Ratio Analysis With Referance To SR Steel Ind Project

A STUDY OF RATIO ANALYSIS WITH REFERENCE TO S. R.
STEEL
INDUSTRIES PVT, LTD. 2021-
22
CHAPTER NO. I
INTRODUCTION
INTRODUCTION OF RATIO ANALYSIS

The ratio analysis is the most powerful tool of financial analysis. Several ratios
calculated from the accounting data can be grouped into various classes according to
financial activity or function to be evaluated. Information about a business
organization, its activities, profitability, financial condition and investment potential
can come from a number of different sources. Foremost amongst these are the firm's
financial reports and therefore it is not surprising to find that traditionally financial
statement analysis has played an important role in providing specialized information
to particular decision makers.
The principal analytical tool employed by financial statement analysts is the ratio,
and as a result ratio analysis has become synonymous with financial statement
analysis. Ratio Analysis is the technique which is used to compare business
performance with other business’ performance. While in same business, it can be
used to measure or compare the business performance of two years. It is systematic
analysis which measures the performance of the business with some determined
formulas. Quantitative analysis of information contained in a company’s financial
statements. Ratio analysis is based on line items in financial statements like the
balance sheet, income statement and cash flow statement, and calculating the ratios
of one item or a combination of items-to another item or combination.
The technique involves the calculation of a number of ratios indicators which attempt
to express the relationships which exist between key financial variables which appear
principally in the published financial statements. The values for individual ratios are
then compared with an appropriate standard to ascertain whether they are satisfactory
or otherwise. Financial statements helps to show the financial performance of
business for year. On that performance Ratio Analysis works to measure or to
compare the performance of the business. It has wider scope. Financial Analysis is
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A STUDY OF RATIO ANALYSIS WITH REFERENCE TO S. R. STEEL
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the selection, evaluation and interpretation of financial data, along with other
permanent information, to assist in investment and financial decision making. The
purpose of this project to introduce about Ratio Analysis.
DEFINITION:
“The indicate quotient of two mathematical expressions and as the relationship
between two or more things’’. It evaluates the financial position and performance of
the firm. As started in the beginning many diverse groups of people are interested in
analyzing financial information to indicate the operating and financial efficiency and
growth of firm. These people use ratios to determine those financial characteristics of
firm in which they interested with the help of ratios one can determine.
 The ability of the firm to meet its current obligations.
 The extent to which the firm has used its long-term solvency by borrowing
funds.
 The overall operating efficiency and performance of firm.
Alexander wall is the pioneer of ratio analysis. He presented a detailed system of

ratio analysis in the year 1919. Ratio analysis is important one for all management
accounting for decision making. Ratio analysis of financial statements stands for the
process of determining and presenting the relationship of items and groups of items
in the statements. Ratio analysis is a powerful tool of financial analysis. It is a
process of identifying the financial strengths and weakness of the firm by properly
establishing the relationship between the different items of balance sheet and profit
and loss account for a meaningful understanding of the financial position and
performance of the firm.

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OBJECTIVE OF THE STUDY

 To study and analyze the financial position of the Company through ratio
analysis.
 To analyze the profitability position of the S. R. Steel Industries Ltd.
 To determine the long term solvency position of S. R. Steel Industries Ltd.
NEED OF THE STUDY

 The study has great significance and provides benefits to various parties
whom directly or indirectly with the company.
 To express the relationship between different financial aspects in such a way

that it allows the user to draw conclusions about the performance, strengths
and weaknesses of the company.
 To diagnose the information contained in financial statement so as to judge

the profitability of the firm.
 The study helps to know a liquidity, solvency, profitability and turnover

position of the company.
SCOPE OF THE STUDY

The scope of the study is limited to collecting financial data published in the annual
reports of the company every year. The study is carried out for 3 years (2017-2016-
2015). The present study is confined to only S. R. Steel Industries Ltd, only.

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RESEARCH METHODOLOGY
The main aim of the study is to know the financial performance of the S.R. Steel
Industries Ltd.
1. Research
Any efforts which are directed to study of strategy needed to identify the
problems and selection of best solutions for better results are known as
research.
2. Research Design
In view of the objects of the study listed above an exploratory research design
has been adopted. Exploratory research is one which is largely interprets and
already available information and it lays particular emphasis on analysis and
interpretation of the existing and available information.
3. Research Design Objective

 To know the financial status of the company.
 To know the credit worthiness of the company.
 To offer suggestions based on research finding.
DATA COLLECTION METHODS

1. Primary Data
 Information collected from internal guide and finance manager.
2. Secondary data
 Company balance sheet and profit and loss account.

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 Company’s annual reports
 Books :- Financial Account

LIMITATIONS OF RATIO ANALYSIS:
The technique of ratio analysis is a very useful device for making a study of the
financial health of a firm. But it has some limitations which must not be lost sight of
before undertaking such analysis. Some of these limitations are:
1. Limitations of Financial Statements:

Ratios are calculated from the information recorded in the financial
statements. But financial statements suffer from a number of limitations and
may, therefore, affect the quality of ratio analysis.
2. Historical Information:
Financial statements provide historical information. They do not reflect
current conditions. Hence, it is not useful in predicting the future.
3. Different Accounting Policies:

Different accounting policies regarding valuation of inventories, charging
depreciation etc. make the accounting data and accounting ratios of two firms
non-comparable.
4. Lack of Standard of Comparison:

No fixed standards can be laid down for ideal ratios. For example, current
ratio is said to be ideal if current assets are twice the current liabilities. But
this conclusion may not be justifiable in case of those concerns which have
adequate arrangements with their bankers for providing funds when they
require, it may be perfectly ideal if current assets are equal to or slightly more
than current liabilities.
5. Quantitative Analysis:

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Ratios are tools of quantitative analysis only and qualitative factors are
ignored while computing the ratios. For example, a high current ratio may not
necessarily mean sound liquid position when current assets include a large
inventory consisting of mostly obsolete items.
6. Window-Dressing:
The term ‘window-dressing’ means presenting the financial statements in
such a way to show a better position than what it actually is. If, for instance,
low rate of depreciation is charged, an item of revenue expense is treated as
capital expenditure etc. the position of the concern may be made to appear in
the balance sheet much better than what it is. Ratios computed from such
balance sheet cannot be used for scanning the financial position of the
business.
7. Changes in Price Level:

Fixed assets show the position statement at cost only. Hence, it does not
reflect the changes in price level. Thus, it makes comparison difficult.
8. Causal Relationship Must:

Proper care should be taken to study only such figures as have a cause-and-
effect relationship; otherwise ratios will only be misleading.
9. Ratios Account for one Variable:

Since ratios account for only one variable, they cannot always give correct
picture since several other variables such Government policy, economic
conditions, availability of resources etc. should be kept in mind while
interpreting ratios.
10. Seasonal Factors Affect Financial Data:

Proper care must be taken when interpreting accounting ratios calculated for
seasonal business. For example, an umbrella company maintains high
inventory during rainy season and for the rest of year its inventory level

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becomes 25% of the seasonal inventory level. Hence, liquidity ratios and
inventory turnover ratio will give biased picture.
LIMITATION OF STUDY
The following are the limitation of study:
 The study was limited to only 3 years financial data.
 The study is purely base on the secondary data which were taken primarily
from publish annual report of S. R. Steel Industries Ltd.
 The ratio is calculated from past financial statements and these are not
indicator of future.

