SUMMER TRAINING REPORT ON

Comprehensive Analysis of Financial Performance

with special reference to MODI AUTO SALES
BY
ARYAN PAREEK
ROLL NO. – 13
RAJASTHAN TECHNICAL UNIVERSITY
In partial fulfillment of the requirement for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Under the guidance of

DR. ASHOK KUMAR

(Associate Professor)

Department of MBA

MAHARISHI ARVIND INSTITUTE OF SCIENCE

AND MANAGEMENT
Ambabari (Jaipur)
2021-2023
 PRACTICAL TRAINING REPORT

SUBMITTED BY

Name : ARYAN PAREEK

Institute Roll No. : 13
Session : 2021-23
Training Period : 11th October 2022 to 25Th November 2022 days 45

SUBMITTED TO

Dr. Ashok Kumar

(Associate Professor)

Maharishi Arvind Institute of Science and Management

Ambabari , Jaipur
 GSTIN : 08ACBPM0362L1ZC

MODI AUTO SALES

53, LALPURA COLONY, BANASTHALI MARG, JAIPUR
+91-966-037-7525

Internship Certificate

Date: 1st December 2022

This is to certify that Aryan Pareek has done his internship in Accounting at Modi Auto Sales,
Jaipur, from 11th October 2022 to 25th November 2022.

During his internship he has demonstrated his skills with self-motivation to learn new skills. His
performance exceeded our expectations and he was able to complete the task on time.

We wish him all the best for his upcoming career.

Sonu Modi

(Sole Proprietor – Modi Auto Sales)

 CERTIFICATE

Ref. No.:

This is to certify that Mr. Aryan Pareek son of Sh. Rajesh Pareek a student of MBA 2021-
23 from Maharishi Arvind Institute of Science and Management has undertaken Summer
Training Project at Modi Auto Sales concern from 11th October 2022 to 25th November
2022. The nature of work seen and performed by him during the training was Accounting
Intern.

His performance and conduct during the training was found satisfactory.

Place :
Date: Signature
Dr. Rubina Sajid (HOD)
 CERTIFICATE

Ref. No.:

This is to certify that Mr. Aryan Pareek son of Sh. Rajesh Pareek a student of MBA 2021-
23 fromMaharishi Arvind Institute of Science and Management has undertaken Summer
Training Project at Modi Auto Sales concern from 11th October 2022 to 25th November
2022. The nature of work seen and performed by him during the training was Accounting
Intern.

His performance and conduct during the training was found satisfactory.

Place
Date Signature

Dr. Ashok kumar

 DECLARATION

I do hereby declare that this project entitled, "Comprehensive Analysis of Financial

Performance of Modi Auto Sales ", has been completed by me and it is original work. This
reportis being submitted for fulfilling the requirement of Post Graduate in Management as a
Summer Training Project report, at Maharishi Arvind Institute of Science and Management,
Ambabari, Jaipur.

It has been submitted nor been published elsewhere.

(Signature)

Aryan Pareek

Date

Place
 Acknowledgement

For any success, we require hard work and genuine, but it is incomplete without innumerable
blessings, support, and sincere guidance.
I especially thank my guide and mentor Mr. Sonu Modi for all the support, motivation and
technical guidance he provided throughout the duration without which my aim would have been
incomplete. I am indeed grateful to all the professors and staff from Maharishi Arvind Institution
with whom I had the opportunity to interact .I am also very
Thankful to rest of subordination and my mentor who assisted me directly or indirectly.
 PREFACE

Education becomes more meaningful when its theoretical aspects are combined with practical
experience. This provides an opportunity to the students to improve their understanding of the
study.
M.B.A is a course which combines both its theoretical and practical aspects in the field of
management. The purpose of this research methodology report is to expose the students of
management sciences to real business situation.
As complementary to my Project report I prepared and submitted a Project report on
“Comprehensive Analysis of Financial Performance With Special Reference to Modi Auto Sales
’’ It was an attempt to present on account of practical knowledge and observations gathered
during the research period.
S. NO. Content
Executive Summary

1. Chapter 1.
∙ Introduction
∙ Product that firm deals in

2. Chapter 2.
∙ Introduction Ratio Analysis
∙ Functions of Ratio Analysis
∙ Types of Ratio Analysis

3. Chapter 3.
∙ Research Methodology
∙ Objective
∙ Scope
∙ Limitation
∙ Sources of collection of Data
∙ Method of collection of Data

4. Chapter 4.
∙ Data analysis and Interpretation

5. Chapter 5.
∙ Findings
∙ Suggestion
∙ Conclusion
∙ Bibliography
 CHAPTER – 1
INTRODUCTION OF FIRM
 FIRM PROFILE
MODI AUTO SALES

FIRM DETAILS:

Modi Auto Sales was started in the year 2001. The firm deals in automobiles products. The
major product that the Firm deals in is Mahindra parts. Modi Auto Sales is a trading firm
which deals in electrical parts of motor vehicles. The sole proprietor of the firm is Mr. Sonu
Modi. The firm deals in various company’s products. It offers various electrical products of the
vehicle. In automobiles, especially the modern ones, varieties of parts are electronics and
operates electrically. Well, charging systems are the basic electrical system in a vehicle which
include an alternator, battery, and voltage regulator. These components are a source of power
to other electrical components in the vehicle. Although voltage regulators are included in the
alternator which serves as energy converters. There are tons of electrical components that rely
on the electrical system of the vehicle.

The primary use of the electrical system is to power all electrical and electronic devices in a
vehicle. starting from the electrical motor, sensors, gauges, heating element, headlights, brake
andtrafficator lights, radio, television, air conditioning system, blowers, interior lights,
refrigerator system, ignition system, etc. all these components receive power from a battery and
the battery ischarged by the alternator.

Thereafter, automotive electrical components became an integral part of vehicles. The

electricalsystem not only helps the engine get started but also ensure the safe driving. Besides,
there are so many things which you should know about the electrical components and how they
function in thecar.
 Product range of the firm are:

Clutch products: The firm majorly deal in Mahindra geniun parts, msl, and luk

Brakes products: The firm deals in Tvs, Tvs-girling, rane, rane brake lining, Mahindra and some
local vendors

Suspension: The firm go through vir, Gabriel, monarch

Bearing: The firm deals in NBC bearing

Oil And Filters: The firm deals in Oslo Cooling System: The firm deals in BANCO Engine Parts

