Project Report at Kel

Kerala Electrical & Allied Engineering co.
LTD KUNDARA
TOPIC: Financial Performance of KEL
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Kerala Electrical & Allied Engineering co. LTD KUNDARA
CHAPTER- 1
1.1INTRODUCTION
. This study is various aspect of organisation is great benefit of
management students. So this study is helpful to know the financial department
function and to know the surplus and deficit of this organisation. Moreover to analyse
the various source of finance in this organisation and to know the profit and losses
variation to this organisation
Analysis means establishing a meaningful relationship between various

items of the two financial statements with each other in such a way that
conclusion is being drawn. By financial statements by means of
t w o statementsProfit and loss account or Income StatementBalance Sheet or
Position Statement These are prepared at the end of a given period of time. They
arethe indicators of profitability and financial soundness of the business
concern. The term financial analysis is also known as analysis and
interpretation of fi na n cia l sta te me n ts. It re fe rs to th e e stab l i shi n g
me a ni n g ful rel a ti on sh i p between various items of the two financial statements
i.e. Income statement and Position statement. It determines financial strength
and weakness of the firm. Analysis of financial statements is an attempt
to assess the efficiency and performance of an enterprise. Thus, the
analysis and interpretation of financial statements is very essential to measure
the , financial soundness and future prospects of the business units.
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
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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
1.2 EXPLANATION OF TOPIC

TOPIC; Financial performance of Kerala Electrical&Allied Engineering CO.Ltd
FINANCE (meaning)
Finance is the life blood and nerve centre of a business, just as circulation of blood is
essential in the human body for maintaining life. Finance is very essential for smooth running
of business. Right from the very beginning i.e., conceiving an idea to business, finance is
needed to promote or establish the business, acquire fixed assets, make investigations such
as market surveys etc., develop product, keep men and machines at work, encourage
management to make progress and create values. Even an existing firm may require further
finance for making improvement or expanding the business.
FINANCIAL SYSTEM
The financial system comprises of a variety of intermediaries, markets, and
instruments. It provides the principal means by which savings are transformed into
investments.
The financial system is divided into six sections
 Functions of the financial system

 Financial assets
 Financial markets
 Financial market returns
 Financial intermediaries
 Regulatory infrastructure
FUNCTIONS OF THE FINANCE SYSTEM
 It provides a payment system for the exchange of goods and services

 It enables the pooling of funds for undertaking large scale enterprises.
 It provides a mechanism for spatial and temporal transfer of resources
 It provides a way for managing uncertainty and controlling risk
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 It generates information that helps in coordinating decentralized

decision making.
 It helps in dealing with the incentive problem when one party has an
informational advantage
Ratio Analysis.
Ratio analysis is an important and widely used tool of analysis of financial
statements. It is essentially an attempt to develop meaningful relationship between
individual items or group of items in the balance sheet or profit and loss account.
The object and utility of ratio analysis as a technique of financial analysis is confined
not only to the internal parties but to the trade creditors, banks and lending
institutions also. It functions as a sort of health test. In the nutshell, ratio analysis
gives the answer to the problems such as:
 Whether the enterprise’s financial position is basically sound,

 Whether the capital structure of the business is in proper order
 Whether the profitability of the enterprise is satisfactory,

 Whether the credit policy in relation to sales and purchases is sound
 Whether the company is credit-worthy
 Thus, ratio analysis highlights the liquidity, solvency, profitability, capital
gearing, etc. It may be emphasized here that a ratio refers whether the
relationship is good or bad. Ratios by themselves are not conclusions; the
analyst must draw some interference from the ratios he has computed before
he makes by any decisions on the financial status of the organization. He
must select or establish his own criterion with which to interpret ratios. The
selection of criterion will greatly depends upon the objective of analysis. The
criterion which may be “good” for short term analysis can be “bad” for long
term analysis. It should be remembered that ratio are only guides to the
analysis of financial statements and no conditions or end in them.
 A ratio is a simple arithmetical expression of the relationship of one number to
another. Ratio analysis is a technique of analysis and interpretation of
financial statement. It is the process of establishing and interpreting various
ratios for helping in making certain decisions. However, ratio analysis is not
an end in itself. It is only a means of better understating of financial strength
and weakness of a firm. Calculation of mere ratios does not serve any
purpose, unless several appropriate ratios are analysed and interpreted.
There are number of ratios which can be calculated from the information given
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in the financial statement, but the analyst has to select the appropriate data
and calculate few appropriate ratios from the same keeping in mind the same
objective of analysis
Ratios can be broadly classified into the following ways:-

(a) Statement wise classification. This classification is based on the
statement from which items are taken.
 (i) Balance sheet ratio. This deals with relationship between two items or
groups of items, all of which are both in the balance sheet.
 (ii) Income statement ratio. This ratio focuses on the relationship
between two items or group of items, all of which are drawn from the
revenues statement. These ratios are also known as ‘operating ratio’.
 (iii) Combined ratio which is drawn from the balance sheet and the other
from the revenue statement. These ratios depict the relationship between
two items, one of.
(b) Classification According To Nature. This mode of classification
includes in its fold 4 different types of accounting ratio which are as follows.
 (i) Liquidity ratio. These ratios portray the capacity of business unit
to meet its short time obligation out of its short term resources.
 ii) Leverage ratio. These ratios are also called efficiency ratio. These
ratio measure the owners stock in the business vis-a-vis that of outsiders. The
long term solvency of the business can be examined by using leverage ratios.
 (iii) Activity ratio. These ratios evaluate the use of total resources of
the business concern along with total resources of the business concern
along with the use of components of total assets. More preciously they are
included to measure the effectiveness of the asset management. The
efficiency with which the assets are used would be reflected in the speed and
rapidity with which the assets and converted into
 (iv) Profitability ratios. The profitability of a business understanding
is measured by the profitability ratio. These ratios highlights the end of result
of business unit can be judged.
(c) Classification According to Importance. It is evident that some
ratios are more important than others. This classification has been
recommended by the British Institute of Management.
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 (i) Primary Ratios. As a success any business understanding is

measured by the quantum of profit earned by it. The ratio which relates the
product to capital employed is termed as primary ratio.
 (ii) Secondary ratios. This classification is effected to facilitate inter-firm
comparison and to focus on some factors responsible for the success of the
unit when such factors are isolated by means of ratio called secondary data
Liquidity Solvency Ratios
Liquidity is the ability of the firm to meet its current liabilities as they fall due.
Since liquidity is basic to continue operations of the firm, it is necessary to determine
the degree of liquidity of the firm. The financial manager analyses the following
important ratios for the purpose. In the absence of adequate liquidity, the firm would
not be able to pay creditors, who have supplied goods and services, on the due date
promised. Firm’s goodwill suffers, in case of default in payment. In fact, dissatisfied
suppliers, normally, refuse to supply, further. Who can finance, indefinitely? Loss of
creditworthiness may result in legal problems, finally, culminating in the closure of
business of a company, even. If the firm maintains more liquidity, it will not not be
able to pay creditors, who have supplied goods and services, on the due date
promised. Firm’s goodwill suffers, in case of default in payment. In fact, dissatisfied
suppliers, normally, refuse to supply, further. Who can finance, indefinitely? Loss of
creditworthiness may result in legal problems, finally, culminating in the closure of
business of a company, even. If the firm maintains more liquidity, it will not
experience any difficulty in making payments. However, a higher degree of liquidity
is bad, as idle assets earn nothing, while there is cost for the funds. The firm’s funds
will be, unnecessarily, tied up in liquid assets. Both inadequate and excess liquidity
are not desirable. It is necessary for the firm to strike a proper balance between high
liquidity and lack of liquidity.
a. Current Ratio
This is the standard measure of any organizations financial health. It is the
ratio of current asset to current liabilities. This ratio is also known as working
capital ratio from the fact that often absolute figures standing alone convey no
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meaning. Therefore the study of accounting ratios is indispensible for financial

analysis.
The current asset includes stock, debtors, bills receivables, cash and cash
equivalents and current liabilities includes creditors, unpaid dividends,
statutory liabilities and other miscellaneous liabilities.
As a conventional rule, a current ratio of 2:1 is considered satisfactory.

The rule is based on the logic that in the worst situation, even if the value of
current assets becomes half, the firm will be able to meet its obligations, fully.
A ‘two to one ratio’ is referred to as ‘Rule of thumb’ or arbitrary standard of the
liquidity of the firm. This current ratio represents a margin of safety for
creditors. Realisation of assets may decline. However, all the liabilities have to
be paid, in full.
b. Quick Ratio
This ratio is also known as Acid Test Ratio. It is the relation between quick
assets to current liabilities. An asset is a liquid if it can be converted into cash
immediately for reasonably soon without a loss of value.
A quick ratio of 1:1 is considered satisfactory as firm can easily meet all its
current liabilities. Quick ratio is the true test of business solvency. A higher
ratio indicates sound financial position and vice-versa.
c. Absolute Liquidity Ratio

This ratio is obtained by dividing cash by current liabilities. Here the cash
Involves cash in hand, bank balance, and investment in securities, treasury
deposits etc.
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A ratio of 1:2 is recommended to ensure liquidity. This test is more vigorous to

measure a firm’s liquidity position.
Leverage Ratios
22. Many financial analyses are interested in the relative use of debt and equity
in the firm. These ratios measure the long-term solvency position of the firm.
Leverage ratios indicate the mix of debt and owners’ equity in financing the assets of
the firm. These ratios measure the extent of debt financing in a firm. Following are
the important leverage ratios:
(a) Debt – Equity Ratio

(b) Proprietary Ratio
(c) Fixed Asset to Net Worth Ratio
(d) Capital Gearing Ratio
a. Debt Equity Ratio

The relationship between borrowed fund and owned capital is a popular
measure of the long-term financial solvency of a firm. The relationship is shown
by the debt equity ratio.
It is computed to ascertain the soundness of the long-term financial position of

the firm. This ratio expresses the relationship between debt (external equities)
and the equity (internal equities)
Debt means long term loans, i.e., debentures, long-term loans from financial
institution. Equity means shareholders’ funds, i.e., preference share capital,
equity share capital, reserves less losses and fictitious assets like preliminary
expenses. The ratio is ascertained as follows:
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Higher Ratio indicates risky financial position while lower ratio indicates safe
financial position. Acceptable Debt-Equity Ratio is 2:1 which means debt can be
twice the equity.
b. Proprietary Ratio
Proprietary ratios refer to the shareholders fund to total assets. This ratio
shows the long term solvency of the business. It is calculated by dividing
shareholders funds by the total assets. Proprietors fund means share capital +
reserves + surplus, Both of capital and revenue nature. Loss and fictitious assets
are deducted. This ratio shows the extent to which the shareholders own the
business.
Higher the ratio the better it is for all concerned. Proprietary Ratio highlights
the general financial position of the enterprise. This ratio is of great importance to
the creditors to ascertain the proportion of shareholders’ funds in the total assets
employed in the firm. The acceptable norm of the ratio is 3:1.
c. Fixed Assets to Net worth Ratio

This ratio shows the relationship between fixed assets and
shareholders fund. The purpose of this ratio is to find out the percentage of
the owners fund invested in fixed assets.
If the ratio is greater than 1, it means the creditors fund have been
used to acquire a part of the fixed assets.
d. Capital Gearing Ratio