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CHAPTER NO. II
THEORETICAL BACKGROUND
FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial strengths and weakness
of the firm. It is done by establishing relationships between the items of financial
statements viz., balance sheet and profit and loss account. Financial analysis can be
undertaken by management of the firm, viz., owners, creditors, investors and others.
NATURE OF RATIO ANALYSIS

Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as "the
indicated quotient of mathematical expression" and as "the relationship between two
or more things". A ratio is used as benchmark for evaluating the financial position
and performance of the firm. The relationship between two accounting figures,
expressed mathematically, is known as a financial ratio. Ratio helps to summarizes
large quantities of financial data and to make qualitative judgment about the firm's
financial performance. The persons interested in the analysis of financial statements
can be grouped under three head owners (or) investors who are desired primarily a
basis for estimating earning capacity. Creditors are the people who are concerned
primarily with Liquidity and ability to pay interest and redeem loan within a
specified period. Management is interested in evolving analytical tools that will
measure costs, efficiency, liquidity and profitability with a view to make intelligent
decisions.

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STANDARDS OF COMPARISON
The ratio analysis involves comparison for a useful interpretation of the financial
statements. A single ratio in itself does not indicate favorable or unfavorable
condition. It should be compared with some standard. Standards of comparison are:
1. Past Ratios
2. Competitor's Ratios
3. Projected Ratios
1. Past Ratios:
Ratios calculated from the past financial statements of the same firm.
2. Competitor's Ratios:
Ratios of some selected firms, especially the most progressive and successful
competitor at the same point in time. Industry Ratios: Ratios of the industry
to which the firm belongs.
3. Projected Ratios:
Ratios developed using the projected financial statements of the same firm.
TIME SERIES ANALYSIS

The easiest way to evaluate the performance of a firm is to compare its present ratios
with past ratios. When financial ratios over a period of time are compared, it is
known as the time series analysis or trend analysis. It gives an indication of the
direction of change and reflects whether the firm's financial performance has
improved, deteriorated or remind constant over time.
CROSS SECTIONAL ANALYSIS

Another way to comparison is to compare ratios of one firm with some selected firms
in the industry at the same point in time. This kind of comparison is known as the

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cross-sectional analysis. It is more useful to compare the firm's ratios with ratios of a
few carefully selected competitors, who have similar operations.
INDUSTRY ANALYSIS
Its ratio may be compared with average ratios of the industry of which the firm is a
member. This type of analysis is known as industry analysis and also it helps to
ascertain the financial standing and capability of the firm & other firms in the
industry. Industry ratios are important standards in view of the fact that each industry
has its characteristics which influence the financial and operating relationships.
METHODS OF ANALYSIS
A financial analyst can adopt the following tools for analysis of the financial
statements. These are also termed as methods of financial analysis.
 Comparative statement analysis
 Common-size statement analysis
 Trend analysis
 Funds flow analysis
 Ratio analysis
Parties interested in financial analysis

The users of financial analysis can be divided into two broad groups.
1. Internal users
 Financial executives
 Top management
2. External users
 Investors
 Creditor
 Workers
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 Customers
 Government
 Public
 Researchers
ADVANTAGES OF RATIO ANALYSIS

Ratio analysis is widely used as a powerful tool of financial statement analysis. It
establishes the numerical or quantitative relationship between two figures of a
financial statement to ascertain strengths and weaknesses of a firm as well as its
current financial position and historical performance. It helps various interested
parties to make an evaluation of certain aspect of a firm’s performance.
The following are the principal advantages of ratio analysis:

1. Forecasting and Planning:
The trend in costs, sales, profits and other facts can be known by computing
ratios of relevant accounting figures of last few years. This trend analysis
with the help of ratios may be useful for forecasting and planning future
business activities.
2. Budgeting:
Budget is an estimate of future activities on the basis of past experience.
Accounting ratios help to estimate budgeted figures. For example, sales
budget may be prepared with the help of analysis of past sales.
3. Measurement of Operating Efficiency:

Ratio analysis indicates the degree of efficiency in the management and
utilization of its assets. Different activity ratios indicate the operational
efficiency.
4. Communication:

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Ratios are effective means of communication and play a vital role in

informing the position of and progress made by the business concern to the
owners or other parties.
5. Control of Performance and Cost:

Ratios may also be used for control of performances of the different divisions
or departments of an undertaking as well as control of costs.
6. Inter-firm Comparison:
Comparison of performance of two or more firms reveals efficient and
inefficient firms, thereby enabling the inefficient firms to adopt suitable
measures for improving their efficiency.
7. Indication of Liquidity Position:

Ratio analysis helps to assess the liquidity position i.e., short-term debt
paying ability of a firm. Liquidity ratios indicate the ability of the firm to pay
and help in credit analysis by banks, creditors and other suppliers of short-
term loans.
8. Indication of Long-term Solvency Position:

Ratio analysis is also used to assess the long-term debt-paying capacity of a
firm. Long-term solvency position of a borrower is a prime concern to the
long-term creditors, security analysts and the present and potential owners of
a business.
9. Indication of Overall Profitability:

The management want to know whether the firm has the ability to meet its
short-term as well as long-term obligations to its creditors, to ensure a
reasonable return to its owners and secure optimum utilization of the assets of
the firm.
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10. Signal of Corporate Sickness:

A company is sick when it fails to generate profit on a continuous basis and
suffers a severe liquidity crisis.
11. Aid to Decision-making:

Ratio analysis helps to take decisions like whether to supply goods on credit
to a firm, whether bank loans will be made available etc.
SIGNIFICANCE OF FINANCIAL ANALYSIS

Financial analysis serves the following purpose:
 To know the operational efficiency of the business
The financial analysis enables the management to find out the overall
efficiency of the firm.
 Helpful in measuring the solvency of the firm

The financial analysis helps the decision makers in taking appropriate
decisions for strengthening the short-term as well as long-term solvency of
the firm.
 Comparison of past and present results

Financial statements of the previous years can be compared and the trend
regarding various expenses, purchases, sales, gross profit and net profit can
be ascertained.
 Helps in measuring the profitability

Financial statements show the gross profit, & net profit.
 Inter‐firm comparison

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The financial analysis makes it easy to make inter-firm comparison. This

comparison can also be made for various time periods.
 Bankruptcy and Failure

Financial statement analysis is significant tool in predicting the bankruptcy
and the failure of the business enterprise. Financial statement analysis
accomplishes this through the evaluation of the solvency position.
 Helps in forecasting
The financial analysis will help in assessing future development by making
forecasts and preparing budgets
TYPES OF RATIOS
Traditional Functional
Statement of Profit And Loss

Ratios
Balance Sheet Ratios
Composite Ratios
Activity Turnover
Liquidity Ratio Solvency Ratio Profitability Ratio
Ratio