Wheel Products Transmission Products Exhaust System

 Evolution of the automobile industry in India

In India, since the early 1940s when the auto industry rolled out first passenger car,its significance
in the economy has progressively increased. However, from its early days until the mid-1980s for
two-wheelers and LCVs, and until the early1990s for passenger cars, the focus of development of
the automotive industry has been on import substitution. The current low penetration levels in
India in all three segments of the industry, namely commercial vehicles, passenger cars and two
wheelers and under-exploitation of the potential of this industry to foster
.The growth of the economy have resulted in the auto industry contributing are latively low
(nearly 5 per cent) share of industrial output in India compared to the 8-10 per cent range in other
developing countries such as Mexico and Brazil and much higher (15-17 per cent range) in
developed countries such as the United States and Germany. Even the share of employment is low
at 2.5 per cent for the auto industry in India compared to 3-7 per cent in developing countries and
around 15 per cent in mature economies. The economic liberalization that dawned in India in the
year 1991 has succeeded in bringing about a sustained growth in the automotive production sector
triggered by enhanced competitiveness and relaxed restrictions prevailing in the India soil. A
number of Indian automobile manufacturers including Tata Motors, Maruti Suzuki ,Mahindra and
Mahindra, and TVS motors have dramatically and internationally to attain its rightful place in the
world trade. A global recession for last two year notwithstanding, the industry has shown
appreciable resilience and adjusted to the challenges of the environment. There are at present 13
manufacturers of passenger cars and multi utility vehicles,7 manufacturers of commercial
vehicles, 11 of 2 or 3 wheelers and
tractors besides 4 manufacturers of engines. The industry has an investment of a sumexceedin g
US$ 10 billion. During 1999-2000 the turnover of the automotive industry as a whole was US$
12.5 billion approximately. The industry employs 500,000 people directly and more than 10
million people indirectly and is now inhabited by global majors in keen competition.
 Automobile industry in India

Indian automobile industry is the seventh largest in the world with an annual production of over
2.6 million units in 2009. In 2009, India emerged as
Asia’s fourth largest exporter of automobiles, behind Japan, South Korea and
Thailand. By 2050, the country is expected to top the world in car volume with approximately
611 million vehicles on the nation’s roads. Indian automobile
industry has matured in last few years and offers differentiated products for different segments of
the society. It is currently making inroads into the rural middle class market after its inroads into
the urban markets and rural rich .In the recent years Indian automobile sector has witnessed a
slew of investments.
India is on every major automobile player’s radar. Indian automobile industry is
also fast becoming an outsourcing hub for automobile companies worldwide, as indicated by the
zooming automobile exports from the country. Due to rapid economic growth and higher
disposable income it is believed that the success story of the Indian automobile industry is not
going to end soon. Automobile industry in India also received an unintended boost from stringent
government auto emission regulations over the past few years. This ensured that vehicles
produced in India conformed to the standards of the developed world.
In India, as in many other countries, the auto industry is one of the largest industries. It is one of
the key sectors of the economy. The industry comprises of automobile and the auto components
sectors and encompasses commercial vehicles, multi utility vehicles, passenger cars, two-
wheelers, three-wheelers ,tractors and related auto components. The industry has shown great
advances since deli censing and opening up of the sector to foreign direct investment (FDI)
in1993. It has deep forward and backward linkages with the rest of the economy, and hence, has a
strong multiplier effect. This results in the auto industry being the driver of economic growth and
India is keen to use it as a lever of accelerated growth in the country. Since the first car rolled out
on the streets of Mumbai (then Bombay) in1898, the Automobile Industry of India has come a
long way. During its early stages the auto industry was overlooked by the then Government and
the policies were also not favorable. The liberalization policy and various tax reliefs by the Govt.
of India in recent years have made remarkable impacts on Indian Automobile Industry, which is
currently growing at the pace of around 25% per annum, has become a hot destination for global
auto players like Volvo,
General Motors, Ford, Hyundai, Tata motors and other big players who are emerging slowly
.Today Indian automotive industry is fully capable of producing various kinds of vehicles and can
be divided into 03 broad categories: Cars, two-wheeler and heavy vehicles. A well developed
transportation system plays a key role in the development of an economy, and India is no
exception to it. With the growth of transportation system the Automotive Industry of India is also
growing at rapid speed, occupying an important place on the ‘canvas’ of Indian economy .During
the early stages of its development, Indian automobile industry heavily depended on foreign
technologies. However, over the years, the manufacturers in India have started using their own
technology evolved in the native soil. The thriving market place in the country has attracted
a number of automobile manufacturers including some of the reputed global leaders to set their
foot in the soil looking forward to enhance their profile and prospects to new heights .At present
about 75 percent of India’s automobile industry is made up by small cars, with the figures ranking the
nation on top of any other country on the globe. Over the next two or three years, the country is
expecting the arrival of more than a dozen new brands making compact car models. The
automobile sector of India is the seventh largest in the world. In the year, the country
manufacturers about 2.6 million cars making up an identifiable chunk in the world’s annual
production of about 73 million cars in a year.
 CHAPTER – 2
INTRODUCTION OF RATIO ANALYSIS
 Introduction on Ratio Analysis
Introduction:
A financial ratio or accounting ratio is a relative magnitude of two selected numerical values
taken from an enterprise's financial statements. Often used in accounting, there are many standard
ratios used to try to evaluate the overall financial condition of a corporation or other organization.
Financial ratios may be used by managers within a firm, by current and potential shareholders
(owners) of a firm, and by a firm's creditors. Financial analysts use financial ratios to compare the
strengths and weaknesses in various companies.[1] If shares in a company are traded in a
financial market, the market price of the shares is used in certain financial ratios.
Values used in calculating financial ratios are taken from the balance sheet, income statement,
statement of cash flows or (sometimes) the statement of changes in equity. These comprise the
firm's "accounting statements" or financial statements. The statements' data is based on the
accounting method and accounting standards used by the organization.
Financial analysis on the company is done by analyzing many factors; ratio analysis is a very
important part of financial analysis to understand its financial statements, position in the market,
liquidity, operating efficiency, etc. it is based on fundamental analysis of the company. It helps
the investor to understand the performance of the company through its financial statements.
Ratio analysis includes an evaluation of data from current and historical financial statements to
understand company financial performance throughout the industry. It helps to set a trend line of
a company’s performance over a period, which tells whether the company is showing growth, or
not.

Importance of Ratio Analysis:

Accounting ratios analysis helps in the identification of the strengths and weaknesses of a
business. Based on the financial reports it enables the business to measure its efficiency and
profitability and provides a way of determining the relationship between one accounting variable
to another on their
financial statements. Over time a business can assess their performance and pick up on key
indicators on whether improvements or changes are necessary.

1. Financial Statement Analysis:

Understanding financial statements are important for stakeholders of the company. Ratio analysis
helps in understanding the comparison of these numbers; furthermore, it helps in estimating
numbers from income statements and balance sheets for the future. For e.g. Equity shareholder
looks into the P/E ratio, the Dividend payout ratio, etc. while creditors observe Debt to Equity
ratio, Gross margin ratio, Debt to asset ratio, etc.

2. Efficiency of Company:

Ratio analysis is important in understanding the company’s ability to generate profit. Return on
Asset, Returns on Equity tell us how much profit the company is able to generate over assets of
the firm and equity investments in the firm, while gross margin and operating margin ratios tell us
the company’s ability to generate profit from sales and operating efficiency.

3. Planning and Forecasting:

From a Management and investor point of view, ratio analysis helps to understand and estimate
the company’s future financials and operations. Ratios formed from past financial statement
analysis helps in estimating future financials, budgeting, and planning for the future operations of
the company.