It is also known as Leverage Ratio. This ratio is mainly used to analyze
the capital structure of the company. The term capital gearing refers to the
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proportion between fixed income bearing securities and none fixed income
bearing securities. The former includes preference share capital and
debenture and the latter includes equity share capital and reserves and
surplus.
For computation of capital gearing ratio, funds that belong to equity

shareholders such as equity share capital, share premium and other reserves
are to be considered. The capital-gearing ratio can be ascertained as under:
Activity Ratios
23. This category of ratios includes those ratios which highlight upon the activity
and operational efficiency of the business. The success or failure of the concern
depends upon the proper use of resources certain ratios are used and they are
collectively called as “Activity Ratios” or “Turn over Ratio”. These ratios are called
because they indicate the speed with which assets are converted or turned over into
sales.
a. Inventory Turnover Ratio

This ratio establishes the relationship between cost of goods sold and
the average stock held by the organization. It shows the stock velocity i.e,
how many times the stock is turned over in a financial year. This ratio helps to
measure the organizations efficiency in stock movement and inventory
management.
b. Fixed Asset Turnover Ratio
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This indicates the extent to which the investments in fixed assets

contribute towards sales. It indicates whether the investment in fixed asset has
been judicious or not when compared with previous year. Thus ratio calculated
as follows
c. Debtors Turnover Ratio

The ratio indicates the relationship between the debtors and sales. It
discloses the number of time the debts are collected in year. The liquidity
positions in the organization to pay its short term liabilities are depends on the
quality of debtors.
This ratio measures the collectivity of accounts receivables and tells about
how the credit policy of the organization is enforced. It indicates the velocity of
the debt collection of the organization.
It indicates the extent to which an organization efficiency with regard to

collection from debtors
d. Creditors Turnover Ratio.

It indicates the number of times the accounts payable rotates in a year.
It signifies the credit period enjoyed by the firm in paying its creditors.
Profitability Ratios.
The business firm is basically a profit earning organization, the income

statement of the firm shows the profit earned by the firm during the accounting
period. The last group of financial ratios, more often used, is Profitability Ratios.
Profit is the difference between revenue and expenses over a period, usually, one
year. Profitability ratios are to measure the operating efficiency of the company.
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Profitability is an indication of the efficiency with which the operator of the business is
carried on. Generally, two major types of profitability ratios are calculated:
 Profitability ratios based on sales
 Profitability ratios based on investment
Profitability Ratios Based on Sales. Profit is a factor of sales. Profit
is earned, after meeting all expenses, as and when sales are made. These ratios
can be further divided into:
(i) Gross profit ratio

(ii) Expenses ratios
(iii) Net profit margin ratio
(a) Gross Profit Ratio. The gross profitability ratio plays an

important role in two management areas. In the area of financial
management, the ratio serves as valuable indicator of the firm’s ability to
utilize effectively outside sources of fund. Secondly, this ratio also serves as
important tool in shaping the pricing policy of the firm, paying its creditors.
This ratio helps in ascertaining whether the average percentage of

mark up on the good is maintained or not. An increase in gross profit ratio
may be due to an increase in the selling price without a corresponding
increase in the cost of goods sold or due to decrease in the cost of goods sold
without corresponding decrease in selling price of goods and vice-versa
(ii) Net Profit Ratio. This ratio expresses profit generating capacity of
sales for an organization for every rupee. It is the difference between what a
business takes in and what it gives in the process of carrying out of its
business. It establishes the relationship between net profit after tax and the
net sales. This ratio indicates the organization capacity to face any adverse
economic condition. This ratio is given as a percentage of net profit to sales.
This ratio indicates the overall measure of the organization profitability and
reveals sales efficiency.
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(iii) Operating Expenses Ratios. To identify the cause of fall or rise in

net profit, each operating expense ratio is to be calculated. This can be
calculated by:
The behaviour of specific expenditure is to be seen, in comparison to the

earlier years, in the same firm. This throws the light on the managerial policies and
actions.
Profitability Ratios Based on Investment. The profitability of a
firm can be analyzed from the point of view of owners in different
perspectives, as follows:
(1) Return Of Total Assets Ratio

Profitability can be measured in terms of relationship between net profit
and total assets. This ratio is also known as return on gross capital employed.
It measures the profitability of investment. The overall profitability can be
known by applying this ratio.
(ii) Return On Capital Employed Ratio. This ratio is also known as

return on investment (ROI). The primary objective of making investment in any
business is to obtain satisfactory return on capital invested. It indicates the
return on capital employed in the business and it can be used to show the
efficiency of the business as a whole.
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Return on Equity. In the real sense, equity shareholders are the real owners
of the company. They assume the risk in the firm. Preference shareholders enjoy
fixed rate of dividend and preference for payment of dividend,
(iii) before dividend is distributed to equity shareholders. Net profits after

tax, after dividend is paid to preference shareholders, entirely belong to the
equity shareholders. Equity shareholders would be interested to know what
their real return is on the funds invested. This ratio for return on equity is
calculated as under:
Equity shareholders’ funds are equity share capital, accumulated

reserves (both general reserves and capital reserves), share premium and
balance in profit and loss account less accumulated losses, if any. Preference
shareholders are not to be included as the dividend due to them has, already,
been deducted from profits, after tax.
Trend analysis
The trend signifies a tendency and such the review and appraisal of tendency
in accounting variables are nothing but the trend analysis .Trend analysis is carried
out by calculating trend ratio. Trend analysis is significant for forecasting and
budgeting. Trend analyses disclose the change in financial and the operating data
between specific periods.
Trend ratios are also an important tool of horizontal financial analysis. Under
this technique of financial analysis, the ratios of different items of various periods
are calculated and then a comparison is made. An analysis of the ratios over past
few years may well suggest the trend or direction in which the concern is going
upward or downward. The method of trend percentages is a useful analytical device
for the management since by substituting percentages of large amounts; the brevity
and readability are achieved.
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The term trend analysis refers to the concept of collecting information and
attempting to spot patter, or trend, in the information. Trend percentages are
immensely helpful in making a comparative study of the financial statement for
several years. Trend analysis is a form of comparative analysis that is often
employed to identify current and future movement of an investment or group of
investment. The process may involve comparing post and current financial ratios as
they related to various institutions in order to project how long the current trend will
continue. This type of information is order to project how long the current trend will
continue. This type of information is extremely helpful to investors who wish to make
the most from their investments.
One year is taken as the base year. Usually, the first year is taken as the
base year. The figures of base year are taken as 100. Trend percentages are
calculated in relation to the base year. If a figure in a year is less than base year,
the trend percentage will be less than 100 and if the trend percentage will be more
than 100.
Statement of Changes in Working Capital.

8. Statement of changes in working capital is also very useful to identify the
increase or decrease in working capital over a period. The main objective of this
statement preparation is to derive an accurate summary of the events that affected
the amount of working capital. The amount of working capital is determined by
deducting the total of current liabilities from the total of current assets. Hence it is a
rough statement, which may be prepared by using balance sheet data only.
However, it does not explain the detailed reasons for the changes in working capital
and methods of financial additional requirements of working capital. Hence, the
preparation of fund flow statements becomes necessary
Due Pont Analysis.
25. The DuPont identity is an expression that shows a company's return on equity
(ROE) can be represented as a product of three other ratios: the profit margin, the
total asset turnover, and the equity multiplier. The DuPont identity, commonly known
as DuPont analysis, comes from the DuPont Corporation, which began using the
idea in the 1920s. DuPont identity tells us that ROE is affected by three things:
1. Operating efficiency, which is measured by profit margin;
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2. Asset use efficiency, which is measured by total asset turnover; and
3. Financial leverage, which is measured by the equity multiplier
The formula for the DuPont identity is:
ROE = profit margin x asset turnover x equity multiplier
This formula, in turn, can be broken down further to:
ROE = (net income / sales) x (revenue / total assets) x (total assets /

shareholder equity)
Financial statement (meaning)
Financial statements refers to formal and original statement prepared by a business

concern to disclose its financial information. AICPA (American Institute Of Certified
Public Accountants) says “financial statements are prepared for the purpose of
presenting a periodical review or report on the progress by the management and
deal with
1. The status of investments in the business and
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2. The results achieved during the period under review
Nature of financial statement
Financial statements are prepared to review the state of investment in a business

and result achieved during a specific period. The reflect recorded facts, accounting
conventions and personal judgments
Functions or Important of financial statements
Financial statements provide meaningful, useful and valuable information

periodically regarding financial position and future prospects of the business
concern. Various parties interested can utilise the information provided by the
financial statements for analysis and interpretation
 For management
Management will be able to take effective decisions only when correct and
reliable information is at its disposal. If information is not available
management can neither plan nor fulfill the functions of operations and control
 For financiers
Financial statements are also of great importance to the financiers and

lenders. Lenders need information regarding customers financial position,
solvency, credit standing, profitability, etc. Financial statements help the
banker and lenders to decide whether to extend loans to the customers.
 For creditors
Trade creditors are another class for whom financial statements are
important. Trade credit implies extending facilities of deferred payment for
credit purchase by seller to buyer. Financial position of a creditor can be
revealed by financial statements with a help of solvency ratios, cash and fund
flow analysis, etc.
 For investors
Present and prospective investors are interested in studying financial

statements to assess earning capacity, growth potential and efficiency of
management.
Limitation of financial statements
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1. Information show in financial statements is not precise

2. Financial statements do not always disclose the correct financial positions of
business concerns
3. Balance sheet of concern is a static document as it discloses the financial
position of a concern on a particular date
4. Information disclosed by profit and loss account may not be real profit
5. Financial statement of one period may not be comparable as such with the
statement of other periods
FINANCIAL STATEMENT ANALYSIS DEFINITION

According to myres “financial statements analysis is largely a study of the
relationship among the various financial factors in a 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.”
OBJECTIVES
I. To interpret the profitability and efficiency of various business activities with the
help of profit and loss account
II. To measure managerial efficiency of the firm
III. To measure short-term and long-term solvency of the business
IV. To ascertain earning capacity in future period
V. To determine the future potential of the concern
VI. To measure utilization of various assets during the period
VII. To compare operational efficiency of similar concerns engaged in the same industry.
LIMITATIONS
 Based on past data

 Financial statement analysis cannot be a substitute for judgment
 Reliability of figures
 Different interpretations
 Change in accounting methods
 Price level changes
 Limitations of the tools of analysis
1.3STATEMENT OF THE PROBLEM

Analyzing financial performance is the process of evaluating the common parts of
financial statements to obtain a better understanding of firm’s position and
performance. Financial performance analysis enables the investors and creditors
evaluate past and current performance and financial position, and to predict future
performance.
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Financial statement is used to judge the profitability and financial soundness of a

firm. In this study, an attempt is made to identify the financial strength and weakness
of the firm by properly establishing relationship between the items in the balance
sheet and profit and loss account of Kerala Electrical &ALLIED Engineering Co.Ltd.
Kundara
1.4 SCOPE OF THE STUDY

The study was carried at The Kerala Electrical & Allied Engineering Co. Ltd. Kundara
analyze its financial performance on the past five years
The study aims to analyze the liquidity, profitability, solvency position of the
company. Liquidity ratios like current ratio, quick ratio etc is prepared to analyze the
financial position of the company. Profitability of the company is found out by using
ratios like return on net profit ratio, return on capital employed ratio etc. The changes
can be observed by comparison of the balance sheet at the beginning and at the end
of a period and these changes can help in forming an opinion about the progress of
an enterprise
1.5 OBJECTIVES OF THE STUDY