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Debt Equity Inventory

Current Ratio Gross Profit Ratio
Ratio Turnover
Debt to Capital Trade Receivable

Quick Ratio Operating Ratio
Employed Ratio Turnover Ratio
Trade Payable Operating Profit
Proprietary Ratio
Turnover Ratio Ratio
Net Assets or
Total Assets To
Capital Employed Net profit ratio
Debt Ratio
Turnover Ratio
Return On
Interest Coverage Capital Employed
Ratio Or Investment
Ratio
Earnings Per
Share Ratio
Books Value Per
Share Ratio
Price Earnings
Ratio
There is a two way classification of ratios:

 Traditional classification
 Functional classification
The traditional classification:-

The traditional classification has been on the basis of financial statements to
which the determinants of ratios belong.
 Statement of Profit and Loss Ratios:

A ratio of two variables from the statement of profit and loss is known as
statement of profit and loss ratio. For example, ratio of gross profit to
revenue from operations is known as gross profit ratio.
 Balance Sheet Ratios:

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In case both variables are from the balance sheet, it is classified as

balance sheet ratios. For example, ratio of current assets to current
liabilities known as current ratio.
 Composite Ratios:
If a ratio is computed with one variable from the statement of profit and
loss and another variable from the balance sheet, it is called composite
ratio. For example, ratio of credit revenue from operations to trade
receivables is calculated using one figure from the statement of profit and
loss and another figure from the balance sheet. Although accounting
ratios are calculated by taking data from financial statements but
classification of ratios on the basis of financial statements is rarely used
in practice.

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Functional
Classification of Ratios:-
 Liquidity Ratios:
To meet its commitments, business needs liquid funds. The ability of the
business to pay the amount due to stakeholders as and when it is due is
known as liquidity, and the ratios calculated to measure it are known as
‘Liquidity Ratios’. These are essentially short-term in nature.
 Solvency Ratios:
Solvency of business is determined by its ability to meet its contractual
obligations towards stakeholders, particularly towards external
stakeholders, and the ratios calculated to measure solvency position are
known as ‘Solvency Ratios’. These are essentially long-term in nature.
 Activity (or Turnover) Ratios:

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This refers to the ratios that are calculated for measuring the efficiency of
operations of business based on effective utilization of resources. Hence,
these are also known as ‘Efficiency Ratios’.
 Profitability Ratios:
It refers to the analysis of profits in relation to revenue from operations or
funds employed in the business and the ratios calculated to meet this
objective are known as ‘Profitability Ratios’.
RATIOS
1. Liquidity Ratios
Liquidity ratios are calculated to measure the short-term solvency of the
business, i.e. the firm’s ability to meet its current obligations. These are analyzed
by looking at the amounts of current assets and current liabilities in the balance
sheet. The two ratios included in this category are current ratio and liquidity
ratio.
a. Current Ratio
Current ratio is the proportion of current assets to current liabilities. It is
expressed as follows
Current Assets
Current Ratio =
Current Liabilities
Current assets include current investments, inventories, trade receivables,

cash and cash equivalents, short-term loans and advances and other
current assets such as prepaid expenses, advance tax and accrued income,
etc. Current liabilities include short-term borrowings, trade payables,
other current liabilities and short-term provisions.

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Significance:
It provides a measure of degree to which current assets cover current
liabilities. The excess of current assets over current liabilities provides a
measure of safety margin available against uncertainty in realization of
current assets and flow of funds. The ratio should be reasonable. It should
neither be very high or very low. Both the situations have their inherent
disadvantages. A very high current ratio implies heavy investment in
current assets which is not a good sign as it reflects under-utilization or
improper utilization of resources. A low ratio endangers the business and
puts it at risk of facing a situation where it will not be able to pay its
short-term debt on time. If this problem persists, it may affect firm’s
credit worthiness adversely. Normally, it is safe to have this ratio within
the range of 2:1.
b. Quick Ratio
The quick assets are defined as those assets which are quickly convertible
into cash. While calculating quick assets we exclude the inventories at the
end and other current assets such as prepaid expenses, advance tax, etc.,
from the current assets. Because of exclusion of non-liquid current assets
it is considered better than current ratio as a measure of liquidity position
of the business. It is calculated to serve as a supplementary check on
liquidity position of the business and is therefore, also known as ‘Acid-
Test Ratio’
Quick Assets
Quick ratio =
Quick Liabilities
Significance:
The ratio provides a measure of the capacity of the business to meet its
short-term obligations without any flaw. Normally, it is advocated to be
safe to have a ratio of 1:1 as unnecessarily low ratio will be very risky

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and a high ratio suggests unnecessarily deployment of resources in

otherwise less profitable short-term investments.
2. Solvency Ratios
The persons who have advanced money to the business on long-term basis are
interested in safety of their periodic payment of interest as well as the repayment
of principal amount at the end of the loan period. Solvency ratios are calculated
to determine the ability of the business to service its debt in the long run. The
following ratios are normally computed for evaluating solvency of the business.
a. Debt-Equity Ratio
Debt-Equity Ratio measures the relationship between long-term debt and
equity. If debt component of the total long-term funds employed is small,
outsiders feel more secure. From security point of view, capital structure
with less debt and more equity is considered favorable as it reduces the
chances of bankruptcy. Normally, it is considered to be safe if debt equity
ratio is 2:1.
However, it may vary from industry to industry. It is computed as

follows:
Long term loan

Debt-equity ratio =
Shareholders fund
Where;
 Shareholders’ Funds (Equity) =
Share capital + Reserves and Surplus + Money received against
share warrants
 Share Capital = Equity share capital + Preference share capital

Or

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 Shareholders’ Funds (Equity) = Non-current assets + Working

capital – Non-current liabilities
 Working Capital = Current Assets – Current Liabilities
Significance:
This ratio measures the degree of indebtedness of an enterprise and gives
an idea to the long-term lender regarding extent of security of the debt.
As indicated earlier, a low debt equity ratio reflects more security. A high
ratio, on the other hand, is considered risky as it may put the firm into
difficulty in meeting its obligations to outsiders. However, from the
perspective of the owners, greater use of debt may help in ensuring higher
returns for them if the rate of earnings on capital employed is higher than
the rate of interest payable.
b. Debt to Capital Employed Ratio

The Debt to capital employed ratio refers to the ratio of long-term debt to
the total of external and internal funds. It is computed as follows:
Long term debt

Debt to capital employed ratio =
Capital employed (net assets)
Capital employed=
Long-term debt + shareholders’ funds. Alternatively, it may be taken as
net assets which are equal to the “total assets – current liabilities”
Significance:
Like debt-equity ratio, it shows proportion of long-term debts in capital
employed. Low ratio provides security to lenders and high ratio helps
management in trading on equity. In the above case, the debt to Capital
Employed ratio is less than half which indicates reasonable funding by
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debt and adequate security of debt. It may be noted that Debt to Capital
Employed Ratio can also be computed in relation to total assets.In that
case, it usually refers to the ratio of total debts to total assets, i.e., total of
non-current and current assets and is expressed as:
Total debt
Total assets
c. Proprietary Ratio
Proprietary ratio expresses relationship of proprietor’s (shareholders)
funds to net assets and is calculated as follows:
Shareholders’ funds
Proprietary ratio =
Significance:
Higher proportion of shareholders’ funds in financing the assets is a
positive feature as it provides security to creditors. This ratio can also be
computed in relation to total assets instead of net assets. It may be noted
that the total of debt to capital employed ratio and proprietary ratio is
equal to 1.
d. Total Assets to Debt Ratio