4. Identifying Risk and Taking Corrective Actions:

The company operates under various business, market, operations related risks. Ratio analysis
helps in understanding these risks and helps management to prepare and take necessary actions.
Leverage ratios help in performing sensitivity analysis of various factors affecting the company’s
profitability like sales, cost, and debt. Financial leverage ratios like Interest Coverage ratio and
Debt Coverage ratio tell how much the company is dependent on external capital sources and the
company’s ability to repay debt.
5. Peers Comparison:

Investor, as well as the company’s management, makes a comparison with Competitors Company
to understand efficiency, profitability and market share. Ratio analysis is helpful for companies
to perform SWOT (Strengths, Weakness, Opportunities, and Threats) analysis in the market. It
also tells whether the company is able to perform growth or not over a period from past financials
and whether the company’s financial position is improving or not.

6. A Better Source of Communication:

Ratio analysis is important while presenting the financials of the company to its stakeholders.
Ratios make it easy to understand than complex and huge numbers. Sometimes numbers can be
deceitful which leads to investors losing confidence, but ratio analysis helps the investor to
understand the situation of the company after comparison and helps them to keep investing in the
business.

7. Financial Solvency:

The company’s ability to pay short-term debt is determined by liquidity. Current Ratio, Acid-test
ratio tells us whether a company is able to pay its short-term obligation within a year. The
company continuously runs analysis on past financial statements to understand and prepare for
payment of short-term obligations.

8. Decision Making:

Ratios provide important information on the operational efficiency of the company, and the
utilization of resources by the company. It helps management to forecast and planning for future,
new goals, concentrate on the different markets, etc.

9. Trend Line :
Ratio analysis gives us the trend line, which indicates whether a company is able to perform over
a period or not. Companies gather data from past reporting periods trend line formed can be used
to understand and judge future performance and any possible issue which cannot be found from
just one-year ratio analysis.

10. Important Tool:

Financial analysis of the company cannot be done without ratio analysis. Ratio analysis is an
important tool that is required to perform all actions whether the comparison with peer
companies, measuring the efficiency of the company in various aspects of creating a financial
model of the company to forecast future performance.

11. All in One Package:

Ratio analysis includes ratios, which measure various aspects of business like liquidity,
efficiency, solvency, leverage, profitability and market value. It gives reliable information to
investors and management from all perspectives to make their own decisions. An investor should
not depend on just one ratio to make investment decisions but should perform a thorough analysis
of various ratios and understand its meaning related to the company’s future performance.
Limitations of Ratio Analysis:

Financial ratios are undoubtedly useful tools of conducting financial analysis of a business
enterprises. Yet they have certain limitations which are

1. Limited use of a single ratio:

A singly ratio used without reference to other ratios gives a false picture of the situation while
forming an opinion about the financial position or soundness of an enterprise. The combined
effect of various ratios must be taken into account.

2. It provides only a media of interpretation:

Ratios a simply tools of analyzing and interpretation the financial position of a concern, still a
great deal of investigation is needed to be done. Hence more importance must be given to those
item which require investigation

3. Affected by qualitative analysis of the problem:

Financial statements may be affected by window dressing thus the ratios based on these financial
statement may give a misleading picture. Hence an analysis must pay attention towards window
dressing.

4. Lack of qualitative analysis of the problem:

During ratio analysis no attention is paid towards the qualitative analysis because the ratios are
collected from the figures which can be expressed in monetary terms.

5. Future estimates on the basis of pasts:

Ratios are based on past records, hence they cannot be used in trend analysis.

6. Effect of personal ability and biases of the analysis:

Accounting ratios are affected by personality ability and biases of the analysis. Hence they must
be used with due care and skills.
7. Donor reflect price level change:
No attention is paid in financial statements on changes in price level. Hence the ratios based on
these financial statements are misleading

8. Only few information’s:

Ratios are based on information supplied in financial statements and this information is no
sufficient for calculation of ratios.

Assumptions of ratio analysis:

The ratio analysis necessarily proceeds on the following assumptions

1. That the financial statements show a reasonable picture of the condition of a business or concern.
2. That the financial statement from which the ratios are calculated present a
typical And up-to-date picture.
3. That the figures in the financial statements of a company are comparative with the figures of
the other companies financial statements.
These assumption may not hold well in actual practice and to extent the interferences drawn may
only be practically correct.

Types of ratios:

1. Liquidity Ratios\Short Term Solvency Ratio

This type of ratio helps in measuring the ability of a company to take care of its short-term debt
obligations. A higher liquidity ratio represents that the company is highly rich in cash. Usually
the following ratios are calculated for this purpose:

∙ Current Ratio
∙ Quick or Liquid Ratio
∙ Absolute Liquidity Ratio
∙ Super quick Ratio
a Current Ratio: The current ratio is the ratio between the current assets and current liabilities of
a company. The current ratio is used to indicate the liquidity of an organization in being able to
meet its debt obligations in the upcoming twelve months. A higher current ratio will indicate that
the organization is highly capable of repaying its short-term debt obligations.
Objectives: The main object is to measure the ability of the concern to meet its short term
obligations and to depict the short term financial soundness of a concern
Current Ratio = Current Assets / Current Liabilities

Current Liabilities Current Assets

Bills Payable Cash

Creditors Bank Balance

Short-term loans Bills Receivables

Bank Overdraft Debtors

Outstanding Stocks\Inventory

Tax Provision Prepaid Expenses

Un-claimed dividend Advance Payment

Advance from Customer Accrued Income

Deposits from Dealers Short Term Investment

Provisions for Bad and Doubtful debt Other accounts receivables within an year

Proposed dividend
Interpretation: A current ratio of 2:1 is considered as ideal that is if current ratio is 2 or more it
mean that the concern has the ability to meet its current obligation but if this ratio is less than 2 it
indicates that the concern has difficulty in meeting
its current obligation. However the ratio above the ideal ratio shows the managerial deficiency of
the concern to profitability

(b) Quick Ratio\Liquid Ratio: This ratio revels the relationship between quick assets and
current liabilities
Objectives: The main objectives of computing this ratio is to measure the ability if the firm to
meet its short term obligations as and when due without relying upon the realization of stock
Quick Ratio= Quick Assets\Current Liabilities

Interpretation: This ratio show the liquidity position of the firm. Generally a quick ratio of 1:1 is
considered to be ideal. Although the quick ratio is more penetrating test of liquidity then the
current ratio, yet it should be use more cautiously. A concern having a quick ratio of more than 1
may not be meeting its short term obligations in time if its current assets include doubtful and
slow paying debtors while a concern having a quick ratio less than 1 may be able to meet its short
term obligations in time because of its very effective inventory management. However if current
liability are excess of quick assets then it will be implied that short term solvency of business is
not satisfactory.