 To study the financial position and financial performance of the company
 To judge the solvency of the firm.
 To determine the long term liquidity of the funds
 To provide valuable suggestions and recommendations for the improvement
of current financial management
1.6 PERIOD OF THE STUDY

This study is conducted at Kerala Electrical & Allied Co. Ltd KUNDARA ltd during the
period of 5 years from 2014 to 2018
1.7 LIMITATION OF THE STUDY
 The period considered for the study is the last 5 years’ financial statement
only. So it is not possible to find out the life time performance of the company
 The study is made exclusively on the financial aspects of the company
 Most of the information is collected from the financial statements. So the
limitations of financial statements may affect the study.
 Non-monetary factors like human behavior, their relationship etc are not
considered
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 The reliability and accuracy of calculation depends on the information

available from the balance sheet
1.8 RESEARCH METHODOLOGY
1 RESEARCH DESIGN
Research design is the plan and structure of investigation so conceived as to obtain answer to
research question. It constitutes the blue print of the collection, measurement and analysis of
data. Analytical research design is used in the study. In analytical research one has to use
facts or information already available and analyze these to make a critical evaluation of the
material.
Primary Data
The primary data have been collected through discussions with the concerned
executives of the company
Secondary Data
Secondary data are those data which are gathered for some other purpose and are
already available in the firm’s internal records and publications. The secondary data
is collected from annual report of the company of the last 5 years from 2014 to 2018
1.8.1 TOOLS OF ANALYSIS

 Ratio Analysis
 Trend analysis
 Schedule in changes in working capita
 Due point analysisl
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CHAPTER-2
REVIEW OF LITERATURE
Financial Performance Analysis
The term ’Financial analysis’ also known as analysis and interpretation of
financial statement, refers to the process of determining financial strengths and
weakness of the firm by establishing strategic relationship between the items of the
balance sheet, profit and loss account and other operation data. The purpose of
financial analysis is to diagnose the information contained in financial statements so
as to judge the profitability and financial soundness of the firm. Just like a doctor
examines his patient by recording his body temperature, blood pressure, etc. before
making his conclusion regarding the illness and before giving his treatment, a
financial analyst analysis the financial statements with various tools of analysis
before commenting upon the financial health or weakness of an enterprise. The
analysis and interpretation of financial statements is essential to bring out the
mystery behind the figures in financial statements. Financial statement analysis is an
attempt to determine the significant and meaning of the financial statement data so
that forecast may be made of the future earnings ability to pay interest and debt
maturities and profitability of a sound dividend policy
Following is the relevant literature reviews for the study
 Singla HK “financial performance of banks in India” (2008), in this paper

financial performance of banks in India, in ICFAI journal of Bank Management
No 7, has examined that how financial management play a crucial role in the
growth of banking. It is concerned with examining the profitability position of
the selected sixteen banks of banker index for a period of six years (2001-06).
The study reveals that the profitability position was reasonable during the
period of study when compared with the previous years. Strong Pcapital
position and balance sheet place, Banks in better position to deal with and
absorb the economic constant over a period of time
 Portland, Maine “Financial Statement Analysis: Interpret Financial
Results for Better Management, Investment and Credit Decision”(2012).
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Financial statement analysis is one of the most complicated and time

consuming tasks you will face, but it is a key means of determining the
financial health of a company. Financial statements often contain a gold mine
of information if you know what to look for. Join us for this seminar and our
experts will help you see financial statement in a different light – one that will
lead to improved investment, credit or management decision making . Find
out what financial statements really reveal about a business and where to find
the best sources for comparative statement data. You will learn to uncover
critical information by reading between the lines of balance sheets, income
statements and cash flow statements. The financial statements of a company
tell a story – learn how to uncover that story.
 Lin Zhang & Wai Fong Chow (2010) conducted a study on “financial
performance in Hong Kong listed hotels: the effect of value – added
creation and cost – leadership seeking”. The study takes forms as a
quantitative study with a deductive approach. A set of financial performance
data collected and examined to show how company performance was
correlated to its strategies and what an outcome was. They aims at providing
another perspective of investment analysis approach to the potential
investors, so they could embrace the whole companies strategy measures
that show no effect on financial performance, the second group is companies
strategy measures that shows some effect on financial performance. The
result indicated will normally staff cost and cost of sale are recognized as cost
leadership measure under product industry, it implies positive contribution to
value creation financial performance in service industry, instead of having
influence on profitability. Also the wealth generated from previous sale
revenue margin will have positive impact on companies competiveness in the
hotel industry.
 Netshakil (2009) conducted a study on an “Evaluation of the Business
and Financial performance of TESCO Plc.” In his study, he compare with
other companies within the industry in which Tesco operators. Tesco plc was
the market leader in terms of market share in the UK. He shows sector wise
performance of respective companies from strategic point of view with
particular focus on financial aspects, reasoning their better or worse
performance.
 Elena Shloma (2009) conducted a study on “the financial performance of
ethical funds: A comparative analysis of the risk – adjusted performance
of ethical and non – ethical mutual funds in UK.” The study shows the
significant growth of socially responsible investment (SRI) in the last few
decades. The increases interest towards SRI indicate that ethical issues have
become more essential for the investors. However the number of surveys
reveals that financial performance remains of an important concern for
socially responsible investors. He used bench mark analysis of the excepted
returns and management fees of the ethical mutual fund were usrd to analyze
and compare the performance of the ethical non- ethical mutual fund in United
Page | 22
Kingdom. The analysis does not indicate the significant difference in the
excepted returns between the two group of funds. However this study
concludes that on average ethical funds charge higher management fees.
Thus investing in conversional funds.
 Sreevastava and Mishra (2008) say that the financial analysis are
undertaken to interpret the position of an enterprise. Financial analysis
included the study of relationship within set of financial statement at a point of
time. Analysis of financial statement to obtain better understanding of a firms
position and performance.
 Harish “performance of the commercial banks under reforms” (2007). He
also highlighted the major issues need to be considered for further
improvement. He concluded banks in general but still there are some
distortions like low priority sector advances, low profitability etc. that needs to
reformed again
 Kiran A.V 2004 generally, the financial performance of banks and other
financial institutions has been measure using combination of financial ratios
analysis, benchmarking, measuring performance again budget or a mix of
thus methodologies.
 ROGER KAUFMANN, ANDREAS GADMER, AND RALF KLETTN
“INTRODUCTION TO DYNAMIC FINANCIAL ANALYSIS” (2001) In the last
few years we have witnessed growing intertest in Dynamic Financial Analysis
(DFA) in the nonlife insurance industry. DFA combines many economic and
mathematical concepts and methods. It is almost impossible to identift
describe a unique DFA methodology. There are some DFA software products
for non life companies available in the market, each of them relying on its own
approach to DFA. Our goal is to give an introduction into this field by
presenting a model framework comprising those components many DFA
models having common. By explicit reference to mathematical language we
introduce an up – and- running model that can easily be implemented and
adjusted to individual needs. An application of this model is presented as well.
 Marc Orlitzky. Frank L. Schmidt, Sara L. Rynes “Corporate Social and
Financial Performance: A Meta – analysis”(1998). This study most
theorizing on the relationship between corporate social / environmental
performance (CSP) and corporate financial performance (CFP) assumes that
the current evidence is too fractured or too variable to draw any generalizable
conclusion. With this integrative, quantitative study, we intend to show that
the mainstream claim that we have little generalizable knowledge about CSP
and CFC is built on shaky grounds. Providing a methodologically more
rigorous review than previous efforts, we conduct a meta – analysis of 52
studies (which represent the population of prior quantitative inquiry) yielding a
total sample size of 33, 878 observation. The metanalytic findings suggest
that corporate virtue in the form of social responsibility and, to a lesser extent ,
environmental responsibility is likely to pay off, although the
operationalizations of CSP appears to be more highly correlated with
Page | 23
accounting – based measures of CFP than with market- based indicators, and
CSP reputation indices are more highly correlated with CFP than are other
indicators of CSP. This meta – analysis establishes a greater degree of
certainty with respect to the CSP- CFP relationship than is currently assumed
to exist by many business scholars.
 Robert R. Hearne and, K. William Easter “The economic and financial
games from water markets in Chile”(1996). In the economic and financial
analysis of water markets, crop budgets were used to estimate the value of
water in agricultural production. The value of water – use rights to urban water
– supply companies was estimated using the avoided cost of an alternative
investment in a water – storage reservoir. The analysis demonstrated that the
market transfer of water – use right does reduce substantial economic gains-
from-trade in both the Elqui and Limari Valliys. These economic gains
produce rents for both buyers and sellers. But buyers especially farmers
growing profitable crops who buy water – use rights and individual buying
water use rights for potable water supply, receive higher rents then sellers.
Large table – grape producers in the Limari Valley individuals buying water for
human consumption in the Elqui Valley received the highest rents. In the Elqui
Valley net gains – from- trade per share were within the range of recent
transfer rises of US$1000. In the Lemari Valley, gains – from – trade per
share are 3.4 times recent prices of US$ 3000 for a share of water from the
Cogoti Reservoir, Where trading was active, especially in the Limari Valley,
transactions costs have not presented an appreciable barrier of trading.
Nonetheless, the large canal systems with fixed flow dividers in the Elqui and
Naipo Valley there have been very few transactions. Various factors
condribute to the lack of trading, but the absence of trading in these large
canal systems highlights the costs of modifying infrastructure, especially
traders between farmers.
Page | 24
. CHAPTER-3
INDUSTRY PROFILE AND COMPANY PROFILE

INDUSTRIAL PROFILE
2.1.1 ELECTRICAL INDUSTRY
Introduction
The energy is neither be created nor be destroyed but it can

be converted from one form to another. The generation of an electrical energy is
nothing but the conversion of various other forms of energy into an electrical energy.
The various energy sources which are used to generate an electrical energy on the
large scale are steam obtained by burning coal, oil, natural gas, water stored in
dams, diesel oil, nuclear power and other non-Conventional energy sources.
The electrical power is generated in bulk at the

generating stations which are also called power stations. Depending upon the
source of energy used, these stations are called thermal power stations,
hydroelectric power stations, diesel power station, nuclear power stations etc...This
generated electrical energy is demanded by the customers. Hence the generated
electrical power is to be supplied to the customers. The electrical power industry
provides production and delivery of electrical power (electrical energy) often known
as power or electricity in sufficient quantities to areas that need heating, cooking and
industrial processes. Because of these aspects of the industry, it is electricity through
a grid. Many house hold and business need access to electricity, especially in
developed nations, the demand being scare in developing nations. Demand for
electricity is derived from the requirement for electricity in order to operate domestic
appliances, office equipment, industrial machinery and provide sufficient energy for
both domestic and commercial lighting viewed as a public utility infrastructure
Page | 25
In many countries electric power companies own the whole

infrastructure, from generating
stations to transmission and distribution. For this reason,

electric power is viewed as a natural monopoly. The industry is generally heavily
regulated, often with controls and is frequently government-owned and operated.
The nature and state of m termines whether electric companies are able to be
involved in just some of these processes without having to own the entire
infrastructure, or citizens choose which component of infrastructure to patronize
2.2 WORLD SCENARIO
Although electricity has been known to be produced as a result

of the chemical reactions that take place in an electrolytic cell, Since Alessandro
Volta developed the voltaic pile in 1800, its production by this means was, and still is,
expensive. In 1831Michael Faraday devised a machine that generated electricity
from rotary motion but it took almost 50 years for the technology to reach a
commercially viable stage. In 1878, in US, Thomas Edison developed and sold a
commercially viable replacement for gas lighting and heating using locally generated
and distributed direct current electricity.
The world’s first public electricity supply was provided in late