This ratio measures the extent of the coverage of long-term debts by
assets. It is calculated as
Total assets
Total assets to debt ratio =
Long term debts

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The higher ratio indicates that assets have been mainly financed by
owner’s funds and the long-term loan is adequately covered by assets. It
is better to take the net assets instead of total assets for computing this
ratio also.
Significance:
This ratio primarily indicates the rate of external funds in financing the
assets and the extent of coverage of their debts are covered by assets.
e. Interest Coverage Ratio

It is a ratio which deals with the servicing of interest on loan. It is a
measure of security of interest payable on long-term debts. It is calculated
as follows:
Net profit before interest and tax

Interest coverage ratio =
Interest on long term debts
Significance:
It reveals the number of times interest on long-term debts is covered by
the profits available for interest. A higher ratio ensures safety of interest
on debts.
3. Activity (or Turnover) Ratio

These ratios indicate the speed at which, activities of the business are being
performed. The activity ratios express the number of times assets employed, or,
for that matter, any constituent of assets, is turned into sales during an
accounting period. Higher turnover ratio means better utilization of assets and
signifies improved efficiency and profitability, and as such are known as
efficiency ratios.
a. Inventory Turnover Ratio

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It determines the number of times inventory is converted into revenue

from operations during the accounting period under consideration. It
expresses the relationship between the cost of revenue from operations
and average inventory. The formula for its calculation is as follows:
Cost of revenue from operations

Inventory turnover ratio =
Average inventory
Where average inventory refers to arithmetic average of opening and

closing inventory, and the cost of revenue from operations means revenue
from operations less gross profit.
Significance:
It studies the frequency of conversion of inventory of finished goods into
revenue from operations. It is also a measure of liquidity. It determines
how many times inventory is purchased or replaced during a year. Low
turnover of inventory may be due to bad buying, obsolete inventory, etc.,
and is a danger signal. High turnover is good but it must be carefully
interpreted as it may be due to buying in small lots or selling quickly at
low margin to realize cash. Thus, it throws light on utilization of
inventory of goods.
b. Trade Receivables Turnover Ratio

It expresses the relationship between credit revenue from operations and
trade receivable. It is calculated as follows:
Net credit revenue from operations

Trade receivable turnover ratio =
Average trade receivable

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Where,
(Opening Debtors and Bills Receivable

+
Closing Debtors and Bills Receivable)
Average trade receivable =
2
It needs to be noted that debtors should be taken before making any

provision for doubtful debts.
Significance:
The liquidity position of the firm depends upon the speed with which
trade receivables are realized. This ratio indicates the number of times the
receivables are turned over and converted into cash in an accounting
period. Higher turnover means speedy collection from trade receivable.
This ratio also helps in working out the average collection period.
c. Trade Payable Turnover Ratio

Trade payables turnover ratio indicates the pattern of payment of trade
payable. As trade payable arise on account of credit purchases, it
expresses relationship between credit purchases and trade payable. It is
calculated as follows:
Net credit purchases

Trade Payable Turnover Ratio =
Average trade payable
Significance:
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It reveals average payment period. Lower ratio means credit allowed by

the supplier is for a long period or it may reflect delayed payment to
suppliers which is not a very good policy as it may affect the reputation
of the business.
d. Net Assets or Capital Employed Turnover Ratio
It reflects relationship between revenue from operations and net assets in
the business. Higher turnover means better activity and profitability. It is
calculated as follows:
Net Assets Revenue from operation

Or =
Capital Employed Turnover ratio Capital employed
Capital employed turnover ratio which studies turnover of capital

employed is analyzed further by following two turnover ratios:
a. Fixed Assets Turnover Ratio: It is computed as follows:
Net revenue from operation

Fixed asset turnover Ratio =
Net fixed assets
b. Working Capital Turnover Ratio: It is calculated as follows:
Net revenue from operation

Working Capital Turnover Ratio =
Working Capital
Significance:
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High turnover of capital employed, working capital and fixed assets is a

good sign and implies efficient utilization of resources. Utilization of
capital employed or, for that matter, any of its components is revealed by
the turnover ratios. Higher turnover reflects efficient utilization resulting
in higher liquidity and profitability in the business.
4. Profitability Ratios
The profitability or financial performance is mainly summarized in the statement
of profit and loss. Profitability ratios are calculated to analyses the earning
capacity of the business which is the outcome of utilization of resources
employed in the business. There is a close relationship between the profit and the
efficiency with which the resources employed in the business are utilized. The
various ratios which are commonly used to analyses the profitability of the
business are:
a. Gross Profit Ratio

Gross profit ratio as a percentage of revenue from operations is computed
to have an idea about gross margin. It is computed as follows:
Gross profit
Gross Profit Ratio = X 100
Net revenue of operations
Significance:
It indicates gross margin on products sold. It also indicates the margin
available to cover operating expenses, non-operating expenses, etc.
Change in gross profit ratio may be due to change in selling price or cost
of revenue from operations or a combination of both.
b. Operating Ratio
It is computed to analyses cost of operation in relation to revenue from
operations. It is calculated as follows:
(Cost of Revenue from Operations

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+
Operating Expenses)
Operating Ratio = X 100
Net Revenue from Operations
Operating expenses include office expenses, administrative expenses,

selling expenses, distribution expenses, depreciation and employee
benefit expenses etc. Cost of operation is determined by excluding non-
operating incomes and expenses such as loss on sale of assets, interest
paid, dividend received, loss by fire, speculation gain and so on.
c. Operating Profit Ratio

It is calculated to reveal operating margin. It may be computed directly or
as a residual of operating ratio.
Operating Profit Ratio = 100 – Operating Ratio
Alternatively, it is calculated as under:
Operating Profit
Operating Profit Ratio = X 100
Revenue from operations
Where,
Operating Profit = Revenue from operations - Operating Profit
Significance:
Operating ratio is computed to express cost of operations excluding
financial charges in relation to revenue from operations. A corollary of it
is ‘Operating Profit Ratio’. It helps to analyze the performance of
business and throws light on the operational efficiency of the business. It

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is very useful for inter-firm as well as intra-firm comparisons. Lower

operating ratio is a very healthy sign.
d. Net profit ratio

It is based on all inclusive concept of profit. It relates revenue from
operations to net profit after operational as well as non-operational
expenses and incomes. It is calculated as under:
Net Profit
Net Profit Ratio = X 100
Significance:
It is a measure of net profit margin in relation to revenue from operations.
Besides revealing profitability, it is the main variable in computation of
Return on Investment. It reflects the overall efficiency of the business,
assumes great significance from the point of view of investors.
e. Return on Capital Employed or Investment

It explains the overall utilization of funds by a business enterprise.
Capital employed means the long-term funds employed in the business
and includes shareholders’ funds, debentures and long-term loans.
Alternatively, capital employed may be taken as the total of non-current
assets and working capital. Profit refers to the PBIT for computation of
this ratio. Thus, it is computed as follows:
Profit before interest and tax

ROCE = X 100
Capital employed
Significance:
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22
It measures return on capital employed in the business. It reveals the

efficiency of the business in utilization of funds entrusted to it by
shareholders, debenture-holders and long-term loans. For inter-firm
comparison, return on capital employed funds is considered a good
measure of profitability.
f. Return on Shareholders’ Funds