(c) Absolute Liquidity Ratio: This ratio is also known as Super Quick Ratio or Cash Position
Ratio. This ratio establishes a relationship between absolute liquid assets and current liabilities.
Absolute Liquidity Ratio=Absolute Liquid Assets\Current Liabilities

Interpretation: This ratio is used to examine absolute liquid position of the firm. If this ratio is
more than 0.5:1 it indicates that the firm has enough cash to pay its creditors. Secondly it’s also
shows the firm is not paying attention towards credit purchases and avoids the use of short term
loan from bank.
(d) Super-quick Ratio: It is a slight variation of quick ratio. It is calculated by comparing the
super quick assets with the current liabilities (or liquid liabilities) of a firm. The ratio may be
expressed as follows: Super-quick Ratio = Super Quick Assets Current Liabilities The term
‘Super- Quick Assets’ means current assets excluding stock, prepaid expenses and debtors Thus,
super- quick assets comprise mainly cash, bank balance and marketable securities. Significance:
This ratio is the most rigorous test of a firm’s liquidity position. In case the ratio is ‘1’, it means
the firm can meet its current liabilities any time. The ratio is a conservation test and not widely
used in practice

2. Leverage Ratio or Long Term Solvency Ratio:

Leverage or Capital Structure ratios are calculated to judge the log-term financial position of the
firm. These rations revels the fund provided by owners and outsiders. These ratio shows how
much amount is introduce by the owner in business. Generally these ratios are beneficial to the
long term creditors like shareholders, financial institutions etc. Thus leverage ratio are calculated
to manage the financial risk and the concern ability of using debt for the benefit of shareholder.
Usually the following ratios are calculated to judge the long term financial solvency of the form:-

∙ Debt-Equity Ratio
∙ Proprietary Ratio
∙ Fixed Assets Ratio
∙ Solvency Ratio
∙ Capital Gearing Ratio
∙ Debt Service Ratio
∙ Preference Dividend Coverage Ratio
∙ Cash to Debtors Services Ratio

(a) Debt-Equity Ratio: This ratio indicates the relationship between long term debts and
shareholder funds.
Objectives: The objectives of calculating this ratio is to measure the relative proportion of debt
and equity in financing assets of the firm.
Debt-Equity Ratio= Debt\Equity
OR
Outsider’s fund\Shareholder or proprietor’s funds or Net Worth

Interpretation: A high debt equity ratio shows that the claims of creditors are greater than those
of owners. A very high ratio is unfavorable from the owner’s point of view. This causes hindrance
in the firm’s operations due to the increases pressure and interference of creditors in
management. A high debt company finds difficulty in raising additional deb. During the periods
of the low profits a highly debts company suffer great strain, it cannot earn sufficient profit even
to pay the interest charge of creditors.

b) Proprietary Ratio: This ratio is also known as Net worth to total Assets Ratio or Shareholders
Equities to Total Equities Ratio and Equity Ratio. This ratio establishes a relationship between net
worth and total assets.
Proprietary Ratio = Proprietors Funds / Total Assets

Interpretation- this ratio shows that how much capital is introduced by the owner in business
.Higher ratio means a sound position of business, because it shows that the organization is not
run through outside funds which mean less interference and pressure of outsiders.

c) Fixed assets ratio: This ratio is calculated as –

Net fixed ratios (after depreciation) / Total long term funds

Interpretation - This ratio reveals the long-term solvency of the business .This ratio is beneficial
for the party's over provide long term loans to the organization. Generally long-term loans are
provided against the security of fixed assets. Therefore the ratio expressed the margin of safety
related to loan provider.

d) Solvency Ratio or Debt to Total Assets Ratio – This ratio is used to measure long- term
solvency of business .This ratio is beneficial for future investors .This ratio indicates that there
are the funds
of the company’s sufficient to meet its total liabilities. This ratio examines capital structure of
business. Higher solvency ratio is unfavorable to creditors .This ratio is calculated as –
Solvency Ratio = Total debts or total outsiders liabilities / Total assets)

e) Gearing or Capital Gearing Ratio - Capital gearing ratio indicates the relationship between
fixed cost bearing capital and variable cost bearing capital .Fixed cost bearing capital means the
capital upon which the rate of return is fixed. Variable cost capital means the capital upon which
rate of return is not fixed because it’s date of dividend keeps on changing. This ratio is calculated
as – Gearing ratio = Fixed cost bearing capital / Variable cost bearing capital
Interpretation- The higher the ratio of the more beneficial for the form because at the time of
prosperity the owners will enjoy the benefits of ‘trading on equity’, while at time of depression
they will have to suffer a lot because they will have to pay the interest whether they are in loss or
profit .When the rate of interest is fixed high gearing ratio is beneficial for shareholders.

f) Interest Coverage Ratio or Debt Service Ratio or Times Interest Earned Ratio: This ratio
indicates the relationship between net profit before interest and taxes on long-term debt.
Objective
– The objective of calculating this ratio is to measure the debt-servicing capacity of a firm so far
as fixed interest on long term debt is concerned.
Time Interest Earned Ratio =
Net income before charging interest and income tax
Interest payable on long-term debt

Interpretation: Interest coverage ratio shows the number of times the interest charges are covered
by the income out of which they will be paid. Higher the ratio of the more beneficial for the
lenders, because this ratio measures the margin of safety for the lenders. If profit just equals
interest it is an unfavorable position for the company since nothing will be left for shareholders
and an unsafe one for the lenders also.

g) Preference Dividend Coverage Ratio: To calculate this ratio is the net income after interest and
text is divided by preference shares dividend, it can be return as
Preference Dividend Coverage Ratio = Net income after Interested and Tax / Preference
Dividend
Interpretation: Generally preference is dividend is fixed. This ratio indicates that after paying the
interest and tax what the proportion of profit and preference dividend is.

h) Cash to Debt Service Ratio: Generally all the debts of interests are payable in cash hence to
find the long term solvency instead of net income the total cash inflows of that period
must be considered. If to pay the interest a sinking fund has been created then the annual
payment in this font must also is accounted, i.e., must be added to the interest. This ratio can be
calculated as Cash to debt service Ratio = Annual cash inflow before interest and tax / Interest
+ Sinking fund appropriations on Debt / 1- Tax Rate

3) Activity or Efficiency Ratios:

Investment of the funds of creditors and owners in various kinds of assets is done to generate
sales and profit. The effective management of assets will increase the amount of sales. Activity
ratios are computed to evaluate the efficiency with which the firm managers and utilizes its
assets. These ratios are also called turnover ratios because they indicate the rapidity with which
assets are being converted or turned over into sales. Some of the important issues are discussed
below –
∙ Stock or Inventory Turnover Ratio
∙ Debtors Turnover Ratio or Receivable Turnover Ratio
∙ Creditors Turnover
∙ Total Assets Turnover Ratio
∙ Fixed Assets Turnover Ratio

a) Stock or Inventory Turnover Ratio: This ratio establishes a relationship between costs of goods
sold and average stock. This ratio tells the rate at which stock is converted into sales.
Inventory Turnover Ratio= Cost of Revenue from Operation / Average Stock

Interpretation – This ratio provides that how many times revenue from operation is made during
year. Higher ratio shows that more revenue from operations is being produced by a unit of
investment in stocks. Companies in which the stock turnover ratio is high generally work on
comparatively low margin of profit.
b) Debtors Turnover Ratio or Receivable Turnover Ratio: This ratio is used to establish the
relationship between net credit sales and average trade debtors.
Objective: The objective of calculating this ratio is to determine the efficiency with which the
trade debtors are managed.
Debtor’s Turnover Ratio = Net Credit from operation / Average Receivables

