A STUDY ON

“RATIO ANALYSIS”
(With reference to SREE KAMAKSHI ENGINEERING WORKS & SUPPLIES)

VISAKHAPATNAM
A Project Report submitted to Jawaharlal Nehru Technology University GV
In partial fulfilment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted By

KASA. RUTHU
PIN No: 22NR1E0074
Under the guidance of

Mr. G. Srinu, M.B.A.

Assistant Professor

DEPARTMENT OF MANAGEMENT STUDIES

BABA INSTITUTE OF TECHNOLOGY & SCIENCES
(Approved by AICTE, New Delhi, Affiliated to JNTU-GV and Accredited ‘NAAC’)
P.M.PALEM, VISAKHAPATNAM – 530 048.
(2022-2024)
 BABA INSTITUTE OF TECHNOLOGY & SCIENCES

(Approved by AICTE, New Delhi, Affiliated to JNTU GV and Accredited

‘NAAC’)

Mrs.K.Sireesha MBA(Ph.D) Tel: Office: 8912793322

Head of the Department Fax Ph: 7799885357

Department of Management Studies Visakhapatnam -530041.

CERTIFICATE

This is to certify that the project report entitled “A STUDY ON RATIO

ANALYSIS” with reference to “SREE KAMAKSHI ENGINEERING
WORKS & SUPPLIES”, Visakhapatnam” submitted in partial fulfilment for
the award of “MASTER OF BUSINESS ADMINISTRATION” by KASA
RUTHU, PIN No: 22NR1E0074 under my guidance and supervision. This
report has not been submitted previously for the award of any Degree, Diploma,
Associate ship, Fellowship or similar title in this University or in any other
University.

Mrs.K. Sireesha Mr. G. Srinu

Head of the Department Project Guide

External examiner
 DECLARATION

I hereby declare that the project report entitled “A STUDY ON RATIO ANALYSIS” with

reference to “SREE KAMAKSHI ENGINEERING WORKS & SUPPLIES”,

Visakhapatnam submitted by me to JAWAHARLAL NEHRU TECHNOLOGY

UNIVERSITY GURAJADA-VIZIANAGARAM in partial fulfilment for the award of the

degree of MASTER OF BUSINESS ADMINISTRATION is an original work carried out

by me.

I have completed this work under the guidance of Mr. G. Srinu, Assistant Professor in the

Department of Management Studies, Baba Institute of Technology and Sciences, PM Palem,

Visakhapatnam.

I also declare that this dissertation has not been previously formed the basis for the award to

the candidate of any Degree, Diploma Associate ship, Fellowship or similar title in this

university or in any other university.

Place: Visakhapatnam K. RUTHU

Date: PIN No: 22NR1E0074
 ACKNOWLEDGEMENT
I would take this opportunity to express my sincere thanks Dr. K. SRI LAKSHMI madam,
Secretary and Correspondent, Baba Institute of Technology and Sciences, who gave me
opportunity in their college.

I expressed thanks to Dr. M. GOVINDHA RAJU, Principal, Baba Institute of Technology

and Sciences, for grant me permission for doing the project.

I would like to thank to Mrs. K. Sireesha Head of the Department, Department of

Management Studies, for gave me suggestions in completion of the project.

I especially thankful to Mr. G. Srinu, Assistant Professor and project guide, for gave
suggestions and encouraging me in entire period of my course, completion of my project.

I am also thankful to HRDC DEPARTMENT and Sri Charan Sir sr. manager (Finance) and
other officials of SKEWS for giving permission to carry out this work and also for providing
the required information.

I also thankful to all my family members and friends who have shared enthusiasm and zeal
and given me the support in completion of project work.