1881,when this streets of Goldalming in the UK were lit with electric light .This
system was powered from a water wheel on the River Wey which drove a Siemens
alternator that supplied a number of arc lamps within the town. This supply scheme
also provided electricity to a number of shops and premises.
Coinciding with this in early 1882, Edison opened the world’s

first steam powered electricity generating station at Holborn Viaduct in London,
where he had
Page | 26
entered into an agreement with the City Corporation for a period of three months to
provide street lighting. In time he had supplied a number of local consumers with
electric light. The method of supply was direct current (DC).
Tesla’s alternating current system remains the primary means

of delivering electrical energy to consumers throughout the world. While high voltage
DC is increasingly being used to transmit large quantities of electricity over long
distances or to connect adjacent asynchronous power systems, the bulk of electricity
generation transmission, distribution and retailing take place using alternating
current.
2.3 INDIAN SCENARIO
Electrical Industry came into existence after the period of the

First World War, and the first one was a fan industry in Calcutta in 1921.The
manufacturing of the electrical equipment like Transformers, Generators, Insulators
etc... took up later. Heavy electrical industry covers units manufacturing large plants
and machinery required for power generation, transmission, distribution and
utilization. These include turbo generators, boilers, various types of turbines,
transformers, motors and switch gears. The major areas where the heavy electrical
equipments are used are the large projects for power generator including nuclear
power stations, Petro chemical complexes, chemical plants, integrated steel plants
etc...The share of the domestic equipment is about 66% of the country’s generation
capacity.
The industry has also established a strong manufacturing base

to the requirement for the equipment for the equipment for the nuclear power plants
in the country. The domestic heavy electric equipment manufacturer are making use
of the developments in the global market with respect to the product designs and
upgrading of manufacturing and testing facilities. The industry is also competitive in
the field of design and engineering as the skill sets available in the country are
relatively less expensive.
2.4 STATE SCENARIO
Page | 27
The first public sector electrical equipment industry setup in

Kerala was the Metropolitan Engineering Company limited in Trivandrum in 1945. It
was followed by the starting of Electrical and Allied Industries Pvt. Ltd (EAIT) at
Kundara in 1946. EAIT at 1964 was taken over by Govt., which was registered as a
Govt. of Kerala undertaking. At present there are five public sector electrical
equipment industries working in Kerala and they are:
• Metropolitan Engineering Company Ltd
• United Electricals Ltd.
• Traco Cables
• Kerala Electrical & Allied Company Ltd.
• Kerala State Electronics Development Corporation Ltd.
• Table No: 2.1
No Company Name Products

1 Metropolitan Engineering Co.Ltd Isolators, Fuses, Switches
2 United Electrical Ltd Meters, Motors, Capacitors
3 Traco Cables Telephone cables, PVC Cables
4 Kerala Electrical &Allied Co.Ltd Alternators, Transformers
5 Kerala State Electronics Development Capacitors, Resistors, Television
Co.Ltd.
3.1 COMPANY PROFILE
The Kerala Electrical & Allied Engineering Co. Ltd., popularly

known as KEL was established in 1964 in the State of Kerala, India and is fully
owned by the State Government. (KEL) is a multifaceted company fully owned by the
State government. Through its three production facilities, located in various districts
of the State, this ISO 9001: 2000 complaint company provides basic engineering
Page | 28
services and products to many of its clients besides executing projects of national
importance for high profile clients like various defence establishments.
The company manufactures and markets products like general

purpose brushless alternators, brushless alternators for lighting and air-conditioning
of rail coaches, medium power and distribution transformers, BLDC Fan as well as
structural steel fabrications The product categories for defense applications include
high frequency alternators, frequency convertors, special alternators and power
packs for missile projects. The power packs designed and supplied by the company
for missile projects like Falcon, Prithvi, Trishul and Akash have been pioneering
efforts. The company has also supplied special alternators to the Army (Military
Power Cars) and Air Force (Radar Applications.) The company's
all-India marketing network with regional offices in all metro cities cater to major
institutional clients like the State Electricity Boards, Indian Railways and various
defence establishments besides the general market clients. KEL is one among the
largest, most vibrant and productive Public Sector Undertaking, and is fully owned by
the Government of Kerala. A multi-product engineering company, consistently
catering to an envious client base, ranging from the army and air force of India to
world-renowned space research organizations, highly competent engineering
companies to mammoth institutions likes the Indian Railways. The company with
three state-of-the-art manufacturing units spread across Kerala has a pan India
presence with marketing offices in major metros and select cities.
3.1.1 HISTORY
Kerala Electrical And Allied Engineering Company Limited

known as KEL was started in the year 1947 with 50% of the share for government
and taken over by government in 1964 as an undertaking of Government of Kerala
engaged in the manufacture of electrical engineering goods. Another unit was set up
at Mamala (Ernakulum District) as part of KEL’s expansion programmers which
became operational in 1968. KEL was also entrusted with the charge of Enclose, a
sick unit in Palakkad that was taken over by the government of Kerala in1977, which
was developed as their 3rd unit. In 1986, a High-tech mechanized foundry at
Kundara was added to KEL group of production units. In 1990 a new unit established
Page | 29
in Bedradka (Kasargod District), Kerala with latest technology and modern

equipment.
3.2 CORPORATE PROFILE
The corporate office of KEL is located at Kochi. In addition to

these production centers a project division for execution of turnkey projects, an R &
D wing and centralized marketing network are having Head Quarters in the
Corporate Office. The organization has strength about200 qualified Managerial staff
and about 1500 employees including special skilled works. The present product
range of the company includes Brushless Alternators for train lighting and
air conditioning, ground power unit (GPU) for aircrafts, high frequency alternators for
defense application and Antarctica expedition, distribution and power transformers, HRC
fuses, switchgears, brushless ac generators. The present sales turnover of the unit is about Rs.
20crores.
3.3 MANUFACTURING UNITS
 Kundara unit, Kollam (dist), Inception: 1964

This is an ISO 9001 certified unit which was started in the year 1964
imbibing technical know-how from EVR of France for the purpose of manufacturing
Statodyne Brushless Alternators used for lighting and air conditioning of Railway
coaches.
There are three divisions in this unit namely:
• Statodyne Alternator Division:
Statodyne Alternator Division manufactures Statodyne Brushless

Alternators used for lighting and air conditioning of Railway coaches.
Statodyne Alternator Division has installed capacity of 3000 numbers of
Page | 30
alternators per annum. More than 25000 alternators are in service with the
Indian Railway Station alone.
• Foundry Division:
Foundry Division has a capacity of 1500MT per annum and

manufactures Spheroidal Graphite Iron and Grey Iron Castings. This unit has
fully mechanized molding lines with sophisticated testing equipments to
ensure quality castings.
• Battery charging systems division:
Manufactures brushless alternators for automobile battery charging

system. The product has been developed through the company’s own R & D
efforts. The alternator caters to the high power needs of modern vehicles and
heavy earth moving equipment. It offers long life and maintenance free
Operation.
 Mamala Unit, Ernakulum District, Inception: 1968
The transformer Division of KEL at Mamala, Ernakulum, was established

in
1968, with the technical assistance of BHEL to manufacture supreme quality
transformer
for various State electricity Boards, Government Departments, Public and Private
Sector
Companies. This division, ISO9001 is certified by TUV, boasts of a long sustained

list of extremely satisfied clients, many of whom who have stood by KEL, for
decades. Over the years relying on the unmatched quality of KEL transformers,
electricity boards across India perfectly maintain a healthy power distribution supply
system. The Transformer Division has production and distribution of medium range
power transformers up to 1600KVA. Manufacturing custom-build transformers, for
specific requirements is yet another specialty of KEL. This division undertakes
Page | 31
design, fabrication and commissioning of hydraulic control gates and hoists for
power and irrigation projects, cranes, pressure vessels and other industrial structure.
 Olavakkod Unit, Palakkad District, Inception: 1977
Unit started in the year 1977 with technical know-how from UNELEC of

France. This unit manufactures Isolators/Changeovers, Switch fuses, Fuse
units/Cutouts, Distribution fuse boards/Panels and castings used for
Industrial, Commercial and domestic applications through their LT Switchgear
Division.

Product Range
• Fuse Switches, Changeover switches, Porcelain Fuse Units.
• Distributions fuse Boards and industrial type switch boards, Distribution

Boards.
Project Division:
KEL project wing headed by the GM attached to its corporate office

undertakes turnkey projects in design, fabrication, supply and erection of gates,
hoists and controlling equipments for power and irrigation projects and civil works
including heavy machinery erection.
 Edarikkod Unit, Malapuram District, Inception: 1988
Unit was commissioned in 1988 for the manufacture of Brushless
Alternator for Automobiles (BAA). But as per the instruction of the government the
execution of the BAA project was suspended as the government wanted to give top
priority for the implementation of the Kasargod project. The capital outlay originally
envisaged for BAA project was Rs.6.42crores, which was subsequently enhanced to
Rs.12.75 crores due to the cost overrun which is in turn, was consequent to the
delay in execution. Now this unit is used for the manufacturing of Power and
Distribution Transformers.
Page | 32
Marketing Division:
The corporate marketing Division piloted

by the GM (Marketing) is controlling the various service centers and Regional Offices
in New Delhi, Bombay and
Madras. And sales and service centers in Kanpur, Calcutta, Bhopal, Hyderabad,
Bangalore, Coimbatore and Trivandrum.
Expansion Project:
While trying to consolidate its exciting units by means of

technological up gradation,KEL in a head on its way with future expansion projects
including brushless alternator for automobiles, Nickel, Cadmium Battery ,special
purpose motor project with technical collaboration from Austria.
3.4 The various products developed by KEL R&D wing are the following:
• 5 kVA,400 Hz alternator for Antarctica expedition for the defense department

of Govt. of India
• 20KW DC manual and self propelled type ground power units for ‘Vayudoot’
for starting their Aircrafts.
• 30kVA rotary converter for radar application for helicopter starting for Indian
Navy.
• 3KV generator for wind mill applications.