Interpretation: The shorter the average collection period the better the quality of debtors as short
collection period indicates from to payment by debtors. A long collection period implies a too
liberal and ineffective credit and collection performance by the management. This increases the
chance of bad debts. The average collection period should be compared against the firm’s credit
policy and turns to judge its efficiency.

c) Creditors Turnover Ratio – This ratio is used to establish the relationship between net credit
purchases and average trade creditors. Objective – The objective of calculating this ratio is to
determine the efficiency with which the creditors are managed.
Creditors Turnover Ratio = Net credit Purchases / Average Payables

d)Total Assets Turnover Ratio – This Ratio is also known as total investment turnover ratio .This
ratio is calculated by dividing cost of goods sold by total capital employed or by total assets
employed in business .This ratio indicates how effectively and profitably the fixed assets of a
business are used. The way to a certain the ratio is:
Total Assets Turnover Ratio = Cost of Revenue from Operation or Net Revenue from Operation
/ Total Assets

Interpretation – This ratio is important and appropriate in manufacturing concern since sales are
produced not only by the use of working capital but also by the capital invested in fixed assets. If
the ratio is lower than expectation it indicates that the asset of the organization are not being
effectively and properly utilized. The management of the concern is weak. High ratio indicates
that the acids are effectively utilized but much higher ratio is a symbol of overtrading of the
organization.
e) Fixed Assets Turnover Ratio: This ratio is calculated by dividing the cost of goods sold or
sales by net fixed assets.
Fixed Assets Turnover Ratio = Cost of Revenue from Operation or Revenue from Operation /
Net fixed Assets

Interpretation - This ratio is most useful for manufacturing concern since the cells are produced
not only by the use of working capital but also by the capital invested in fixed assets. An
improvement in the above ratio is a symbol of better
performance and the decline in it would show a declining efficiency or improvident investment.
f) Current Assets Turnover Ratio: The formulae used for calculating this ratio is Current Assets
Turnover Ratio = Cost of Revenue from Operation or Revenue from Operation / Current Assets

Interpretation - This ratio is most useful for non manufacturing concern since the cells are
produced mainly but current assets are compared to fixed assets. This ratio indicates the effective
use of current assets. More all less investment in current assets affect the solvency of a concern.

g) Working Capital Turnover Ratio: This ratio indicates in now effectively working capital is
being utilized by the concern. Working capital means current assets minus current liability.
Working capital Turnover Ratio = Cost of Revenue from Operation or Revenue from Operation
/ Net working capital

Interpretation – The higher the ratio the lesser is the investment in working capital and the
greater are the profits. A very high ratio is a sign of over trading and the low ratio indicates
understanding, i.e., working capital is not effectively used.

h) Capital Employed Turnover Ratio - This Ratio establishes a relationship between capital
employed in business and sales or cost of goods sold and capital employed. In the form of
formula Capital employed
Turnover Ratio = cost of revenue from operation or Revenue from operation / Capital Employed
Interpretation- Higher ratio indicate effective management and proper utilization of capital
employed. A too hi ratio may indicate the situation of over-trading. Worth Turnover Ratio – This
ratio indicates how effectively the owners fund are utilized. The formula used is –
Net Worth Turnover Ratio = Cost of Revenue from Operation or Revenue from Operation / Net
worth

Interpretation – A high ratio is a symbol of effective utilization of owners fund and a too high
ratio indicate over-trading. A low ratio indicates under-taking which is unfavorable for the
concern and owners.

4) Profitability Ratio:
The term profitability may be defined as ability of a given investment to earn a return from its
use. Profitability is a relationship of the earnings to the total resources of the corporation. It may
be noted that profit is an absolute term why profitability is a relative term, where profit is
described in relation to capital invested.

1) Profitability Ratio Based on Sales

∙ Gross Profit Ratio or Gross Profit Margin
∙ Operating Ratio
∙ Operating Profit Ratio Net Profit Ratio
∙ Net Profit Ratio
2) Profitability Ratios Based on Capital Employed
∙ Return on capital Employed or Return on investment
∙ Return on Proprietor’s Funds or Shareholders Investment
∙ Return on Equity Capital Return on Total Assets
3) Ratios Based on Earning on Shares
∙ Earnings per share (EPS)
∙ Price Earnings Ratio or P/E Ratio
∙ Dividend Per Share or DPS
∙ Dividend Pay-out Ratio
∙ Dividend Yield Ratio
∙ Reserves to Equity Capital Ratio
1 Profitability Ratio Based on Sales
a) Gross Profit Ratio or Gross Profit Margin – This profit establishes a relationship between
gross profit and net sales, and is generally expressed in percentage. It is calculated as under
Gross Profit Ratio = Gross Profit/ Net Revenue from Operation * 100

Interpretation: This ratio is calculated to find the profitability of business. A high gross profit
margin ratio is a symbol of good management. If the actual gross profit ratio is lower than
expectation then it provides that profit in the business is not sufficient in comparison to revenue
from operation. This situation is not healthy for the business. Hence a low gross profit margin
ratio should be carefully investigated. This may be due to higher cost of production, in efficient
utilization of plant and machinery etc.

b) Operating Ratio: This ratio is computed by dividing the operating cost by the net series. Hence
it can be returned as
Operating Ratio = Operation cost / Net Revenue from Operation *100

Interpretation: A high ratio is unfavorable since it will leave a small amount of operating income
to meet interest, dividend, etc. The operating ratio is of the form should be compared with the
ratios of the similar forms and industry average. This will reveal the true picture. Operating the
issues are related with cost structure of a firm.

c) Operating Profit Ratio: The formula used is

Operating Profit Ratio = Operating net Profit before Interest and tax / Net Revenue from
Operation *100

d) Net Profit Ratio: This ratio is calculated as

Net Profits/ Net Revenue from operation *100

This ratio is a symbol of profitability and efficiency of the business. Higher the ratio the more
favorable for the business as it denotes sound management and efficiency. Lower Ratio levels
decline in profits and mismanagement.
2) Profitability Ratio Based on Capital Employed
(a) Return on Capital Employed or Return on investment: This ratio measures the relationship
between net profit before interest and tax on capital employed.
Return on investment= Profit Margin *Investment Turnover

Interpretation – This ratio measures profitability of total capital employed in the business. This
ratio helps in determining as to what extent the management has been successful in increasing the
income of the shareholders through the use of borrowed capital. This ratio is an important tool
for making capital budgeting decisions, a project building higher return is favorable as it reveals
more.
b) Return on proprietors fund for shareholders investment – This ratio is calculated to find out
how efficiently the funds is supplied by the shareholders have been used. Higher the ratio of the
more efficient the management and utilization of shareholders fund. The formula used as a –
Return on shareholders’ investment: = Net Profit after Interest and tax / Shareholders
Investment *100

C) Return on equity capital – Equity shareholders are the real owners, therefore it is very essential
to calculate return on equity capital. If we want to calculate return on equity shareholders fund
then computation formula will be as under:
Return on equity capital – = Net Profit after tax – preference dividend / Paid up equity share
capital *100

e) Return on Total assets – This dishonor users a relationship between net profit after tax before
interest and total assets.
Objective – The objective of calculating this ratio is to find out how efficiently the total assets
have been used by the management.
Return on Total assets = Net profit after tax + interest / Total assets excluding Fictitious assets
*100