This ratio is very important from shareholders’ point of view in assessing
whether their investment in the firm generates a reasonable return or not.
It should be higher than the return on investment otherwise it would
imply that company’s funds have not been employed profitably. A better
measure of profitability from shareholders point of view is obtained by
determining return on total shareholders’ funds, it is also termed as
Return on Net worth (RONW) and is calculated as under:
Profit after tax
Return on Shareholders’ Fund =
Shareholders fund
g. Earnings per Share

The ratio is computed as:
Profit available for equity shareholders

EPS =
No. of equity shares
In this context, earnings refer to profit available for equity shareholders

which is worked out as. Profit after Tax – Dividend on Preference Shares.
This ratio is very important from equity shareholders point of view and
also for the share price in the stock market.
h. Book Value per Share

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This ratio is calculated as:
Equity shareholders fund

Book Value per share =
No. of equity shares
Equity shareholders’ fund refers to Shareholders’ Funds – Preference

Share Capital. This ratio is again very important from equity shareholders
point of view as it gives an idea about the value of their holding and
affects market price of the shares.
i. Dividend Payout Ratio

This refers to the proportion of earning that are distributed to the
shareholders. It is calculated as
Dividend per share

Dividend Payout Ratio =
Earnings per share
This reflects company’s dividend policy and growth in owner’s equity.
j. Price / Earnings Ratio

The ratio is computed as
Market price of a share

P/E Ratio =
Earnings per share

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22
CHAPTER NO. III

COMPANY PROFILE
INFORMATION OF S. R. STEEL INDUSTRIES

An ISO 9000-2008 Certified Company
S.R. Industries
Quality and Suitability
Company Profile
Quality and Suitability
VISION
To be most respectful and successful company with slandered quality products and
services in the steel fabrication furniture, contractions industry and it’s always front
lender in development of human society.

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STRATEGY
To produces high quality, innovated and affordable products with expert resources
and talent.
BUSINESSES
With main focus on steel fabrication pipe line laying and fabrication, furniture and
constructions businesses; we serve industry related markets through four over
lapping sectors: fabrication, interiors, construction works and labour supply services.
Throughout our portfolio, we demonstrate our innovation capacity by translating
customer insights into meaningful technology and applications that improve the
quality of people’s lives and final outcome to the benefit of all our shareholders.
INDUSTRIES MAIN BUSINESSES

S.R. Steel Industries
 Structures fabrication, pipeline laying and fabrication, playground
equipment’s and developments.
S.R. Interior and furniture

 Steel, stainless steel, wooden and powder coated furniture also interior
designer and contractor, kitchens and modular kitchens etc.
Mauli Association
 Industrial services painting, job work, labour contracts, transport and storage
facilities,
Sahara Construction
 Civil construction works, plot development, road works
INDUSTRIES CLIENTS

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SR. NO. S.R. STEEL INDUSTRIES VALUABLE COSTUMERS

1 TATA Metallica’s LTD, Redi.
2 Caterpillar India.
3 Pratibha industries LTD.
4 Gammon India LTD.
5 H.C.C. LTD.
6 IVRCL LTD, Mumbai.
7 CMS (I) Pvt. Ltd, Banda, Goa.
8 Power Engineer (P) Ltd, Goa.
9 Mahalsa Rentals (P) Ltd, Goa.
10 SOMA Developers Ltd, Thane.
11 Bank Of India.
12 Bank Of Baroda.
13 State Bank Of India.
14 MSSIDC LTD, Mumbai.
15 MSSIDC LTD, Sindhudurg.
16 Das Off Shore Pvt. Ltd.
17 Sheyam Restore Ltd.
18 West Coast Land Base (P) Ltd.
19 Z.P. Sindhudurg.
20 Z.P. Kolhapur.
HISTORY OF COMPANY
1. Name of the Firm : S. R. Steel Industries Pvt. Ltd.
2. Year of Establishment : 1999 – 2000
3. Types of Organization : Partnership
4. Details of The Company Registration : Small Scale Industries
5. Name of The Registering Authority : Directorate of Industries
6. Register Number And Date : Government of Maharashtra

a. No. 112803308
b. Date 09/10/1998
7. Service Tax Register Number : AAVFS7372QSD001

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8. PAN Number : AAVF7372Q
9. VAT Number : 27890560846V
10. Name and Address of Bakers : State Bank of India, Sawantwadi

Bank of India, Sawantwadi
11. Total Staff Strength : Management Staff – 6, Supervisor – 9
a. Administrative Staff – 11
b. Worker 69 (Skilled & Semi-Skilled
Workers)
12. Achievements : ISO 9001-2008 Certificate

2ND District Award from Govt. of
Maharashtra directorate of Industry
COMPANY CONTRACTS
1. Office
 Flat No. 4, Ground Floor, Shree Ganesh Apartment, Banda.
2. Factory
 Plot no. 112/117 Udyam Nagar, Majgaon, Sawantwadi and Dist. –
Sindhudurg, Tal – Sawantwadi. Pin - 416510.
3. Show room
 S. R. Steel Industries, Majgaon.
 S. R. Enterprises Fish Market Road, Banda.
 Suman Enterprises, Aajara Road.

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22
4. Management
 Rajesh Bokade : Partner of industry
 Pratima Ludbe : Partner of industry
 Rawool : Head of Account Department
 Negi : Head of Purchase Department
5. Contract Person
 Name of Person : Rajesh Bokade
 Mob. No. : 9422946262 / 8806819750
 E-mail : rajeshbokade@rediffimail.com
sindustries@rediffimail.com
S.R STEEL INDUSTRIES

NOTE FORMING PART OF THE ACCOUNT
1. Information of Company
The partnership firm is engaged in the business of trading in furniture items,
manufacturing of furniture, execution of construction contracts and related
services, in the name and style as S.R. industries.
2. Statement of Significant Accounting Policies

Basic of Preparation
The financial statement are prepared by following going concern under historical
cost convention on an accrual basis and are in accordance with the statutory
provision of income tax act 1661 and accounting standard as specified therein.
The accounting policies have been consistently applied by the firm and except for
changes in accounting policy discussed more fully below, are consistent with

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22
those used in the previous year. The preparation of financial statement in

conformity with generally accepted accounting principle requires management to
make estimates and assumption that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the financial
statement and the result of operation during the reporting period. Although these
estimate are based upon management best knowledge of current events and
actions actual result could differ from these estimates
a. Fixed Assets
Fixed asset are stated at cost of acquisition less depreciation as per income
tax act. Cost include purchase price, inward freight, duties and taxes (net of
credits) and incidental expenses incurred related to acquisition and bringing
the asset in present location and condition for its intended use.
b. Depreciation
Depreciation on fixed assets is provided on written down value method at the
rates prescribed under to income tax act, 1961. Depreciation on fixed asset
disposed of during the year is not provided and depreciation is provided at
half rate, for additions during the year, which are put to use for less than 180
days.
c. Inventories
The stock of traded goods, raw material and work in progress are valued at
cost or net realizable value of whichever is lower. Cost is determined on the
first in first out method.
d. Revenue Recognition
Revenue is recognized to the extent that is it probable that that the economic
benefit will flow the firm and the revenue can be reliably measured.
Revenues/income and cost / expenditure are generally accounted on accrual
as they are earned or incurred. Sale of good is recognized on transfer of