• 5KV alternator for with rectifier regulator unit for battery charging in locomotive
engines.
• 40kVA ground power unit for requirements of starting of fighter aircrafts like
‘MIRAGE’.
• 90 kVA ground power unit for Boeing and Air Bus aircrafts
• 20kVA alternator for powering mobile radar installations.
3.5 Over Seas Partnerships:
Page | 33
As a company in tune with modern technology, KEL have had associated with
reputed overseas manufactures who are experts in their respective fields.
• Inductor type brushless alternator for lighting and air conditioning of rail
coaches --- EVR ,France
• HRC fuses --- UNELEC, France
• General purpose brushless a.c generators --- Moteures Leroy Somer, France
• Nickel-Cadmium battery project --- Honda, Japan
• Technical collaboration with ----T-Lin of Austria
3.6 Players in India
• Kerala Electrical and Allied Engineering Company

• H.M.T.D Chennai
• Stone India Calcutta
• Crompton Greaves Ltd Chennai
• Steasalite Ltd
• Press tech India
• Unitec
3.7 KEL-KUNDARA UNIT
The Kundara unit of the company was established in the year

1946 in private sector for manufacture of low tension switches and was taken over
by the Govt. of Kerala in 1964.In the early 70’s the unit was diversified into the field
of brush less alternators for railway lighting. As a part of diversification program, new
mechanical equipments and facilities were added to the unit. KEL had set up a
modern iron foundry which manufactures spherical granite iron and gray iron
castings of various grades at Kundara unit.
The Kundara unit of KEL has manufacturing brushless

alternators which is acclaimed and accepted by the Railways as the most efficient
Page | 34
and reliable one. More than 25000 number of alternators manufactured in KEL are
already in operation with the Indian Railway alone.
3.7.1 Vision Statement of KEL
To be a globally recognized enterprise committed to enhancing

stakeholder value by providing world class engineering and power system solutions.
To achieve our vision by:
• Applying state-of-the-art technology, processes and innovative solutions.

• Building long term relationship with stakeholders in an environment of
fair business ethics and values.
• Creating value through sustainable and profitable growth.
• Leveraging productivity through highly motivated & empowered team.
3.7.2 Mission Statement of KEL
• Ensuring team work at all levels.

• Establishing and maintaining vendor evaluation and rating.
• Establishing and maintaining quality system suitable for meeting customer

requirement.
• Continuous improvement through constant up gradation of technology,
process and skilled manpower.
3.7.3 Core Values
• Fairness, transparency, integrity.

• Trust and mutual respect.
• Passion for professional and operational excellence.
• Corporate and social responsibility.
3.7.4 Objectives
Page | 35
To educate and train our skilled manpower on a half yearly basis at

the rate of 8 hours training per employee to upgrade the skill level and to reduce the
rate of absenteeism to 3% from 5% .Which will be measured on a monthly basis.
3.7.5 Quality Policy
The Quality Policy of KEL, Kundara is to Achieve Customer

Satisfaction by providing the right product and services at the right time as per
Customer’s requirements .
This shall be achieved through
 Ensuring team work at all levels.

 Establishing and maintaining suppliers’ evaluation and rating.
 Establishing and maintaining a quality system suitable for meeting customer
requirement.
 Continual improvement through constant up gradation of technology / process
and skilled manpower.
3.8 PRODUCT PROFILE
• Location : Kundara ,Kollam District

• Inception : 1964
• Technical knowhow : EVR of France
• ISO 9001 certified by RWTUV
• Statodyne Alternator Division:
• Used for : lighting & air conditioning of railway coaches

• Capacity : 3000 alternators per year
• More than 25000 alternators with Indian Railway alone.
• Foundry Division:
• Manufactures : Spheroidal Graphite iron & Grey Iron casting

• Capacity : 1500MT per annum
Page | 36
• Induction Furnace : 2x3T

• Fully mechanized molding lines with sophisticated testing
equipment to ensure quality castings.
Fig .3.1
3.8.1 PRODUCT RANGE
Table No: 3.1
No Range Name Purpose
1 3KW,24V Brushless Alternator Train lighting (Third Class Coaches)

2 4.5KW,24V Brushless Alternator Train lighting (Second Class
Coaches)
3 4.5KW,110V Brushless Alternator Train lighting (Second Class
Coaches)
4 12KW,110V Brushless Alternator 2 Tier AC Coach(Meter Gauge)
5 18KW,110V Brushless Alternator 2 Tier AC Coach(Broad Gauge)
6 25KW,130V Brushless Alternator Roof Mounted AC Coaches
7 12KW Auxiliary Alternator Diesel Electric Multiple Unit
Coaches
8 18.5 KW Auxiliary Alternator Diesel Electric Multiple Unit
Coaches
9 2KW Diesel Generator (DG)Set Ground Power Unit
10 50kVA Diesel Generator Set Ground Power Unit
11 20kVA Alternator DG Set for Defense Applications
12 5kVA Alternator DG Set for Defense Applications
13 25KW Electronic Rectifier Unit Train Lighting (Ordinary Coaches)
14 4.5KW Electronic Rectifier Unit Train Lighting (Ordinary Coaches)
Page | 37
15 BL DC Fan Railway Application
USP
Induction Alternator
 Brush less excitation without winding on the rotor. Both field and armature
windings are embedded in stator slots, hence no limitation for working speed
and
ideal for variable speed application like ---Train, Automobile, Windmill etc…
 Totally enclosed fan cooled version available for Dusty/Humid/Corrosive

environments.
3.8.1 Top customers:

• Integral Coach Factory, Rail Coach Factory
• Indian Railway
• Tanzania Railway Corporation
• Rites
• Station Power Controls Ltd
• L&T
• CGL
• Paras Electricals Ltd
• AVISH AVIATION Equipment Pvt. Ltd
• Medha Servo System
• DIGHI , Pune
• Indian Defense, Air Force
• Bharat Heavy Electricals Ltd(BHEL)
• Bharat ers Ltd(BEEarth MovML)
Page | 38
CHAPTER-4
DATA ANALYSES AND INTERPRETATION
Data analysis and interpretation deals with the analysis and interpretation of the data
collected from the survey.
4.1 RATIO ANALYSIS
5. Ratio analysis is one of the techniques of financial analysis where ratios are
used as a yardstick for evaluating the financial condition and performance of a firm.
4.1.1LIQUIDITY RATIOS
6. Liquidity ratios show the ability of a firm to meet its current liabilities. Short-
term refers to a period not exceeding one year. Liquidity ratios measure the firm’s
ability to meet current obligations, as and when they fall due.
(a) Current Ratio.
Current ratio is defined as the relationship between current assets and

current Liabilities. It is also known as working capital ratio. This is calculated
by dividing total current Assets by total current liabilities.
Page | 39
The two basic components of the ratio are current assets and current
liabilities. Current assets are those that can be realized within a short period
of time, generally one year. Similarly, current liabilities are those that are to be
paid, within a period of one year. The components of current assets and
current liabilities are shown, here under
TABLE NO 4.1.1.1
Table showing current ratio
current
Year CA CL ratio
2014 ₹ 81,18,53,403 ₹ 87,23,61,816 0.93
2015 ₹ 71,45,19,554 ₹ 77,81,99,574 0.92
2016 ₹ 73,64,23,182 ₹ 90,63,71,773 0.81
2017 ₹ 71,21,57,452 ₹ 1,11,90,16,267 0.64
2018 ₹ 66,49,34,760 ₹ 1,25,65,86,963 0.53
Source; Annual Report of KEL KUNDARA
Average= 3.73/5= 0.75
CHART NO. 4.1.1.1
Page | 40
current ratio
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
2014 2015 2016 2017 2018
INTERPRETATION
Ideal ratio is 2: I would suggest here is pure management of working capital
below 1 indicates cash problem above 1 indicates adequate working capital . Here
all five year values are below 1 so cash problem is there
(b) Quick Ratio.
Liquid ratio establishes the relationship between liquid assets and current
liabilities. Liquid assets are those that can be converted into cash, quickly,
without loss of value. Cash and balance in current account with bank are the
most liquid assets
TABLE NO 4.1.1.2
Table showing quick ratio
YEAR CA CL QUICK RATIO
Page | 41
2014 653715793 872361816 0.749363144

2015 578032324 778199574 0.742781599
2016 579687836 906371773 0.639569604
2017 500714739 1119016267 0.44745975
2018 443684655 1256586963 0.353087107
Average= 2.93/5=0.59
CHART NO. 4.1.1.2
QUICK RATIO
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2014 2015 2016 2017 2018
INTERPRETATION
The ideal quick ratio is 1:1 considered satisfactory. This firm have less
than 1:1 in every year so the financial position of the firm shall be deemed to
be unsound. If an organization quick ratio is 1:1 considered satisfactory as a
firm can easily meet all its current liabilities. If the ratio is more than 1:1, then
Page | 42
the financial position of the concern is sound and good. This firm currently
face the financial unsoundness
(c) Absolute liquidity ratio.
This ratio is obtained by dividing cash (cash in hand and cash at bank) and
marketable securities by current liabilities. It is also known as cash position
ratio.
Table no: 4.1.1.3

Table showing liquid ratio
Year cash current liability liquid ratio
2014 ₹ 1,96,20,076 ₹ 87,23,61,816 0.02
2015 ₹ 1,54,21,257 ₹ 77,81,99,574 0.02
2016 ₹ 5,34,56,397 ₹ 90,63,71,773 0.06
2017 ₹ 2,44,04,970 ₹ 1,11,90,16,267 0.02
2018 ₹ 2,48,98,239 ₹ 1,25,65,86,963 0.02
Average= 0.14/5= 0.028
Chart 4.1.1.3
Page | 43
Debt Equity Ratio

0.00
2014 2015 2016 2017 2018
-0.50
-1.00
-1.50
-2.00
-2.50
-3.00
-3.50
-4.00
INTERPRETATION
Absolute Liquid Assets include cash in hand and cash at bank and
marketable securities or temporary investments. This ideal liquid ratio of
0.75:1 is recommended to ensure liquidity The liquid ratio is 0.2:1 so this
industry is poor liquidity in this status all the creditors are not expected to
demand cash at the same time and then cash may also be realized from
debtors and inventories. Here, the absolute liquidity ratio is 1:1 and below in
all the past five years. This indicates a poor liquidity status.
Leverage ratios indicate the long-term solvency of the firm. Leverage ratios indicate
the mix of debt and owners’ equity in financing the assets of the firm. These ratios
measure the extent of debt financing in a firm.
(a) Proprietary Ratio.
It establishes the relationship between proprietor’s funds and total assets.