Interpretation – This ratio reveals the profitability of total assets hence it throws light on how
efficiently the acid the utilized by the management. Higher the ratio the more beneficial for the
concerned.
3) Earnings per share – This ratio determines the earnings available on per equity share.
Objective – The objective of determining this ratio is to measure the profitability of the form on
equity shares. This ratio is calculated as under –
Earnings Per share = Net profit after Tax and preference dividend / No. Of equity shares

Interpretation – Higher the figure the more earnings per share better is the performance and
prospectus of the company. The increasing trend of EPS increase the possibility of more dividend
and bonus share which finally has a favorable effect on the market value of share. This ratio
assets in evaluating the prevailing market price of share in the light of earning capacity of the
form. This ratio must not use blindly .The financial data, from which this ratio is computed must
be carefully observed.

b) Price – earnings Ratio – This ratio is helpful in predicting the market price of equity share at
some future date and in determining whether the share of a particular form are undervalued /
overvalued this ratio is determined as –
P.E Ratio = Market Price per Equity share / Earning Per share

c) Dividend per share – This ratio is calculated by dividing the dividend paid to equity
shareholders by number of equity shares. Hence –
Dividend Per share = Dividend paid to equity shareholders / Number of equity shares
outstanding

Interpretation – Higher the ratio of the ratio of the more favorable it is because this ratio shows
that how much income is profit will be received by investors. Generally no company distributes
and their profits is divided among shareholders a full list of some part of the prophets are kept as
reserved for the purpose of future necessity.

d) Dividend Pay-out Ratio – This ratio is calculated by dividing dividend per share by Earning per
share. Hence it can be returned –
Dividend per share / Earning per share *100
Interpretation – This ratio reveals that how much profits are distributed as cash didn’t after takes
and how much profit are kept as retained earnings .

f) Dividend yield ratio – This ratio depends on dividend per share and market price per share.
That is:
Dividend per share / Market Price per share *100

Interpretation – This ratio shows that how much dividend can be received by an investor if he
buys the shares from open market.
 CHAPTER- 3
Research Methodology
Research methodology
“Research methodology is a process of planning, acquiring, analyzing and disseminating
relevant data and information”.
The use of right methodology is necessary because if the right methods are not adopted and
thoughts are not arrange in a logical order the exact truth might not be expressed. Thus the
methodology means correct arrangement of thoughts and knowledge.
Research process involves defining needs translation problem into a research problem
and collection & analyzing and reporting the information specified in research problem
represents the initial steps on the research process with emphasis upon types of data sources
and option available to the researchers.
The research is said to be a good if the methodology is adopted properly. The design and
implementation is depended on data available. There are two types of Data sources i.e.
Primary data and Secondary data.

Selection of the topic:

It is an important part of a research as it is important that the topic which has been selected has
something new in it so that it gives the chance to the researcher to get new ideas from various
sources. As we all know that in the present time there is a huge increase in the competition and
because of that competition working capital is becoming necessary for the organizations.
Working capital is basically a part of capital in which it is necessary to take the day to day
expenditure of the business organization. Working capital play a very important role because
as company needs capital for its day to day expenditure. Lots of company’s results with a fail
because of a poor working capital management. WC is the funds which are invested by a firm
in its current assets. To have sufficient current assets will results with smooth and
uninterrupted production but at the same time it consumes a lot of working capital. So at that
time there comes a need of a proper working capital management.
Therefore the topic which is finalised for the project is to study the Working Capital
Management ofModi Auto Sales.
OBJECTIVES OF REPORT:
∙ To study the concept of working capital
∙ To study the manufacturing process and various knowledge about the industries.
∙ To study various technologies related to the industry
∙ To find out the awareness of the product in the market
∙ TO know the performamce of the prospective firm.

SCOPE OF STUDY:
In order to carry out any business one must ensure finance, because finance is closely related
with production, marketing and other functions in an organization. For example, a decision to
build a new plant or to buy a new machine implies specific way of financing that project.
Ratios analyses shows you comparative result of the any firm for that purpose we have
calculate various ratio of Company. That ratio shows us
∙ Short and long term solvency of the firm.
∙ Financial position of the company.
∙ Efficiency of the management of the company for establish new plan for the next financial year.
∙ It also useful in the make financial budget of the company for next year. ∙ To compare of
two different period performance of the firm.

LIMITATIONS OF STUDY:
1. Time period for project is two month and it’s too short for analysing the financial health
of company.
2. Financial information of company is provided only for a period of three years which is not
show the clear picture of company.
3. In company financial information is internal information which is not shown by any
company fully, so this also a barrier.
4. Also limited ratios have been taken in this study. So the study can be further done with
more data and more ratios.
5. In this project, filed work is not involved so much due to Covid-19 so, only secondary data
has been used.
Data Sources:
In my research there is only secondary data collection.
1. Secondary data collection: These are those data which has been already collected and stored
in the reports of the company. Secondary data can be easily available in the company’s annual
reports, from company’s records or from journals of the company and also secondary data can
be easily available through books, trade magazines etc…
This research is completely based on the secondary data which has been collected from the
company’s annual report. The collection of data is aimed on studying the Working Capital
Management of the company.
The project is based on:

1. Annual Report of 2019-20

2. Annual Report of 2020-21

Literature review
Working capital is very important for a company, because working capital management helps
to meet day to day expenses and urgent payment of a company. A good Working Capital
increases the company’s profit and vice versa.
For an efficient and effective Working Capital the collection days should be less and the
payment days should be more and the overall cash conversion cycle should be less or can be
in negative.
 Chapter 4.
Data analysis and Interpretation
Data analysis and Interpretation
(1) Current Ratio:
Current Ratio in 2020
Current ratio = current assets \ current liability Current Assets =7, 89,
15,813 Current Liabilities =4, 04, 19,216
Current ratio = 7, 89, 15,813 \ 4, 04, 19,216
Current Ratio
1.95:1 Current
Ratio in 2021
Current ratio = current assets \ current
liability Current Assets =9, 08, 65,923
Current Liabilities =4, 46, 77,196
Current Ratio = 9, 08, 65,923 \ 4, 46, 77,196
Current Ratio 2.03:1

A current ratio of 2:1 is considered as ideal that is if current ratio is 2 or more it mean that the
concern has the ability to meet its current obligation but if this ratio is less than 2 it indicates
that the concern has difficulty in meeting its current obligation. However the ratio above the
ideal ratio shows the managerial deficiency of the concern to profitability
As the graph indicates that ratio in 2020 is 1.95:1 and ratio in 2021 is 2.03:1. From the above
information it can be concluded that the firm has ability to meet its current obligation because
it has large proportion of short term liabilities

(2) Quick Ratio:

Quick Ratio in 2020

Quick Ratio = Quick Assets / Current
Liabilities Quick Assets = Current assets –
Stock
= 9, 08, 65,923 – 1, 07, 98,033
= 8067890
Quick Ratio = 8067890 / 44677196 = 1.79: 1
Quick Ratio in 2021
Quick Ratio = Quick Assets / Current Liabilities
Quick Ratio = Current Assets – stock
= 78915813 – 16099076
= 62816737
Quick Ratio = 62816737 / 40419216
= 1.55:1
Interpretation:
A quick ratio that is greater than 1 means that the company has enough quick assets to pay for
its current liabilities. Quick assets (cash and cash equivalents, marketable securities, and short-
term receivables) are current assets that can be converted very easily into cash. Hence,
companies with good quick ratios are favored by creditors

The quick ratio measure a company’s capacity to ay its current liabilities without needing to
sell its inventory or obtain additional financing. The higher the ratio result, the better a
company’s liquidity and financial health, the lower the ratio, the more likely the company will
struggle with paying debts.
As the graph indicates that ratio in 2020 is 1.79:1 and ratio in 2021 is 1.55:1. From the above
information it can be concluded that the Firm has enough quick assets to pay for its current
liabilities. Quick assets (cash and cash equivalents, marketable securities, and short-term
receivables) are current assets that can be converted very easily into cash.