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22
significant risk and reward of ownership which is generally on dispatch of

goods. Gross sales exclusive excise and sales tax.
e. Borrowing Cost
Borrowing cost that are attributable to acquisition / construction or
production of a qualifying assets are capitalized as part of cost of such assets
till such time as the asset is put to use. All other borrowing cost is recognized
as an expense in the year in which they incurred. Borrowing cost consist of
interest and other cost that an entity incurs In connection with the borrowing
of funds
f. Taxes On Income
 Current Tax :
tax on income for the current period is determine on the basis of the
taxable income and tax credit computed for the year in accordance with
the provision of income tax act 1961
 Differed Tax :
Differed tax is recognized subject to consideration of materiality,
prudence, on timing difference, being the difference between taxable
incomes and accounting income that originated in one period and are
capable of reversal in one or more subsequent period. Defied tax asset
arising on accounts of unabsorbed depreciation are recognized only to the
extent that there is virtual certainty of its realization.
g. Foreign Exchange Transaction

 Initial recognition transaction in foreign currency entered into by the
company are accounted at the exchange rates prevailing on the date of
transaction or at rates that closely approximate the rate at the date of
transaction.

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22
 Measurement of foreign currency monetary items t the balance sheet date

foreign currency monetary items of the company outstanding at the balance
sheet date are restated at the closing rate i.e. rate on the balance sheet date.
 Treatment of exchange differences: exchange differences arising on

settlement or restatement of monitory items are transferred to statement of
profit and loss a/c through foreign exchange different a/c and is either shown
in other expenses non-operating income other mislenious expenses /income
as the case may be.
h. Provision Contingent Liabilities And Contingent Assets

A provision is recognized it as a result of a past event the firm has a present legal
obligation that can be estimated reliably and it’s probable that an out flow of
economics benefits will be required to settle the obligation. Provisions are
determined by the best estimate of the outflow of economic benefit required to
settle the obligation at the reporting date. Where no reliable estimate can be
made, a disclosure is made as contingent liability. A disclosure for contingent
liability is also made when there is a possible obligation or a present obligation
that may, but probably will not, required an out flow of resources. Where there is
a possible obligation in a respect of which the likelihood of outflow of resources
is remote, provisions, contingent liability and contingent assets are reviewed at
each, balance sheet date.
 Government Grants
Assesses has not received any government grants during the year.
 Investment
Current investment is stated at cost or fair market value whichever is lower.
Long term investment are stated at cost.

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 Retirement Benefits:
The concern provide only short term employee benefits which have been
accounted for as an expenses if paid and the unpaid part has been shown as a
liability. No post-employment benefits are being provided by the concern.
 Intangible Assets:
Intangible assets, if any, have been recognized as a part of fixed assets and
are depreciated at the rate prescribed under the applicable act.
QUANTITATIVE INFORMATION
Quantitate Information Regarding Goods Traded (As Certified By
Management)
In a view of nature of the business it was not feasible to furnish details of the
quantities due to heterogeneity of the items involved.
CHAPTER NO. IV
DATA ANALYSIS AND INTERPRETATION
BALANCE SHEET
Particulars Years
2017 2016 2015

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22
Equity and liabilities

1,039,939,76 1,039,939,76 1,039,939,76
Share capital
5 5 5
1,289,920,93 1,330,242,67 1,410,215,74
Reserve and surplus
1 1 1
2,329,860,69 2,370,182,43 2,450,155,50

6 6 6
Share application money

pending allotment
Non-current liabilities
Long term borrowing 375,971,569 355,690,357 346,441,847
Deferred tax liabilities (net) - -
Other long term liabilities 218,124,972 32,57,88,979 372,623,974
Long term provisions 27,321,161 25,228,322 26,682,000
621,417,702 706,707,658 747,747,821
Current liabilities
Short term borrowing 368,495,542 300,023,735 304,516,203
1,245,675,62 1,986,490,31 1,967,479,73
Trade payables
8 0 1
Other current liabilities 150,822,775 39,530,439 73,078,406
Short term provisions 134,135,450 136,119,389 116,664,877
1,899,129,39 2,462,163,87 246,17,39,21

5 3 6
4,850,407,79 5,539,053,96 565,96,42,54
Total
3 7 3
Assets
Non-current assets
a) Fixed assets
2,477,506,13 2,314,858,68 2,280,511,42
i) Tangible assets
9 1 9
ii) Intangible assets 4,163,925 5,656,703
iii) Capital work in progress 176,337,360 191,824,040
2,481,670,06 2,496,852,74 2,472,335,46

4 3 9
b) Non-current investments 21,476,940 21,476,940 21,476,940
c) Deferred tax assets (net) 1,78,03,360 36,108,849
d) Long term loans and advances 184,974,747 191,934,988 188,055,228
e) Other non-current assets 66,464,805 281,516,301 422,055,338
2,754,586,55 3,009,584,33 3,140,031,82

6 3 4
Current assets
a) Current investments
1,087,588,40 1,356,407,16 1,664,150,39
b) Inventories
5 4 1
c) Trade receivables 400,497,644 659,223,336 411,433,969
d) Cash and cash equivalents 18,566,728 29,996,457 25,768,781
e) Short term loans and advances 304,298,359 184,714,405 157,518,135
f) Other current assets 28,4,870,101 299,128,273 260,739,443
2,095,821,23 2,529,469,63 2,519,610,72
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7 4 0
4,850,407,79 5,539,053,96 5,659,642,54
Total
3 7 3
PROFIT AND LOSS ACCOUNT
Sr.
No Particulars Years
.
2017 2016 2015
Income
5,734,806,71 6,336,048,45 10,944,649,23
1 Revenue from operation (gross)
8 6 2
Less:- Excise duty 6,05,143,905 497,174,792 560,098,922
512,96,62,81 583,88,73,66 10,384,550,31
Revenue from operation (net)
3 3 0
2 Other income 52,146,810 104,709,272 99,003,129
5,181,809,62 5,943,582,93 10,483,553,43
3 Total revenue (1+2)
3 6 9
4 Expenditure
3,805,290,77 3,163,101,84
a) Cost of materials consumed 4,434,090,575
7 3
1,770,185,89
b) Purchase of stock in trade 323,565,623 5,073,013,743
3
c) Changes in investments of
finished goods, work in progress and -333,578,325 -335,995,134 -589,541,198
stock in trade
d) Employee benefits expense 178,732,303 213,615,124 207,677,447
e) Finance costs 110,298,251 98,572,432 94,797,735
f) Depreciation and amortization
153,088,368 179,198,892 183,628,723
expense
g) Other expenses 923,639,402 832,308,251 1,017,816,953
5,161,033,39 5,920,987,30 10,421,483,97
Total expenses
9 1 8
Profit/loss before exceptional and
5 20,776,224 22,595,635 62,069,461
extraordinary items and tax (3-4)
6 Exceptional items
Profit/loss before extraordinary
7 20,776,224 22,595,635 62,069,461
items and tax (5+6)
8 Extraordinary items
9 Profit/loss before tax (7+8) 20,776,224 22,595,635 62,069,461
10 Tax expenses:-
a) Current tax expenses for current

year
b) Less:- MAT credit ( where

applicable)
c) Current tax expense relating to
-324,625
prior years 430,000
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d) Net current tax expense 430,000 -324,625

e) Deferred tax 17,803,360 18,305,489
430,000 17,803,360 17,980,864
11 Profit/loss after tax (9+10) 21,206,224 40,398,995 80,050,325
Earning per equity share of face

value of 1/- each
Basic and diluted (in Rs.) 0.05 0.1 0.2
DATA ANALYSIS AND INTERPRETATION
1. CURRENT RATIO
Formula:-
Current Assets
Current Ratio =
Current Liabilities
Chart:-
Particulars Years
2017 2016 2015
Current Assets 2,095,821,237 2,529,469,634 2,519,610,720
Current Liabilities 1,899,129,395 2,462,163,873 2,461,739,216
Total Ratio 1.10 1.03 1.02
Graph:-