Proprietors fund means share capital + reserves + surplus, Both of capital and
revenue nature. Loss and fictitious assets are deducted. This ratio shows the
extent to which the shareholders own the business. The difference between
this ratio and 100 represents the ratio of total liabilities to total assets. It is
computed as follows:
Page | 44
Table no: 4.1.2.1
Table showing proprietary ratio

Year proprietary fund Total assets Proprietary Ratio
2014 -₹ 26,19,37,523 ₹ 92,51,64,072 -0.28
2015 -₹ 42,85,79,049 ₹ 88,61,44,217 -0.48
2016 -₹ 60,11,61,781 ₹ 95,18,18,946 -0.63
2017 -₹ 77,14,38,728 ₹ 92,95,93,193 -0.83
2018 -₹ 98,58,80,897 ₹ 89,54,48,960 -1.10
Average= -3.32/5= -0.66
CHART NO. 4.1.2.2
Proprietary Ratio
0.00
2014 2015 2016 2017 2018
-0.50
-1.00
-1.50
-2.00
-2.50
-3.00
-3.50
-4.00
INTERPRETATION
Page | 45
This ratio shows the financial strength of the company. It helps the
creditors to find out the proportion of shareholders fund in the total assets.
Higher ratio indicates a secured position to creditors and a low ratio indicates
greater risk to creditors. Here, as a result of accumulated losses, the
proprietor’s fund is in -ve figure in all the cases.
(b) Fixed Assets to Net Worth Ratio.
The ratio shows the relationship between fixed assets and shareholder’s
fund. The purpose of this ratio is to find out the percentage of the owner’s
fund invested in fixed assets. It is calculated by dividing the fixed assets by
net worth. If the ratio is greater than one, it means that the creditors fund have
been used to acquire a part of the fixed assets.
TABLE NO. 4.1.2.2
Table showing fixed asset to net worth ratio

Year Fixed Assets Shareholders Fund Fixed Asset to Net worth Ratio
2014 ₹ 11,33,10,669 -₹ 26,19,37,523 -0.43
2015 ₹ 17,16,24,663 -₹ 42,85,79,049 -0.40
2016 ₹ 21,53,95,764 -₹ 60,11,61,781 -0.36
2017 ₹ 21,74,35,741 -₹ 77,14,38,728 -0.28
2018 ₹ 23,05,14,200 -₹ 98,58,80,897 -0.23
Average= -1.7/5= -0.34
Page | 46
CHART NO.4.1.2.2
Debt Equity Ratio

0.00
2014 2015 2016 2017 2018
-0.50
-1.00
-1.50
-2.00
-2.50
-3.00
-3.50
-4.00
INTERPRETATION
Here is all value is negative so the creditors funds not acquire a part of
the fixed asset. This firm is not have sufficient fixed asset to meet creditors
fund
(c) Debt Equity Ratio

The relationship between borrowed fund and owned capital is a popular
measure of the long-term financial solvency of a firm. The relationship is shown
by the debt equity ratio.
Debt means long term loans, i.e., debentures, long-term loans from financial
institution. Equity means shareholders’ funds, i.e., preference share capital,
equity share capital, reserves less losses and fictitious assets like preliminary
expenses. The ratio is ascertained as follows:
TABLE NO. 4.1.2.3
Page | 47
Table showing debt equity ratio

Debt Shareholders Fund Debt Equity Ratio
₹ 90,39,43,118 -₹ 26,19,37,523 -3.45
₹ 80,70,81,172 -₹ 42,85,79,049 -1.88
₹ 93,51,97,093 -₹ 60,11,61,781 -1.56
₹ 1,14,32,46,693 -₹ 77,14,38,728 -1.48
₹ 1,27,88,89,626 -₹ 98,58,80,897 -1.30
Average=- 9.67/5= -1.93
CHART NO.4.1.2.3
Debt Equity Ratio

0.00
2014 2015 2016 2017 2018
-0.50
-1.00
-1.50
-2.00
-2.50
-3.00
-3.50
-4.00
INTERPRETATION
A high ratio shows that the claims of creditors are greater than those of
owners. A very high ratio is unfavorable for the firm. A low debt-equity ratio implies a
greater claim of owners than creditors. From the point of view of creditors, it
represents a satisfactory capital structure of this business. In this firm have a
favorable debt-equity ratio
(d)Ratio Solvency
Page | 48
Solvency Ratio indicates the relationship between total outside

liabilities to total assets. Total assets does not include fictitious assets does
not include fictitious assets.
Solvency Ratio=Total liabilities ¿ outsiders ¿

Total Assets
TABLE NO. 4.1.2.4
Table showing solvency ratio

Year Total liabilities to outsiders Total Assets Solvency Ratio
2014 ₹ 1,06,08,74,133 ₹ 92,51,64,072 1.15
2015 ₹ 94,27,45,574 ₹ 88,61,44,217 1.06
2016 ₹ 1,15,24,85,773 ₹ 95,18,18,946 1.21
2017 ₹ 1,31,38,48,267 ₹ 92,95,93,193 1.41
2018 ₹ 1,47,12,11,963 ₹ 89,54,48,960 1.64
Average= 6.47/5= 1.29
CHART NO. 4.1.2.4
Page | 49
operating ratio
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2014 2015 2016 2017 2018
INTERPRETATION
Generally, lower the ratio of total liabilities to total assets,
more satisfactory or stable is the long term solvency position of a firm . This
firm have pure solvency position. In every year gradually increase the
solvency ratio that is not fare in the organization.
ACTIVITY RATIOS
8. Activity ratios reflect the management of assets and their effective utilization.
If assets are converted into sales, with speed, profits would be more. Activity ratios
bring out the relationship between the assets and sales.
(a) Fixed assets turnover ratio.
TABLE NO.4.1.3.1
Table showing fixed asset to turn over ratio
Year Net sales Fixed Assets Fixed Assets to Turnover Ratio
2014 ₹ 64,21,27,681 ₹ 4,19,87,941 15.29
Page | 50
2015 ₹ 93,36,80,381 ₹ 3,35,94,799 27.79

2016 ₹ 94,67,26,024 ₹ 2,82,44,233 33.52
2017 ₹ 1,05,16,71,115 ₹ 7,80,21,488 13.48
2018 ₹ 99,76,69,880 ₹ 7,05,29,563 14.15

Average= 104.84/5= 20.97
CHART NO. 4.1.3.1
operating ratio
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2014 2015 2016 2017 2018
INTERPRETATION
The ratio indicates the extent to which the investment in fixed assets contributed
towards sales. If it is compared with previous period, it indicates whether the
investment in fixed assets have been judicious or not. A higher fixed asset turnover
ratio shows that the company has been more efficient in using the investment in
fixed assets to generate revenues
(b) Inventory turnover ratio.

This ratio establishes the relationship between cost of goods sold and
the average stock held by the organization. It shows the stock velocity i.e,
how many times the stock is turned over in a financial year. This ratio helps to
Page | 51
measure the organizations efficiency in stock movement and inventory

management.
TABLE NO. 4.1.3.2

Table showing inventory turn over ratio
Year Net sales Fixed Assets Inventory Turnover Ratio
2014 ₹ 64,21,27,681 ₹ 15,81,37,610 4.06
2015 ₹ 93,36,80,381 ₹ 13,64,87,230 6.84
2016 ₹ 94,67,26,024 ₹ 15,67,35,346 6.04
2017 ₹ 1,05,16,71,115 ₹ 21,14,42,713 4.97
2018 ₹ 99,76,69,880 ₹ 22,12,50,105 4.51

Average= 26.42/5= 5.28
CHART NO. 4.1.3.2
Page | 52
operating ratio
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2014 2015 2016 2017 2018
Interpretation
The ideal inventory turnover ratio would

depend on many factors such as nature of business, logistics strategy, etc. But, in
general a ratio between 4 and 6 usually means that the rate at which you restock
items is well balanced with your sales. Here, the ratio is fluctuating from 8 to 12,
which shows a pretty good state of inventory management. A low inventory turnover
ratio result in blocking of funds in inventory
PROFITABILITY RATIOS
9. The business firm is basically a profit earning organization, the income

statement of the firm shows the profit earned by the firm during the accounting
period. The last group of financial ratios, more often used, is Profitability Ratios.
Profit is the difference between revenue and expenses over a period, usually, one
year. Profitability ratios are to measure the operating efficiency of the company
(a) Gross Profit Ratio

The gross profitability ratio plays an important role in two management
areas. In the area of financial management, the ratio serves as valuable
indicator of the firm’s ability to utilize effectively outside sources of fund.
Page | 53
Secondly, this ratio also serves as important tool in shaping the pricing policy
of the firm, paying its creditors.
TABLE NO. 4.1.4.1

Table showing gross profit ratio
Year Gross Profit Net Sales Gross Profit Ratio
2014 ₹ 64,89,10,598 ₹ 64,21,27,681 101%
2015 ₹ 94,65,32,617 ₹ 93,36,80,381 101%
2016 ₹ 95,43,58,043 ₹ 94,67,26,024 101%
2017 ₹ 1,05,92,22,584 ₹ 1,05,16,71,115 101%
2018 ₹ 96,69,88,447 ₹ 99,76,69,880 97%

Average= 5.01
CHART NO. 4.1.4.1
Gross Profit Ratio
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2014 2015 2016 2017 2018
Page | 54
INTERPRETATION
This ration helps in ascertaining whether the average percentage of profit on the
goods is maintained or not. An increasing in the gross profit ratio may be due to an
increase in the selling price without a corresponding in the cost of goods sold or due
to a decrease in the cost of goods sold without a corresponding decrease in the
selling price of goods. Similarly, the decrease in the gross profit ratio may be due to
a decrease in the selling price without a corresponding decrease in cost of goods
sold or due to an increase in the cost of goods without a corresponding increase in
the selling price of the goods sold. The graph showing 2015 is highest gross profit
ratio. In the 2018 showing decreasing ratio due to the decrease in the selling price
without corresponding decrease in cost of goods sold
(a) Net Profit Ratio

This ratio expresses profit generating capacity of sales for an organization for
every rupee. It is the difference between what a business takes in and what it
gives in the process of carrying out of its business. It establishes the relationship
between net profit after tax and the net sales.
Table no 4.1.4.2
Table showing net profit ratio
Year Net Profit Net Sales Net Profit Ratio

2014 ₹ 6,49,32,902 ₹ 64,21,27,681 10%
2015 ₹ 3,79,82,370 ₹ 93,36,80,381 4%
2016 ₹ 16,55,96,123 ₹ 94,67,26,024 17%
2017 ₹ 17,25,82,732 ₹ 1,05,16,71,115 16%
2018 ₹ 21,44,42,116 ₹ 99,76,69,880 21%
Average= 68/5= 13.6
Page | 55
CHART NO. 4.1.4.2
operating ratio
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2014 2015 2016 2017 2018
INTERPRETATION
This ratio is used to measure the overall profitability and hence it is very useful to
proprietors. It is an index of efficiency and profitability of the business. Higher the
ratio, better is the operational efficiency of the concern. In this firm 2018 have a good
profit ratio in this year they are properly reduces expenses and cost due to increase
the profit ratio. In 2015 showing the low profit ratio there is cost and expenses will be
increase the other years
(a) Operating Expenses Ratios
To identify the cause of fall or rise in net profit, each operating expense ratio
is to be calculated. This can be calculated by:
Page | 56
TABLE NO. 4.1.4.3

Table showing operating ratio
Operating Expense Net Sales operating ratio

2014 ₹ 38,19,94,350 ₹ 64,21,27,681 59.49%
2015 ₹ 43,94,21,216 ₹ 93,36,80,381 47.06%
2016 ₹ 56,69,95,780 ₹ 94,67,26,024 59.89%
2017 ₹ 54,06,11,403 ₹ 1,05,16,71,115 51.40%
2018 ₹ 49,97,33,466 ₹ 99,76,69,880 50.09%
Average=267.93/5= 53.59
CHART NO. 4.1.4.3
operating ratio
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2014 2015 2016 2017 2018
INTERPRETATION
Lower the ratio, the more profitable are the operation indicating an efficient control
over costs and an appropriate selling price. Reverse is the position when the ratio is
higher. It is one of the most important efficiency ratios. The 2015 year the operating
ratio is comparatively less in other years in this year operating ratio is 47.06 other
tears are higher than this year operating ratio
Page | 57
4.2 TREND ANALYSIS

The financial statement may be analyzed by computing trends of series of
information. This method determines the direction upwards
(a) Trend of Current Assets.
TABLE NO. 4.2.1
Year Amount Trend %