(3) Absolute Quick Ratio:

Current Ratio in 2020
Absolute Liquid Ratio = Absolute Liquid Assets / Current Liability Absolute Liquid
Assets = Current Assets – Closing Stock = 78915813 – 16099076
= 62816737
Absolute Liquid Ratio = 62816737 / 40419216 =
1.55:1 Current Ratio in 2021
Absolute Liquid Ratio = Absolute Liquid Assets / Current Liability Absolute Liquid
Assets = Current Assets – Closing Stock = 90865923 – 10798033
= 80067890
Absolute Liquid Ratio = 80067890 / 44677196
= 1.79:1
 This ratio show the liquidity position of the firm. Generally a quick ratio of 1:1 is considered
to be ideal. Although the quick ratio is more penetrating test of liquidity then the current ratio,
yet it should be use more cautiously. A concern having a quick ratio of more than 1 may not
be meeting its short term obligations in time if its current assets include doubtful and slow
paying debtors while a concern having a quick ratio less than 1 may be able to meet its short
term obligations in time because of its very effective inventory management. However if
current liability are excess of quick assets then it will be implied that short term solvency of
business is not satisfactory.

(4)Super Quick Ratio:

Current Ratio in 2020
Super Quick Assets / Current Liabilities
Super Quick Ratio = Current Assets - Stock - Debtors = 90865923 – 10798033 –
79292016 = 775874
Super Quick Ratio = 775874 / 44677196
= 0.01:1
Current Ratio in 2021
Super Quick Assets / Current Liabilities
Super Quick Ratio = Current Assets - Stock – Debtors = 78915813 – 16099076 –
60089647 = 2727090
Super Quick Ratio = 2727090 / 40419216 = 0.06:1
0.07 0.06 0.05 0.04 0.03 0.02 0.01
0
The most favorable and optimum value of this ratio value for this ratio should be one, that is
1:2. It indicates the adequacy of the 50% worth of absolute quick assets to pay the 100%
worth current liabilities in time. It means absolute quick assets worth one half of the worth of
the current liabilities are sufficient for satisfactory liquid position of a business.

(5) Fixed Assets Turnover Ratio:

Current Ratio in 2020
Fixed Assets Turnover Ratio = Net Sales / Net Fixed Assets
= 260795248 / 2323364
=112.24:1
Current Ratio in 2021
Fixed Assets Turnover Ratio = Net Sales / Net Fixed Assets
= 247594661 / 2497424 = 99.14:1

This ratio is most useful for manufacturing concern since the cells are produced not only by the
use of working capital but also by the capital invested in fixed assets. An improvement in the
above ratio is a symbol of better performance and the decline in it would show a declining
efficiency or improvident investment.

(6) Working Capital Turnover Ratio:

Current Ratio in 2020
Working Capital Turnover Ratio = Net Average Sale / Working Capital WORKING CAPITAL
= CURRENT ASSETS – CURRENT LIABILITIES = 90865923 – 44677196
= 46188727
Working Capital Turnover Ratio = Net Average Sale / Working Capital = 260795248 / 46188727
= 5.64:1
Current Ratio in 2021
Working Capital Turnover Ratio = Net Average Sale / Working Capital WORKING CAPITAL
= CURRENT ASSETS – CURRENT LIABILITIES = 78915813 – 40419216
= 38496597
Working Capital Turnover Ratio = Net Average Sale / Working Capital = 247594661 / 38496597
= 6.43:1

A high turnover ratio shows that management is being very efficient in using a company’s short
term assets and liabilities for supporting sales. In other words it is generating a higher amount of
sales for working capital used.

(7) Gross Profit

Ratio:
Current Ratio in
2020
Gross Profit Ratio = Gross Profit / Net Revenue from Operation *100 = 8836215 / 260795248 * 100
= 3.38:1
Current Ratio in 2021
Gross Profit Ratio = Gross Profit / Net Revenue from Operation *100 = 10271653 /
247594661 * 100
= 4.14:1

This ratio is calculated to find the profitability of business. A high gross profit margin ratio is a
symbol of good management. If the actual gross profit ratio is lower than expectation then it
provides that profit in the business is not sufficient in comparison to revenue from operation.
This situation is not healthy for the business. Hence a low gross profit margin ratio should be
carefully investigated. This may be due to higher cost of production, in efficient utilization of
plant and machinery etc.

(8)Net Profit Ratio:

Net Profit Ratio in 2020
Net Profit Ratio = Net Profit / Net Revenue from Operation *100 = 209431 / 260795248 * 100
= 0.08:1
Net Profit Ratio in 2021
Net Profit Ratio = Net Profit / Net Revenue from Operation *100 = 350484 / 247594661 * 100
= 0.14:1

ss
This ratio is a symbol of profitability and efficiency of the business. Higher the ratio the more
favorable for the business as it denotes sound management and efficiency. Lower Ratio levels
decline in profits and mismanagement.
As the graph indicates that ratio in 2020 is 0.08:1 and ratio in 2021 is 0.14:1. From the above
information it can be concluded that the profit in 2021 has been increased.
ANNUAL REPORTS

STATEMENT OF PROFIT AND LOSS

INCOME March `21 March`20

Revenue From Operations 247594661 260795248
[Gross]
Less: Excise/Service Tax/Other
Levies 0 0
Revenue From Operations [Net] 247594661 260795248
Other Income 300000 250000
Total Revenue 247894661 261045248

EXPENSES
Purchase Of Stock-In Trade 190098408 201767220
Operating And Direct Expenses 14257380 15132540
Finance Costs 9504920 1008840
Depreciation And Amortization
Expenses 4752460 5044180

Other Expenses 161583648 29256253

Total Expenses 237623008 252209033

Profit/Loss before exceptional 10271653 8836215

item and tax
Exceptional Items and tax 9921169 8626784
Profit/Loss 350484 209431
 BALANCE SHEET

March `21 March`20

Sources Of Funds
Sonu Capital 5000000 4000000
Reserves 1200000 1000000
Net worth (A) 6200000 5000000
Secured Loans 20000000 18000000
Unsecured Loans 30000000 30000000
Total Debt (B) 50000000 48000000
Total Liabilities (A+B) 56200000 53000000