KASA RUTHU

PIN No: 22NR1E0074

 CONTENTS
CHAPTER – I Page No.
➢ Introduction 2

➢ Need for the study 3

➢ Scope of the study 4

➢ Objective of the study 5

➢ Methodology 6

➢ Limitations

CHAPTER-II

➢ Industry Profile 9

➢ Company Profile 12

CHAPTER – III

➢ Theoretical Framework 15

CHAPTER – IV

➢ Data Analysis & interpretation 28

CHAPTER –V

➢ Findings 55

➢ Suggestions 56

➢ Conclusion 57

➢ Bibliography 58
 Chapter-1

➢ INTRODUCTION

➢ NEED FOR THE STUDY

➢ SCOPE OF THE STUDY

➢ OBJECTIVES OF THE STUDY

➢ METHODOLOGY

➢ LIMITATIONS

1
 INTRODUCTION OF THE STUDY
Ratio Analysis is powerful tool of financial analysis. A ratio is defined as “the indicated quotient
of two mathematical expressions” and “the Relationship between two or more things”. In
financial analysis, a ratio is used as a Benchmark for evaluation the financial position and
performance of a firm. The Absolute accounting figures reported in the financial position and
performance of a firm. The absolute accounting figure reported in the financial position of a
firm. An Accounting figure conveys meaning when it is related to some other relevant
Information. For example, an Rs.5 core net profit may look impressive, but the Firm’s
performance can be said to be good or bed only when the net profit figure is Related to the firm’s
Investment.

The relationship between two accounting figures expressed mathematically, is known as a

financial ratio (or simply as a ratio). Ratios help to Summarize large quantities of financial data
and to make qualitative judgment About the firm’s financial performance. For example, consider
current ratio. It is Calculated by dividing current assets by current liabilities; the ratio indicates
a Relationship- a quantified relationship between current assets and current liabilities. This
relationship is an index or yardstick, which permits a quantitative judgment to Be formed about
the firm’s liquidity and vice versa. The point or note is that a ratio Reflecting a quantitative
relationship helps to form a qualitative judgment. Such is the nature of all financial ratios.

Standard of comparison:
The ratio analysis involves comparison for a useful interpretation of the financial Statements. A
single ratio in itself does not indicate favourable or unfavourable Condition. It
should be compared with some standard.
Standards of comparison may consist of:

➢ Past ratios, i.e. ratios calculated form the past financial statements of the same
firm;
➢ Competitors’ ratios, i.e., of some selected firms, especially the most
Progressive and successful competitor, at the same pint in time;
➢ Industry ratios, i.e. ratios of the industry to which the firm belongs; and
➢ Protected ratios, i.e., develop0ed using the protected or Performa, financial
Statements of the same firm.

In this project calculating the past financial statements of the same firm does ratio Analysis.

2
 NEED FOR THE STUDY

Ratio analysis is important for the company to analyse its financial position, liquidity,
profitability, risk, solvency, efficiency, operations effectiveness, and proper utilization of
funds. It also indicates the trend or comparison of financial results helpful for decision-making
for investment by company shareholders.

It helps us compare the trends of two or more companies over time.

❖ Analysis of Financial Statements

❖ Helps in Understanding the Profitability of the Company
❖ Analysis of Operational Efficiency of the Firms
❖ Liquidity of the Firms
❖ Helps in Identifying the Business Risks of the Firm
❖ Helps in Identifying the Financial Risks of the Company
❖ For Planning and Future Forecasting of the Firm

3
 SCOPE OF THE STUDY
Ratio analysis can be applied to financial statements and similar data in order to:

# Assess performance of a company.

# Determine whether company is solvent and financially healthy.
# Assess risk attached to its financial structure.
# Analyse returns generated for shareholders and other interested parties.

4
 OBJECTIVES OF THE STUDY

1. To know the simplify of accounting information.

2. To determine liquidity or Short-term solvency and Long-term solvency.

3. To Assess the operating efficiency of the business.

4. To Analyse the profitability of the business.

5. To know the comparative analysis, i.e. inter-firm and intra-firm comparisons.

5
 METHODOLOGY OF THE STUDY

Methodology:
Research methodology is a systematic approach in management research to achieve pre-
defined objectives. A Research design is the arrangement of conditions for collection and
analysis of data in a manner that aims to combine relevance to the research purpose with
economy in procedure.
Sources of Data: The study is based on both primary data and secondary data.