2014 ₹ 81,18,53,403.00 100
2015 ₹ 71,45,19,554.00 88.01%
2016 ₹ 73,64,23,182.00 90.71%
2017 ₹ 71,21,57,452.00 87.72%
2018 ₹ 66,49,34,760.00 81.90%
CHART NO. 4.2.1
Page | 58
Trend of Current ASSETS

₹ 900,000,000.00
₹ 800,000,000.00
₹ 700,000,000.00
₹ 600,000,000.00
₹ 500,000,000.00
₹ 400,000,000.00
₹ 300,000,000.00
₹ 200,000,000.00
₹ 100,000,000.00
₹ 0.00
2014 2015 2016 2017 2018
INTERPRETATION
From the above analysis it can be inferred that the ‘Current Assets’ shows a rise in
2014 when compared to other years. The year 2014 is highest trend in current
assets then decreasing trend in 2015 then a small rate of current assets trend will be
increasing 2016 then decrease the trend in subsequent year. In above chart will be
shown the trend fluctuation in current assets.
(a) Trend of Sales.
TABLE NO.4.2.2
Year Amount Trend %

₹
2015 64,21,27,681.00 100
₹
2016 93,36,80,381.00 145.40%
₹
2017 94,67,26,024.00 147.44%
₹
1,05,16,71,115.0
2018 0 163.78%
₹
2017 99,76,69,880.00 155.37%
Page | 59
CHART NO. 4.2.2
Trend on Sales
₹ 1,200,000,000.00
₹ 1,000,000,000.00
₹ 800,000,000.00
₹ 600,000,000.00
₹ 400,000,000.00
₹ 200,000,000.00
₹ 0.00
2014 2015 2016 2017 2018
INTERPRETATION
From the above analysis it can be inferred that the sales show a high
jump in 2014 to 2017 then reduce a small trend in 2018. In above analysis 2017 is
high trend in sales due to increase the price without increasing cost of goods sold in
this year have a greater sales compared to other years. In 2014 have less sales
compared to other years sales trend.
(a) Trend of Inventory.
TABLE NO. 4.2.3
Trend
Year Amount %
2014 ₹ 54,16,83,138.00 100
2015 ₹ 13,64,87,230.00 25.20%
2016 ₹ 15,67,35,346.00 28.93%
2017 ₹ 21,14,42,713.00 39.03%
2018 ₹ 22,12,50,105.00 40.84%
Page | 60
CHART NO,4.2.3
Trend in Inventory
₹ 600,000,000.00
₹ 500,000,000.00
₹ 400,000,000.00
₹ 300,000,000.00
₹ 200,000,000.00
₹ 100,000,000.00
₹ 0.00
2014 2015 2016 2017 2018
INTERPRETATION
Inventory holding in 2014 is very high compared to other years in the above
analysis 2015 to 2018 showing a rapid increase in inventory trend. High
inventory trend is not good for firm. In this firm have a low inventory trend
that is favorable to the firm.
(a) Trend of Net Profit.
TABLE NO. 4.2.4

Yea Trend
r Amount %
201
4 ₹ 6,49,32,902.00 100
201
5 ₹ 3,79,82,370.00 58.49%
201 255.03
6 ₹ 16,55,96,123.00 %
201 265.79
7 ₹ 17,25,82,732.00 %
Page | 61
201 330.25
8 ₹ 21,44,42,116.00 %
CHART NO.4.2.4
Trend of Net Profit

₹ 1,400,000,000.00
₹ 1,200,000,000.00
₹ 1,000,000,000.00
₹ 800,000,000.00
₹ 600,000,000.00
₹ 400,000,000.00
₹ 200,000,000.00
₹ 0.00
2014 2015 2016 2017 2018
INTERPRETATION
In 2014 to 2015 have a downward trend in net profit. In the year 2015
has low profit in the year have a high cost of goods sold or less sales. In the
year 2018 have a high net profit trend that year has expenses are less. In 2015
to 2018 has a rapid increase in net profit trend.
(b) Trend of Current Liabilities
Yea Trend
r Amount %
201
4 ₹ 87,23,61,816.00 100
201 89.21
5 ₹ 77,81,99,574.00 %
201 103.90
6 ₹ 90,63,71,773.00 %
201 128.27
7 ₹ 1,11,90,16,267.00 %
201 144.04
8 ₹ 1,25,65,86,963.00 %
Page | 62
CHART NO. 4.2.5
Trend in Current Liabilities

₹ 1,400,000,000.00
₹ 1,200,000,000.00
₹ 1,000,000,000.00
₹ 800,000,000.00
₹ 600,000,000.00
₹ 400,000,000.00
₹ 200,000,000.00
₹ 0.00
2014 2015 2016 2017 2018
INTERPRETATION
In the above analysis 2015 has a low current liability compared to other years.
In the year 2015 to 2018 has a rapid increase in trend in current liability. In
high trend in current liability is not favorable in a firm. In this firm have not
favorable position in the current trend in current liability.
4.3 SCHEDULE IN CHANGES IN WORKING CAPITAL

. Statement of changes in working capital is also very useful to identify the
increase or decrease in working capital over a period.
Page | 63
Schedule of changes in working capital for the year ended
31st march 2013&2014
TABLE NO. 4.3.1
Particulars 2013 2014 Increase/Decreas

e
A. Current Assets
₹ ₹ -₹ 2,98,52,411.00
(a) Inventories 18,79,90,021.00 15,81,37,610.00
₹ ₹ ₹ 6,54,03,726.00
(b) Trade receivables 47,62,79,412.00 54,16,83,138.00
₹ -₹
(c) Cash and Cash equivalants 12,07,02,983.00 ₹ 1,96,20,076.00 10,10,82,907.00
(d) Other Bank Balances
(e) Short term loans and ₹ 30,45,249.00
advances ₹ 3,03,21,467.00 ₹ 3,33,66,716.00
(f) Other Current assets ₹ 5,14,50,000.00 ₹ 5,90,45,863.00 ₹ 75,95,863.00
Total Current Assets ₹ 86,67,43,883.00 ₹ 81,18,53,403.00 -₹ 5,48,90,480.00
B. Current Liabilities
-₹
(a) Short term Borrowings ₹ 31,31,17,393.00 ₹ 20,29,89,882.00 11,01,27,511.00
(b) Trade Payable ₹ 13,21,32,143.00 ₹ 19,94,08,296.00 ₹ 6,72,76,153.00
(c) Other Current Liabilities ₹ 40,65,69,467.00 ₹ 45,77,36,117.00 ₹ 5,11,66,650.00
(d) Short term Provisions ₹ 59,51,044.00 ₹ 1,22,27,521.00 ₹ 62,76,477.00
Total Current Liability ₹ 85,77,70,047.00 ₹ 87,23,61,816.00 ₹ 1,45,91,769.00
C. Working Capital(A-B) ₹ 89,73,836.00 -₹ 6,05,08,413.00 -₹ 5,15,34,577.00
INTERPRETATION
This schedule showing negative figure in working capital amount at

-51534577 that showing current liability is higher than the current assets. In
2013 working capital is positive but the next year working capital is negative
figure . Compare the two year this firm working capital is not favorable. The
mane cause is increase the short term borrowings.
Page | 64
1.3.2. Schedule of changes in working capital for the year ended 31 march
2014& 2015

e
A. Current Assets
₹ ₹ -₹ 2,16,50,380.00
(a) Inventories 15,81,37,610.00 13,64,87,230.00
₹ ₹ -₹ 3,14,21,086.00
(c) Cash and Cash equivalants ₹ 1,96,20,076.00 ₹ 1,54,21,257.00 -₹ 41,98,819.00
(e) Short term loans and ₹ 1,55,93,059.00
advances ₹ 3,33,66,716.00 ₹ 4,89,59,775.00
(f) Other Current assets ₹ 5,90,45,863.00 ₹ 33,89,240.00 -₹ 5,56,56,623.00
(a) Short term Borrowings ₹ 20,29,89,882.00 ₹ 20,22,48,671.00 -₹ 7,41,211.00
(b) Trade Payable ₹ 19,94,08,296.00 ₹ 20,37,79,539.00 ₹ 43,71,243.00
(c) Other Current Liabilities ₹ 45,77,36,117.00 ₹ 36,20,13,691.00 -₹ 9,57,22,426.00
(d) Short term Provisions ₹ 1,22,27,521.00 ₹ 1,01,57,673.00 -₹ 20,69,848.00
Total Current Liability ₹ 87,23,61,816.00 ₹ 77,81,99,574.00 -₹ 9,41,62,242.00
C. Working Capital(A-B) -₹ 6,05,08,413.00 -₹ 6,36,80,020.00 -₹
12,41,88,433.00
INTERPRETATION
In above table showing the changes in working capital for two year. Both year
have a negative figure so there is high current liabilities and the trade payable
is variation is very high compared with other current liabilities. In this firm has
not required working capital so there is day to day activities is going slowly so
the firm not required to meet current liabilities due to current asset.
Page | 65
4.3 Schedule of changes in working capital for the year
Ended 31 march 2015 & 2016
TABLE NO. 4.3.3

e
A. Current Assets
₹ ₹ ₹ 2,02,48,116.00
(a) Inventories 13,64,87,230.00 15,67,35,346.00
₹ ₹ -₹ 1,25,79,192.00
(c) Cash and Cash equivalants ₹ 1,54,21,257.00 ₹ 5,34,56,397.00 ₹ 3,80,35,140.00
(e) Short term loans and -₹ 2,10,84,834.00
advances ₹ 4,89,59,775.00 ₹ 2,78,74,941.00
(f) Other Current assets ₹ 33,89,240.00 ₹ 6,73,638.00 -₹ 27,15,602.00
Total Current Assets ₹ 71,45,19,554.00 ₹ 73,64,23,182.00 ₹ 2,19,03,628.00
(a) Short term Borrowings ₹ 20,22,48,671.00 ₹ 21,25,17,575.00 ₹ 1,02,68,904.00
(b) Trade Payable ₹ 20,37,79,539.00 ₹ 25,09,57,377.00 ₹ 4,71,77,838.00
(d) Short term Provisions ₹ 1,01,57,673.00 ₹ 1,48,83,423.00 ₹ 47,25,750.00
Total Current Liability ₹ 77,81,99,574.00 ₹ 90,63,71,773.00 ₹ 12,81,72,199.00
23,36,28,611.00
INTERPRETATION
In the above analysis working capital of 2015 and 2016 has negative figure
because current liability is higher than the current assets. In the above analysis
trade payable and other current liabilities are increasing than base year. In this
analysis to find out this firm has not required working capital for meet the
current liabilities.
Page | 66
4.4 Schedule of changes in working capital for the year ended
March 31 2016 & 2017

e
A. Current Assets
₹ ₹ ₹ 5,47,07,367.00
(a) Inventories 15,67,35,346.00 21,14,42,713.00
₹ ₹ -₹ 4,08,46,595.00
(c) Cash and Cash equivalants ₹ 5,34,56,397.00 ₹ 2,44,04,970.00 -₹ 2,90,51,427.00
(e) Short term loans and -₹ 93,98,151.00
advances ₹ 2,78,74,941.00 ₹ 1,84,76,790.00
(f) Other Current assets ₹ 6,73,638.00 ₹ 9,96,714.00 ₹ 3,23,076.00
(a) Short term Borrowings ₹ 21,25,17,575.00 ₹ 15,05,07,014.00 -₹ 6,20,10,561.00
(b) Trade Payable ₹ 25,09,57,377.00 ₹ 44,60,30,604.00 ₹ 19,50,73,227.00
Total Current Liability ₹ 90,63,71,773.00 ₹ ₹ 21,26,44,494.00
1,11,90,16,267.00
57,68,07,406.00
INTERPRETATION
In 2016 & 2017 working capital is not required for their day to day activities. In
both year working capital is negative figure so there is no required working
capital. Working capital is very important in day to day activities of a firm and it
is required to meet the current liabilities. In the firm have negative figure in
working capital so the firm is in efficient.
Page | 67
4.3.5. Schedule of changes in working capital for the year ended