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Current Ratio
32% 35% 2017

2016
2015
33%
Interpretation:-
This graph is shows to current financial position of S.R. Steel Industries Pvt, Ltd.
on the basis of current ratio. In 2015 the current ratio is 32 % and 2016 the
current ratio is 33% will be increase with the value of 1 % on previous year. In
2017 the current ratio is 35% will be increase with the value of 2 % on previous
year.
2. QUICK RATIO
Formula:-
Quick Assets
Quick ratio =
Quick Liabilities
Chart:-
Particulars Years
2017 2016 2015
Quick Assets 723,362,731 873,934,198 594,720,885
Quick Liabilities 1,899,129,395 2,462,163,873 2,461,739,216
Total Ratio 0.38 0.35 0.24
Graph:-

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Quick Ratio
25%
39% 2017
2016
2015
36%
Interpretation:-
This graph is related to quick ratio of S.R. Steel Industries Pvt, Ltd. In 2015 the
quick ratio is 25 % and 2016 the quick ratio is 36 % will be increase with the
value of 11 % on previous year. In 2017 the quick ratio 39 % will be increase
with the value of 3 % on previous year.
3. DEBT-EQUITY RATIO
Formula:-
Long term loan
Debt-equity ratio =
Shareholders fund
Chart:-
Particulars Years
2017 2016 2015
Long Term Loan 744,467,111 655,714,092 650,958,050
Shareholders’ funds 2,329,860,696 2,370,182,436 2,450,155,506
Total Ratio 0.32 0.28 0.27

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Graph:-
Debt-Equity Ratio
31%
37% 2017
2016
2015
32%
Interpretation:-
This graph shows debt-equity ratio of S.R. Steel Industries Pvt, ltd. In 2015 the
debt-equity ratio is 31 % and 2016 the debt-equity ratio is 32 % will be increase
with the value of 1 % on previous year. In 2017 the debt-equity ratio 37 % will
be increase with the value of 5 % on previous year.
4. DEBT TO CAPITAL EMPLOYED RATIO
Formula:-
Long term debt
Chart:-
Particulars Years
2017 2016 2015
Long Term Debt 375,971,569 355,690,357 346,441,847
Net Assets 196,691,842 67,305,761 57,871,504

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Total Ratio 1.91 5.28 5.99
Graph:-
Debt to Capital Employeed Ratio
14%
2017
2016
45%
2015
40%
Interpretation:-
This graph shows debt to capital employed ratio of S.R. Steel Industries Pvt, ltd.
In 2015 the debt to capital employed ratio is 45 % and 2016 the debt to capital
employed ratio is 40 % will be decrease with the value of 5 % on previous year.
In 2017 the debt to capital employed ratio 15 % will be decrease with the value
of 25 % on previous year.
5. PROPRIETARY RATIO
Formula:-
Proprietary ratio =
Chart:-
Particulars Years
2017 2016 2015
Shareholders’ Funds 2,329,860,696 2,370,182,436 2,450,155,506
Net Assets 196,691,842 67,305,761 57,871,504

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22
Total Ratio 11.85 35.22 42.34
Graph:-
Proprietary Ratio
13%
2017
2016
47% 2015
39%
Interpretation:-
This graph shows proprietary ratio of S.R. Steel Industries Pvt, Ltd. In 2015 the
proprietary ratio is 47 % and 2016 the proprietary ratio is 40% will be decrease
with the value of 7 % on previous year. In 2017 the proprietary ratio 13 % will be
decrease with the value of 27% on previous year.
6. TOTAL ASSETS TO DEBT RATIO:-
Formula:-
Total assets
Total assets to debt ratio =
Long term debts
Chart:-
Particulars Years
2017 2016 2015
Total Assets 4,850,407,793 5,539,053,967 5,659,642,543

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Long Term Debtors 375,971,569 355,690,357 346,441,847

Total Ratio 12.90 15.57 16.34
Graph:-
Total Assets To Debt Ratio
29%
36% 2017
2016
2015
35%
Interpretation:-
This graph shows total asset to debt ratio of S.R. Steel Industries Pvt, ltd. In 2015
the total asset to debt ratio is 36 % and 2016 the total asset to debt ratio is 35%
will be decrease with the value of 1 % on previous year. In 2017 the total asset to
debt ratio 29 % will be decrease with the value of 6 % on previous year.
7. INVENTORY TURNOVER RATIO
Formula:-
Cost of revenue from operations

Inventory turnover ratio =
Average inventory

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Chart:-
Particulars Years
2017 2016 2015
Cost of Revenue From Operation 5,734,806,718 6,336,048,456 10,944,649,232
Average Inventory 400,497,644 659,223,336 411,433,969
Total Ratio 14.32 9.61 26.6
Graph:-
Inventory Turnover Ratio
28%
2017
2016
2015
53%
19%
Interpretation:-
This graph shows inventory turnover ratio of S.R. Steel Industries Pvt, Ltd. In
2015 the inventory turnover ratio is 53 % and2016 the inventory turnover ratio is
19% will be decrease with the value of 34 % on previous year. In 2017 the
inventory turnover ratio 28 % will be increase with the value of 9% on previous
year.
8. TRADE RECEIVABLES TURNOVER RATIO
Formula:-
Net credit revenue from operations

Trade receivable turnover ratio =
Average trade receivable

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Chart:-
Particulars Years
2017 2016 2015
10,384,550,31
Net Credit Revenue From Operations 0 5,838,873,663 5,129,662,813
Average Trade Receivable 411,433,969 659,223,336 400,497,644
Total Ratio 25.24 8.86 12.81
Graph:-
Trade Receivable Turnover Ratio
27%
2017
2016
2015
54%
19%
Interpretation:-
This graph shows trade receivable turnover ratio of S.R. Steel Industries Pvt, Ltd.
In 2015 the trade receivable turnover ratio is 27 % and 2016 the trade receivable
turnover ratio is 19% will be decrease with the value of 28 % on previous year. In
2017 the trade receivable turnover ratio is 54 % will be increase with the value of
31 % on previous year.
9. GROSS PROFIT RATIO
Formula:-
Gross profit
Gross Profit Ratio = X 100
Net revenue of operations
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Chart:-
Particulars Years
2017 2016 2015
10,944,649,23
Gross Profit 5,734,806,718 6,336,048,456
2
Net Revenue of 10,384,550,31
5,129,662,813 5,838,873,663
Operation 0
Total Ratio 1.12 1.09 1.05
Graph:-
Gross Profit Ratio
32% 34%
2017
2016
2015
33%
Interpretation:-
This graph shows gross profit ratio of S.R. Steel Industries Pvt, Ltd. In 2015 the
gross profit ratio is 32 % and 2016 the gross profit ratio is 34% will be increase
with the value of 1 % on previous year. In 2017 the gross profit ratio 34 % will
be the same value of the previous year.
10. NET PROFIT RATIO
Formula:-
Net Profit
Net Profit Ratio = X 100