Application Of Funds
Gross Block 5000000 4000000
Less: Accum. Depreciation 500000 400000
Net Block (A) 4500000 3600000
Investments (B) 100000 100000
Inventories 16099076 10798033
Sundry Debtors 79292016 60089647
Cash and Bank Balance 200000 100000
Total Current Assets 90865923 78915813
Current Liabilities 44677196 40419216
Total CL 44677196 40419216
Net Current Assets (C) 46188727 38496597
Total Assets (A+B+C) 50788727 42196597
CASH FLOW STATEMENT

March21 March`20

10271653 8836215
Net Profit/Loss Before Tax
Net Cash Flow From
OperatingActivities 247594661 260795248

Net Cash Used In Investing 5000000 6000000

Activities
Net Cash Used From
FinancingActivities 1000000 1000000
Net Inc/Dec In Cash And 4385690 4023540
CashEquivalents
Cash And Cash Equivalents
Beginningof Year 1000000 2000000
Cash And Cash Equivalents
End OfYear 2000000 1000000
 Chapter: 5
FINDINGS AND
SUGGESTIONS
Findings
❖ In the year 2019-20 the current ratio is 1.95:1, which is more than the ideal ratio i.e. 2:1 which is
considered as the best and in 2021-21 it increased to 2.03:1 which is also a good condition for the company
.
❖ The ideal quick ratio is 1:1, so in all the years from 2019 to 2021 it has been more than the ideal ratio
which is a good point for the company as it is having more than the ideal ratio . the company’s short term
financial position is sound & it can be said that the company is in the position to pay its current liabilities.
❖ Debtors turnover ratio is increasing from 2019 to 2021 and there Average Collection Period has been
decreased from 2019 to 2021 which shows that company has no need to improve the average collection
period days which is increasing from the past 3 years, this is a good indication for the company.
❖ Working capital turnover ratio has increased from 2019 to 2021 ,a higher ratio indicates that the company
is efficiently using its working capital and vice versa, so we can say that it is good situation for the company
as high ratio shows greater efficiency and helps in smooth functioning of company’s operations whereas a
low ratio indicates risk of default.
❖ So it shows that the business is using its working capital in a correct manner and also shows that business
is effectively using its current assets to manage production
❖ Total assets to debt ratio measures the extent to which long term debts are covered by assets which
indicates the margin of safety available to providers of long-term loans. Total assets of this company are
generally more than 3.4 times in all the respective years , in comparison to its long-term debts of the
company. The higher ratio indicates the use of lower debts in financing the assets which means higher
security to lenders.
SUGGESTIONS
∙ Company current ratio is an ideal position as 2:1 so company need to maintain this position further.
∙ Ideal quick ratio is 1:1,in this firm the quick ratio are almost up to the standard requirement so the working
capital management is satisfactory and should maintain with it and keep working on it to make it more than
the standard requirement for better results.
∙ The working capital turnover ratio is increasing which is a good sign for the company as company is able
to convert it into sales which is good but the company should focus on how they can manage to increase
their working capital.
∙ Solvency position of company is good because of their capital structure and company maintains this.
∙ Company should try to keep its sales or borrowings with in manageable proportion. It’s should also try to
reduce debt equity ratio to1:1.
CONCLUSIONS
After the analysis of financial statements, the company status is better, because the Net working capital of
the company is increased from the last year’s position
The company is utilizing the fixed assets, which majorly help to the growth of the organization. The
company should maintain that perfectly. The company’s overall position is at a good position. Particularly
the current year’s position is well due to raise in the profit level from the last year position. It is better for
the organization to diversify the funds to different sectors in the present market scenario.
I have got knowledge about ratios as a tool of financial statement analysis. I have understood the financial
strengths and weaknesses of the company. I have studied the overall profitability of last three years by
calculating profitability ratios. Now I also know the liquidity position of the company, with the help of
Current ratio Got insight into long term solvency of “Modi Auto Sales ”.
BIBLIOGRAPHY

Book references:
Financial management- M.R. AGARWAL
Financial management- M Y KHAN , P K
JAIN Ratio Analysis – Raj Kumar Sharma
Annexure

Questionnaire

Name:

Title:

Organization Name:

Q1. Does your organization have written accounting policies and procedures?

Q2. Complete the following information concerning the person who will maintain your
accounting records

A. How many years of experience does this person have?

B. How many years has this person been with your organization?
C. Does this person know how to use excel?
D. Does this person know how to use a computerized accounting system? E.
Does thisperson have a degree in accounting or finance?
F. Can this person communicate in English?

Q3. Does your accounting system have the capacity to separate all receipts and payments for a
ned grant from the receipts and payments for activities funded by non-ned sources?

Q4. Do you keep invoices, vouchers and receipts for all payments made from grant funds?

Q5. Does your organization organize its accounting documentation, like invoices and
timesheets, by quarter, by donor, and by budget category?
Q6. Does your organization keep accounting records including invoices, vouchers, receipts
and timesheets for at least three years?

Q7. Can you open or do you already have an organization bank account?

Q8. Is there a limit to the amount of funds that can be received in your bank account per

transfer? Q9. Do you keep inventory records for equipment?

Q10. Are timesheets, a record of working hours of full-time and part-time employees,
maintained for each paid employee?
 SUMMER TRAINING PROJECT EVALUATION FORM

Name of Student Aryan Pareek

Institute Roll No.

13 Session 2021-23

Name of Organization Modi Auto Sales

Address 53, Sindhi Camp, Jaipur Place

Jaipur Pin 302006 Phone

9414442958

Duration of Training Period from 11th October to 25th November 2022No. of Worki

1) How to you rate the overall training programme as an educational experience? Excellent ( )
Very good ( Yes ) Good ( ) Fair ( ) Poor ( )
2) To what extent will it help you in future?
To large extent ( ) To some extent ( Yes ) Negligible extent ( )

3) Indicate subject/ area to which training was found relevant.

Market
ing Intern

4) Indicate the level of interest taken by the training organization

High ( ) Moderate ( Yes ) Low ( )

5) Any

other

comments/

suggestions

No

suggestions

6) Dated :1 D e c
Signature of the Student
Note: A free and frank assessment of the Training experience would be helpful in improving
theTraining Programme.
 FEED BACK FORM

1. Name of the Industry : M o d i Auto Sales

2. Concerned Group : Automobile Spare parts Industry
3. Turn Over (in terms of Capital) : 50Lakhs (in terms of Product)
4. Work Force : 2-4 employeed
5. Description of Product Range: Automobile electrical spare parts
6. Description of Process: Accounting intern at Modi
Auto Sales

7. Area of Training: Accounting

8. Contact details of the Person responsible for Summer Training Project:
a. Name of contact person: Sonu Modi
b. Designation: Sole proprietor
c. Communication address: Modi Auto Sales, Sindhi Camp, Jaipur
d. Phone No. with STD code:
e. Mobile No. : 7850024742
f. Email Address:

Name of the student : Aryan Pareek

Institute Roll No: 13

Class: MBA (Sem 3rd)

Phone : Mobile No. : 9 7 8 2 5 5 2 9 4 6

Email: aryanpareek506@gmail.com

Dated : 1st December 2022