Primary Data:

Primary data are also known as raw data. Data are collected from the original source in a
controlled or an uncontrolled environment. Example of a controlled environment is experimental
research where certain variables are being controlled by the researcher. On the other hand, data
collected through observation or questionnaire survey in a natural setting are examples data
obtained in an uncontrolled environment.
The Information relating to the study is collected with the cooperation of management of
SREE KAMAKSHI ENGINEERING WORKS & SUPPLIES., who permitted me to carry on
the study and providing with requisite data through oral interviews with the employees.

Secondary Data:

The secondary data are those which have already collected and stored. It can be easily got
from records, journals, annual reports of the company etc. It will save the time, money and efforts
to 11 collect the data. Secondary data also made available through trade magazines, annual reports,
books etc. This project is based on secondary data collected through annual reports of the
organization.
Since the study is aimed at the financial aspects of the SREE KAMAKSHI
ENGINEERING WORKS & SUPPLIES., the whole data has been gathered from,
• Annuals Reports of the company.
• Broachers of the company.
• Library Books.
The period of the study has been taken from 2017 – 2022

6
 LIMITATIONS OF THE STUDY
• Ratio analysis only considers quantitative aspects and fully ignores the qualitative aspects.
• It does not take into consideration the reasons for fluctuation of amounts due to which results
may not be appropriate.
• It only shows the comparison or trend, actions have to be taken afterward by management
based on an analysis of ratios.
• The reliability of ratio depends upon the reliability of the original data / information
collected.
• Increases, decreases and constant changes in the price distort the comparison over period of
years.
• No Standard Definition of Ratios
• The data provided was not exactly the same as the actual data.

7
 CHAPTER-2:
➢ INDUSTRY PROFILE

➢ COMPANY PROFILE

8
 INDUSTRY PROFILE
Boring Tools Market :
Boring is the process of widening a hole that has previously been drilled, using a single-point
cutting tool (or a boring head containing many such tools). It is a technique for increasing the
precision of a hole's diameter and cutting a tapered hole. After drilling, boring equipment is used
to increase the diameter of the hole. It is commonly used to increase the diameter of a hole. The
Boring Tools Market has been developing at a quicker rate with considerable growth rates in
recent years, and it is expected to increase considerably in the forecast period. The booming
automotive sector all across the world, rising demand from a variety of end-use industries, and
increased manufacturing of light automobiles are all driving up demand for metal boring tools,
which might be a significant growth inducer of the market in the coming years.

Global Boring Tools Market

Report Coverage Details

Base Year: 2023 Forecast Period: 2022-2027
2017 to
Historical Data: Market Size in 2023: US $ 3.45 Bn.
2023
Forecast Period
4.92% Market Size in 2027: US $ 4.60 Bn.
2022 to 2027 CAGR:
by Type • Fine Boring Tools • Rough Boring Tools
Segments Covered: by • Transportation • Automotive • General
Application Machinery • Precision Engineering • Others

Boring Tools Market by Region

• North America
• Europe
• Asia Pacific
• South America
• Middle East and Africa

9
CNC Tool Holders:
The spindle of your CNC machine operates the cutting tool and controls the precision process.
However, interference is required to prevent damage to your spindle and cutting tool. A tool
holder provides the necessary margin between these two components.
CNC tool holders are designed to safely hold a cutting tool in a precise location. Depending on
the tool holder you choose, some offer incomparable accuracy and a firm grip, while others allow
the cutting tool to float to prevent a broken tool.
All holders need to be precision-engineered to offer the cutting accuracy and long-lasting
performance you need. A damaged tool holder can be a major setback and costly replacement, so
it’s important to invest in the right holder and look for signs of wear.
A precision tool holder can keep your CNC machine turning out excellent workpieces of all types.
Work with a tool holder manufacturer who can help you get the most out of your CNC machine.
Versatile equipment deserves versatile accessories and tooling.