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Chart:-
Particulars Years
2017 2016 2015
Net Profit 2,120,622,400 4,039,899,500 8,005,032,500
10,384,550,31
Net Sales 5,129,662,813 5,838,873,663
0
Total Ratio 0.41 0.69 0.77
Graph:-
Net Profit Ratio
22%
2017
41%
2016
2015
37%
Interpretation:-
This graph shows net profit ratio of S.R. Steel Industries Pvt, ltd. In 2015 the net
profit ratio is 41 % and 2016 the net profit ratio is 37% will be decrease with the
value of 7 % on previous year. In 2017 the net profit ratio 22 % will be decrease
with the value of 15% on previous year.
CHAPTER NO. V
FINDINGS AND SUGGESTIONS

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FINDINGS
 Current ratio analysis of S.R. Steel Industries Pvt, Ltd. shows recurring
surplus in itself. Since 2015 it increasing continuously.
 Quick ratio provides positive signs since 2015 it is going increasing

continuously.
 Debt equity proportion of S.R. Steel Industries Pvt, Ltd. improving year by
year but it is not satisfactory.
 The proportion of debt to capital employed shows distinct losses after 2015.
 The proprietary ratio also decrease at huge proportion.
 The ratio of total asset to long term debts ratio will be decrease with huge
losses on company financial statements.
 Inventory turnover ratio will be not satisfactory for company position that’s
why company faces various losses.
 Due to sudden increment in stock turnover ratio there it also affected to

debtors turnover ratio. It also improve up to 54%.
 There is not satisfactory signs in gross profit ratio. It reducing by 1% in 2016-

17 as compared to in 2015.
 Due to decrement in gross profit it effect net profit of the company but it's no
strongly influence.
SUGGESTIONS

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 Current ratio of S.R. Steel Industries Pvt, Ltd. its growing good that’s why it
is better for company poisons.
 Quick ratio of possessions is better for S.R. Steel Industries Pvt, Ltd.
 Debt equity proportion of S.R. Steel Industries Pvt, Ltd. is not satisfactory but
increases in revenue of S.R. Steel Industries Pvt, Ltd. can keep the ratio
stable.
 The debt to capital employed ratio of S.R. Steel Industries Pvt, Ltd. is faces
huge losses in company position but company can also manage this ratio with
the help of proper asset management techniques
 The proprietary ratio was not favorable for company position after company
analysis.
 The ratio of total asset to long term debts growing slowly but this situation is
not superior for company growth
 Inventory turnover ratio is not superior for company growth the company will
reduce his non profitable product that time the inventory ratio create positive
signs
 Stock turnover ratio affects to debtors turnover ratio that why this ratio is an
growing position and this situation is better for company growth
 The gross profit ratio proportion of S.R. Steel Industries Pvt, Ltd. is not
satisfactory but company analyses all profit margins that time company can
keep the ratio on incremental situation.
 Gross profit ratio affects to net profit ratio that why this ratio is an
unfavorable and this situation is not good for company growth but company
can remove its unprofitable product, reduce inventories and reduce overheads
that time the net profit ratio will be superior for company growth.
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CHAPTER NO. VI
CONCLUSION
The purpose our project report at an organization was to help us attain knowledge
about the working pattern in an organization. Appling theoretical knowledge into
practice helps in gaining additional knowledge. We learnt the skill of planning,
organizing and completing the assignment within the stipulated time. Ratio analysis
that company current ratio is better than the quick ratio and fixed / worth ratio. It
means company has invested more in current assets than the fixed assets and liquid
assets.
The cash flow statement shows that net increase in cash generated from operating
and financing activities is much more than the previous year but cash generated from
investing activities is negative in both years. Therefore analysis of cash flow
statement shows that cash inflow is more than the cash outflow in company. Thus
ratio analysis and trend analysis and analysis of cash flow statement show that
company financial position is good. Company profitability is increasing but not at
high rate. The company liquidity position is fair but not good because company
invests more in current assets than the liquid assets. As we all know that a SR Still
Industry Pvt, Ltd. is on the first position among the entire private sector bank of India
in all areas but it should pay attention on its profitability and liquidity. The company
position is stable.

PAGE
22
BIBLIOGRAPHY
 Source internet
 www.wikipedia.ORG
 Reference Books :
i. Financial Account
ii. Financial Management

PAGE

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A STUDY OF RATIO ANALYSIS WITH REFERENCE TO S. R.

INTRODUCTION OF RATIO ANALYSIS

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 1|PAGE

 The ability of the firm to meet its current obligations.

 The overall operating efficiency and performance of firm.

Alexander wall is the pioneer of ratio analysis. He presented a detailed system of

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 2|PAGE

OBJECTIVE OF THE STUDY

 To analyze the profitability position of the S. R. Steel Industries Ltd.

 To determine the long term solvency position of S. R. Steel Industries Ltd.

NEED OF THE STUDY

 To express the relationship between different financial aspects in such a way

 To diagnose the information contained in financial statement so as to judge

 The study helps to know a liquidity, solvency, profitability and turnover

SCOPE OF THE STUDY

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 3|PAGE

3. Research Design Objective

 To know the credit worthiness of the company.

 To offer suggestions based on research finding.

DATA COLLECTION METHODS

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 4|PAGE

 Company’s annual reports

 Books :- Financial Account

1. Limitations of Financial Statements:

3. Different Accounting Policies:

4. Lack of Standard of Comparison:

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 5|PAGE

7. Changes in Price Level:

8. Causal Relationship Must:

9. Ratios Account for one Variable:

10. Seasonal Factors Affect Financial Data:

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 6|PAGE

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 7|PAGE

NATURE OF RATIO ANALYSIS

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 8|PAGE

TIME SERIES ANALYSIS

CROSS SECTIONAL ANALYSIS

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 9|PAGE

Parties interested in financial analysis

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 10 |

ADVANTAGES OF RATIO ANALYSIS

The following are the principal advantages of ratio analysis:

3. Measurement of Operating Efficiency:

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 11 |

Ratios are effective means of communication and play a vital role in

5. Control of Performance and Cost:

7. Indication of Liquidity Position:

8. Indication of Long-term Solvency Position:

9. Indication of Overall Profitability:

10. Signal of Corporate Sickness:

11. Aid to Decision-making:

SIGNIFICANCE OF FINANCIAL ANALYSIS

 Helpful in measuring the solvency of the firm

 Comparison of past and present results

 Helps in measuring the profitability

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 13 |

The financial analysis makes it easy to make inter-firm comparison. This