march 31 2017 & 2018

e
A. Current Assets
₹ ₹ ₹ 98,07,392.00
(a) Inventories 21,14,42,713.00 22,12,50,105.00
₹ ₹ -₹ 6,28,90,171.00
(c) Cash and Cash equivalants ₹ 2,44,04,970.00 ₹ 2,48,98,239.00 ₹ 4,93,269.00
(e) Short term loans and ₹ 59,87,431.00
advances ₹ 1,84,76,790.00 ₹ 2,44,64,221.00
(f) Other Current assets ₹ 9,96,714.00 ₹ 3,76,101.00 -₹ 6,20,613.00
(a) Short term Borrowings ₹ 15,05,07,014.00 ₹ 17,62,67,436.00 ₹ 2,57,60,422.00
(b) Trade Payable ₹ 44,60,30,604.00 ₹ 39,23,16,939.00 -₹ 5,37,13,665.00
Total Current Liability ₹ ₹ ₹ 13,75,70,696.00
1,11,90,16,267.00 1,25,65,86,963.00
99,85,11,018.00
INTERPRETATION
In the above analysis the firm has not required working capital. The year 2017
& 2018 variation of working capital is negative figure that showing current
liability higher than the current assets. In this analysis showing the firm will be
going to a large debt and the current asset is not required to meet the current
liabilities. In the above analysis the both year have negative figure of working
capital that showing the high level of current liabilities.
Page | 68
4.4 DUE POINT ANALYSIS

DuPont Analysis is a financial ratio analysis that determines the ability of the
company to increase its return on equity ratio. It breaks down the return on equity
into a detailed form to overcome the shortcoming of ROE. The DuPont Analysis
model has three components for return on equity calculation. They are, profit
margin (operating efficiency), asset turnover (asset use efficiency) and financial
leverage. On the basis of the above three points of interpretation, the DuPont Model
calculates the performance of a company. In addition, the DuPont analysis suggests
that how a company can raise its return on equity with efficient use of assets or
increasing the turnover of the company or by maintaining a higher profit margin.
Investors are not looking for large or small output numbers from this model.
Instead, they are looking to analyze what is causing the current ROE. If investors are
unsatisfied with a low ROE, the management can use this formula to pinpoint the
problem area whether it is a lower profit margin, asset turnover, or poor financial
leveraging. This model helps investors compare similar companies like these with
similar ratios. Investors can then apply perceived risks with each company’s
business model.
Operating Efficiency (net profit/revenue)
TABLE NO. 4.4.1
Year Net Profit Revenue Op Efficiency

2014 ₹ 6,49,32,902 ₹ 94,08,32,617 6.90%
2015 ₹ 3,79,82,370 ₹ 95,43,68,043 3.98%
2016 ₹ 16,55,96,123 ₹ 1,05,92,22,584 15.63%
2017 ₹ 17,25,82,732 ₹ 1,19,60,75,905 14.43%
2018 ₹ 21,44,42,116 ₹ 96,69,88,447 22.18%
INTERPRETATION
The operating efficiency of a KEL is raised from 14,43 to 22.18 it is high

profit margin in every year have a profit margin. In 2018 is very high
profit margin the company does not solely depend on shareholders capital
Page | 69
for doing business. Major chunk of the operating money comes from loan
funding. This affects the profit margin.
Asset use Efficiency (Revenue/Total assets)
TABLE NO.4.4.2
Asset Use
Year Revenue Total Assets Efficiency
2014 ₹ 94,08,32,617 ₹ 92,51,64,072 101.69%
2015 ₹ 95,43,68,043 ₹ 88,61,44,217 107.70%
2016 ₹ 1,05,92,22,584 ₹ 95,18,18,946 111.28%
2017 ₹ 1,19,60,75,905 ₹ 92,95,93,193 128.67%
2018 ₹ 96,69,88,447 ₹ 89,54,48,960 107.99%
INTERPRETATION
In the above analysis the assets efficiency will be rise in year to year excluding
the year 2018. In the year 2018 have a less asset efficiency
Financial leverage (Total assets/Shareholders fund)
TABLE NO. 4.4.3

Shareholder's
Year Total Assets Equity Financial Leverage
2014 ₹ 92,51,64,072 ₹ 26,19,37,523 353.20%
2015 ₹ 88,61,44,217 -₹ 42,85,79,049 -206.76%
2016 ₹ 95,18,18,946 ₹ 60,11,61,781 158.33%
2017 ₹ 92,95,93,193 -₹ 77,14,38,728 -120.50%
2018 ₹ 89,54,48,960 -₹ 98,58,80,897 -90.83%
INTERPRETATION
Financial Leverage can be seen as a highly fluctuating figure. This is mainly
because the ‘Shareholders Funds’ is greatly affected by negative figure of Reserve
and surplus resulted by accumulated losses from the past
Page | 70
Due Point ROE
TABLE NO.4.4.4.
Yea Asset Use Financial

r Op EfficiencyCHART
Efficiency
NO.4.4.1 Leverage ROE
201
4 6.90% 101.69% 353.20% 24.78%
201
5 3.98% 107.70% -206.76% -8.86%
201
6 15.63% 111.28% 158.33% 27.54%
201
7 14.43% 128.67% -120.50% -22.37%
201
8 22.18% 107.99% -90.83% -21.76%
ROE
600.00%
500.00%
400.00%
300.00%
200.00%
100.00%
0.00%
2013.5 2014 2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5
-100.00%
INTERPRETATION
Due point analysis consider both financial asset and operating asset again
financial income and operating income. Since financial income doesn't come
from operating activities there is no guarantee that those income will sustain
in fuure. Du point fails to separate financial activities from operating activities
so this analysis is not appropriate and not a perfect measure.
Page | 71
CHAPTER-5
FINDINGS, SUGGECTIONS AND CONCLUSIONS
5.1 FINDINGS
 This firm has not favorable in current ratio

 In this firm have a favorable and healthy financial position
compared to other government organization
 This organization does not positive figure in Reserve and
Surplus
 Quick assets are lesser than liabilities
 This organization have a pure Liquid position
 Gross profit ratio will be increase year to year
 Sale is lesser than the gross profit
 This organization does not have favorable working capital
 Fixed asset turnover ratio reflects better investment in fixed
asset, which contribute sales.
 Trend in net profit will be increasing the year 2015 to 2018
Trend in inventory will be reducing year to year that will be
favorable to the firm
 The solvency position of the company is up to the mark
 Trend of current liability is increasing the year 2015 to 2018
 Current assets will be decrease in year to year
 Outsiders liability will be higher in the organization
Page | 72
5.2. SUGGECTIONS
 Current assets maintain a constant level through meet the

current liabilities
 The company should try to reduce the current liabilities for
achieving good liquidity
 The company has to improve the efficiency of production
process or utilization of assets either by attaining economies of
scale or by reducing the idle time
 The company raises funds for diversification in order to sustain in
the market
 The company should take necessary actions to reduce the
operating expenses, this helps to increase the net profit ratio
 The company may increase the absolute liquid assets in order to
ensure its absolute liquidity position
 Efficient utilization of finance due to reduce the long term
borrowings
 Adopt new technology to production for efficient utilization of idle
time
Page | 73
5.3. CONCLUSION
In this study an attempt to analyze the working capital position of Kerala Electrical
and Allied Engineering Company. Though the company is a profit making
organization its profit is not to the mark with respect to the assets employed in the
organization. Since the working capital amount shows negative trend it reveals that
the company is in a to unable to meet day to day operations. The analyze and
interpreting various data relating to working capital management help to reach a
conclusion that the working capital is not sufficient. The firm succeeded in building
up a brand image and increasing the favorable attitude in the mind of customers.
The customer have accepted the firm has reliable and quality organization. The
overall performance of the company is satisfactory. This project helps to identify and
give suggestions to the area of the weaker position of the business.
Page | 74
Page | 75
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Kerala Electrical & Allied Engineering co.

TOPIC: Financial Performance of KEL

Analysis means establishing a meaningful relationship between various

Thus, analysis of financial statements refers to the treatment of information

1.2 EXPLANATION OF TOPIC

The financial system is divided into six sections

 Functions of the financial system

FUNCTIONS OF THE FINANCE SYSTEM

 It provides a payment system for the exchange of goods and services

 It generates information that helps in coordinating decentralized

 Whether the enterprise’s financial position is basically sound,

 Whether the profitability of the enterprise is satisfactory,

Ratios can be broadly classified into the following ways:-

 (i) Primary Ratios. As a success any business understanding is

Liquidity Solvency Ratios

meaning. Therefore the study of accounting ratios is indispensible for financial

As a conventional rule, a current ratio of 2:1 is considered satisfactory.

c. Absolute Liquidity Ratio

A ratio of 1:2 is recommended to ensure liquidity. This test is more vigorous to

(a) Debt – Equity Ratio

a. Debt Equity Ratio

It is computed to ascertain the soundness of the long-term financial position of

c. Fixed Assets to Net worth Ratio

d. Capital Gearing Ratio

For computation of capital gearing ratio, funds that belong to equity

a. Inventory Turnover Ratio

b. Fixed Asset Turnover Ratio

This indicates the extent to which the investments in fixed assets

c. Debtors Turnover Ratio

It indicates the extent to which an organization efficiency with regard to

d. Creditors Turnover Ratio.

The business firm is basically a profit earning organization, the income

(i) Gross profit ratio

(a) Gross Profit Ratio. The gross profitability ratio plays an

This ratio helps in ascertaining whether the average percentage of

(iii) Operating Expenses Ratios. To identify the cause of fall or rise in

The behaviour of specific expenditure is to be seen, in comparison to the

(1) Return Of Total Assets Ratio

(ii) Return On Capital Employed Ratio. This ratio is also known as

(iii) before dividend is distributed to equity shareholders. Net profits after

Equity shareholders’ funds are equity share capital, accumulated

Statement of Changes in Working Capital.

Due Pont Analysis.

1. Operating efficiency, which is measured by profit margin;

2. Asset use efficiency, which is measured by total asset turnover; and

3. Financial leverage, which is measured by the equity multiplier

The formula for the DuPont identity is:

ROE = profit margin x asset turnover x equity multiplier

This formula, in turn, can be broken down further to:

ROE = (net income / sales) x (revenue / total assets) x (total assets /

Financial statement (meaning)

Financial statements refers to formal and original statement prepared by a business

1. The status of investments in the business and

2. The results achieved during the period under review

Nature of financial statement

Financial statements are prepared to review the state of investment in a business

Functions or Important of financial statements

Financial statements provide meaningful, useful and valuable information

Financial statements are also of great importance to the financiers and

Present and prospective investors are interested in studying financial

Limitation of financial statements

1. Information show in financial statements is not precise