A tool holder, if maintained, can handle high-performance CNC machining day in and day out.
However, a tool holder undergoes extreme pressure with heavy use. Over time, this vital
component will need to be serviced or replaced.

Tools Holders:
Tool holders are the physical compatible connection point between machine apparatus axle and a
cutting tool, which is intended for a particular application and custom-made to upgrade both,
machine execution and functional effectiveness. The machine mount style assumes a significant
part for choice of an appropriate tool holder. Tool holders come in numerous machine mount
styles from the more established R8 style to fresher HSK or VDI mount. The projection length of
the instrument holder is the separation from the gage line to the furthest limit of the tool holder.
For smooth machining activities, it is vital that the instrument is accurately embedded in the collet
and turns throughout its procedure with decreased run-out. Increased utilization of loT for
condition-based checking of tool holders, innovative designing in tool holder, programmed and
manual machine tasks, and rising economies from developing nations positively impact the
development of this market.
10
Market Restraints: The development of the tool holders market could be disturbed by the design
of laser cutting instruments and equipment as laser cutting tools doesn't need tool holders all
through the instrument cutting procedure. Along with that constant change in foreign currencies
and unpredictable financial condition in the developing economies are could restrain the
development of the tool holder market. The strict industry regulations, lack of experts, component
quality issues, and cost related with the development of tool holders can act as restraining factor
for tool holder market.

11
 Company profile
Established in year 2000, Sree Kamakshi Engineering Works is one of the
leading Manufacturer, Wholesaler, Traders and Service Provider of Machine Lead Screws,
Hydraulic Cylinders, Hydraulic Piston Rod etc. Our claim to success is hallmarked by the
offered quality products that gained us huge recognizance. We are working towards
development through a determined team of people to meet the most stringent requirements of
customers.

Behind our enormous accomplishment lies the sheer devotion of Mr. charan, whose devotion
and hard work have gifted us enormous glory and repute in the market.

Management team(India mart)

Managing Director & CEO Dinesh Chandra Agarwal.

Whole Time Director Brijesh Kumar Agarwal.
Chief Operating officer Dinesh Gulati.
Chief Product officer Amarinder Singh Dhaliwal
Chief Finance Officer Prateek Chandra
Company Secretary Manoj Bhargava

Sree Kamakshi Engineering Works & Supplies, commonly referred as SKEWS, is a

Distributer of indiamart. Incorporated in 2009 and registered in 2011.
SKEWS:-

Established in year 2009, Sree Kamakshi Engineering Works is one of the leading
Manufacturer, Wholesaler, Traders and Service Provider of Machine Lead Screws,
Hydraulic Cylinders, Hydraulic Piston Rod etc.
India mart:-
Indiamart is India’s largest online B2B marketplace, connecting buyers with suppliers. With
60% market share of the online B2B Classified space in India, the channel focuses on providing
a platform to Small & Medium Enterprises (SMEs), Large Enterprises as well as & nbsp;
individuals. Founded in 1999, the company’s mission is ‘to make doing business easy’

Indiamart has 5,066* employees located across nation.

IndiaMART for Buyers:-

• Convenience of connecting with sellers anytime, anywhere

• Wider marketplace with a range of products and suppliers
• Payment protection programme
12
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14
 CHAPTER-3

THEORITICAL FRAMEWORK

15
 THEORETICAL FRAMEWORK OF THE STUDY
Ratio analysis is the process of determining and interpreting numerical relationship
based on financial statements. A ratio is a statistical yardstick that provides a measure of the
relationship between variables of figures. This relationship can be expressed as a percentage or
as quotient. Ratio analysis is a powerful tool of financial analysis .in financial analysis ratio is
used as a benchmark of a firm. The absolute accounting figures reported in the financial
statement do provide a meaningful understanding of the performance and financial data and to
make qualitative judgment about the firm’s financial performance.
Ratio analysis is the systematic use of ratio to interpret the financial statement so that
the strengths and weakness of a firm as well as its historical performance and current financial
position can be determined. The relational of ratio analysis lies in the fact that it makes related
information comparable. A single figure by itself has no meaning but when expressed in terms
of related figure, it yields significant inferences.

