 STATEMENT OF CHANGES IN WORKING CAPITAL OF PRICOL LIMITED

YEAR CHANGES IN WORKING CAPITAL

PARTICULARS
2012 2013 INCREASE DECREASE

Current assets

Cash 684.669 22.092 - 662.577

Inventories 1337.930 1062.456 - 275.474

Sundry debtors 1800.875 1639.644 - 161.231

Total current 3823.474 2724.192 - -

asset

Current liability 3637.053 3046.065 - 590.988

Total current 3637.053 3046.065 - -

liability

Working capital 186.421 -321.873 - -

(CA-CL)

Decrease in -135.452 - - -135.452

working capital

Total 7325.075 5770.257 - 1554.818

52
 STATEMENT OF CHANGES IN WORKING CAPITAL OF PRICOL LIMITED

YEAR CHANGES IN WORKINGCAPITAL

PARTICULARS
2013 2014 INCREASE DECREASE

Current assets

Cash 22.092 37.797 15.705 -

Inventories 1062.456 965.958 - 96.498

Sundry debtors 1639.644 1589.746 - 49.898

Total current 2724.192 2593.501 - -

asset

Current liability 3046.065 2478.18 - 567.885

Total current 3046.065 2478.18 - -

liability

Working capital -321.873 115.321 - -

(CA-CL)

Decrease in -206.552 - - -206.552

working capital

Total 5563.705 5071.681 15.705 507.729

53
 STATEMENT OF CHANGES IN WORKING CAPITAL OF PRICOL LIMITED

YEAR CHANGES IN WORKING CAPITAL

PARTICULARS
2014 2015 INCREASE DECREASE

Current assets

Cash 37.797 67.582 29.785 -

Inventories 965.958 1082.816 116.858 -

Sundry debtors 1589.746 1644.743 54.997 -

Total current 2593.501 2795.141 - -

asset

Current liability 2478.18 2589.452 111.272 -

Total current 2478.18 2589.452 - -

liability

Working capital 115.321 205.689 - -

(CA-CL)

Decrease in 90.368 - - 90.368

working capital

Total 5162.049 5384.593 222.544 90.368

54
 STATEMENT OF CHANGES IN WORKING CAPITAL OF PRICOL LIMITED

YEAR CHANGES IN WORKING CAPITAL

PARTICULARS
2015 2016 INCREASE DECREASE

Current assets

Cash 67.582 64.717 - 2.865

Inventories 1082.816 1157.283 74.467 -

Sundry debtors 1644.743 2001.904 357.161 -

Total current asset 2795.141 3223.904 - -

Current liability 2589.452 3016.498 427.046 -

Total current 2589.452 3016.498 - -

liability

Working capital 205.689 207.406 - -

(CA-CL)

Decrease in -1.717 - - -1.717

working capital

Total 5382.876 6240.402 858.674 1.148

55
 TABLE NO: 7

TREND ANALYSIS OF CURRENT ASSETS OF PRICOL LIMITED

YEARS CURRENT ASSETS PERCENTAGE

2012 3823.474 100

2013 2724.192 71.25

2014 2593.501 67.83

2015 2795.141 73.11

2016 3223.904 84.35

INTERPRETATION

Current assets of Pricol Limited have decreased for two years. Decreased
percentages are 2013-71.25%, 2014-67.83%. But, after that each and every year the ratio is being
increased simultaneously and has rapid growth in cumulative years. So that the variation in
current asset and percentage. There is downward and upward in percentage.

56
 CHART NO:7

CURRENT ASSETS OF PRICOL LIMITED

120

100

80
PERCENTAGE

60
PERCENTAGE
40

20

0
2012 2013 2014 2015 2016
YEAR

57
 TABLE NO: 8

TREND ANALYSIS OF CURRENT LIABILITIES OF PRICOL LIMITED

YEARS CURRENT LIABILITIES PERCENTAGE

2012 3637.053 100

2013 3046.065 83.75

2014 2478.18 68.14

2015 2589.452 72

2016 3016.498 82.94

INTERPRETATION

Current Liabilities of Pricol Limited have decreased for two years. Decreased
percentages are 2013-83.75%, 2014-68.14%. But, after that each and every year the ratio is being
increased simultaneously and has rapid growth in cumulative years. So that the variation in
current asset and percentage. There is downward and upward in percentage.

58
 CHART NO:8

CURRENT LIABILITIES OF PRICOL LIMITED

120

100

80
PERCENTAGE

60
PERCENTAGE
40

20

0
2012 2013 2014 2015 2016
YEAR

59
 CHAPTER-IV
FINDINGS, SUGGESTIONS AND CONCLUSIONS
60
 CHAPTER-IV

FINDINGS, SUGGESTIONS AND CONCLUSIONS

4.1 FINDINGS

 In the year 2012-2013 it shows decrease in working capital of -135.452

 And in the following year 2013-2014 shows decrease in working capital of -206.552
 In the year 2014-2015 it shows decrease in working capital of 90.368
 In the year 2015-2016 it shows decrease in working capital of -1.717
 This is due to increase and decrease in the value of liability

61
4.2 SUGGESTIONS

 The current ratio is maintained at a satisfied level. So that industry pursues this much of
current assets to meet the objectives of the firm.
 Company is maintaining high quick assets to overcome liabilities for better results
 At the same time it should increase the liable of current assets little more to overcome
from the increase in working capital
 The maximum profits will increased by using of financial resource
 It should introduce new innovations means the company will gain more profit
 Company should provide better offer to satisfy the customer

62
4.3 CONCLUSION

This study has been undertaken with the objectives of studying the financial
performance of Pricol Limited for the period of 2012-2016. The research found that the company
had some upward and downward trend during the period of study. In order earn sufficient profits,
a firm has to depend on its sales apart from others.

63