SIGNIFICANCE OF RATIO ANALYSING

Ratio analysis is of great help of commercial bankers, trade creditors and institutional
lenders. They judge the ability of borrowing enterprises by observing various ratios like the
current ratio, acid test ratio, turnover of receivables inventory turnover, coverage of interest by
the level of earnings etc. borrowing enterprises to pay interest principal in case earnings decline
they find valuable the ratios of total debt to equity and total debt to total assets.

Investors in shares judge the performance of the company by observing the per share into
ratios like earnings per share, book value per share, market price per share, dividends per share
etc.
Lastly, ratio analysis is of great use of the management of the firm. Management of the
firm is interested in every aspect of ratio analysis as it is they’re overall responsibility to see
that the resources of the firm are used most efficiently and effectively and that the firm’s
financial conditions is sound.
STANDARDS FOR COMPARISON:
For making a proper use of ratios, it is essential to have fixed standard for comparison.
A ratio by itself has very little meaning unless it is compared to some appropriate standard.
Selection of proper standards of comparison is a most important element is ratio analysis. The
four most common standard used in ratio analysis are as follows:

1. Absolute
2. Historical
3. Horizontal

4. Budgeted
16
 1. Absolute:
Absolute standards are those, which become generally recognized as being desirable
regardless of the type of the company, the time stage of business cycle, or the objectives
of the analyst.

2. Historical:
Historical standards involve comparing a company’s own past performance as a standard
for the present or future. But this standard may not provide a sound basis for judgment,
as the historical figure may not have represented an acceptable standard.

3. Horizontal:
In case of horizontal standards one company is compared with another or with average of
other companies of the same nature. It is also called as intra-firm comparison.

4. Budgeted:
The budgeted standard is arrived at after preparing the budget for a period. Ratios
developed from actual performance are compared to the planned ratios in the budge to
examine the degree of accomplishment to the anticipated targets of the firms.

COMPANY DIFFERENCES:

Situation of two companies are never same. Similarly, the factors influencing the performance
of a company in one-year change in another year. Thus, the comparison of the ratios of two
companies becomes difficult and meaning less when are operating in different situations.

CLASSIFICATION OF RATIOS
Ratios may be classified in a number of ways keeping in view the particular purpose.
Ratios indicating profitability are calculated on the basis of the profit and loss account; those
indicating financial position are computed on the basis of the balance sheet and those which show
operating efficiency or productivity or effective use of resource are calculated on the basis of
figures in the profit and loss account and balance sheet. This classification is rather crude and
unsuitable to determine the profitability and financial position of the business. To achieve this
purpose effectively ratios may be classified as:

I. Profitability Ratios
II. Market Ratios (test)
III. Coverage Ratios
IV. Turnover Ratios 17
17
 V. Financial Ratios
VI. Leverage Ratios.

I. PROFITABILITY RATIOS:

Profitability is the overall measure of the companies with regard to efficient and effective
utilization of resources at their command. It indicates in a nutshell the effectiveness of the
decisions taken by the management from time to time.
Profitability ratios are of utmost important for a concern. These ratios are calculated to
enlighten the end results of business activities which is the sole criterion of the overall efficiency
of a business concern.
The following are the important profitability ratios:

1.GROSS PROFIT RATIO:

This ratio tells gross margin on trading and is calculated as under:
Gross Profit Ratio Formula = (Gross Profit/Net Sales) X 100
Higher the ratio, the better it is. A low ratio indicates unfavourable trend in the form of
reduction in selling prices not accompanied by proportionate decrea41 se in cost of goods or
increase in cost of production.
2.OPERATING RATIO:
This ratio indicates the proportion that the cost of sales bears to sales. Cost of sales
includes direct cost of goods sold as well as other operating expenses,
(administration, selling, and distribution expenses) which have matching relationship with sales.
It excludes income and expenses which have no bearing on production and sales, ex: non-
operating incomes and expenses as interest and dividend received on investment, interest paid on
long-term loans and debentures, profit or loss on sale of fixed assets or long-term investments. It
is calculated as follows:
Operating ratio = {(Operating Expenses + Cost of Goods Sold)/ Net Sales}X100

Here, cost of goods sold = opening stock + purchases + direct expense + manufacturing
expenses – closing stock – gross profit
Operating expenses = administrative expenses + selling and distribution expenses.

3.EXPENSES RATIOS:
These are calculated to ascertain the relationship that exists between operating expenses
and volume of sales. The following ratios will help in analysing operating ratio;

18
a) Material Consumed Ratio= (Material Consumed/Net Sales) X100
b) Conversion Cost Ratio= {(Labour Expenses +Manufacturing Expenses) /
Net Sales} X100
c) Administrative Expenses Ratio= (Administrative Expenses/Net Sales) X100

4.OPERATING PROFIT RATIO:

This ratio establishes the relationship between operating profit and sales and is calculated as
follows;
Operating Profit Ratio= (Operating Profit/Net Sales) X100

Where, Operating Profit=Net Profit+Non-Operating Expenses-Non-Operating Income

5.NET PROFIT RATIO:

This ratio explains per rupee profit generating capacity of sales. If the cost of sales is
lower, than the net profit will be higher and then we divide it with the net sales, the result is the
sales efficiency. If lower is the net profit per rupee of sales, lower will be the sales result.

Net Profit Ratio = (Net Profit After Tax / Net Sales) X100
6.RETURN ON CAPITAL EMPLOYED:
This ratio is an indicator of the earning capacity of capital employed in the business. This
ratio is calculated as follows
Return on Capital Employed= (Operating Profit / Capital Employed) X100

Here capital employed = equity share capital + preference share capital+ undistributed
profit + reserves and surplus+ long term liabilities – fictitious assets – nonbusiness assets
This ratio is considered to be the most important ratio because it reflects the overall
efficiency with which capital is used. This ratio is a helpful tool for making capital budgeting
decisions.
7.RETURN ON SHAREHOLDER FUND:

When it is desired to work out the profitability of the company from the shareholders point
of view, then this ratio is calculated by the following formula:

Return on Shareholder’s Fund= (Net Profit After Interest and Tax/Shareholder’s

Fund) X100

19
8.RETURN ON TOTAL ASSETS:

This ratio is calculated to measure the profit after tax against the amount invested in total
assets to ascertain whether assets are being utilized properly or not. It is calculated as under:

Return on Total Asset= (Net Profit After Tax/Total Assets)43 X100

Suppose net profit after tax is Rs. 20000 and total assets are Rs. 100000.
Return on total assets will be 20%. the higher the ratio, the better it is for concern.

II.MARKET TEST RATIO:

These ratios are calculated in respect of those companies whose shares are treated
on the stock exchanges. Shareholders are not only interested in profit of the company but
also in the appreciation of the value of their shares in the stock exchange market. the
value of the shares depends upon dividend declared, earning per share, the payment
policy etc.

1.EARNINGS PER SHARE:

This helps in determining the market price of equity shares of the company and
in estimating the company’s capacity to pay dividend to its equity shareholder. It is
calculated as follows:

Earnings Per Share= (Net Profit After Tax and Preference Dividend/No. Of Equity
Shares) X100

2.PRICE EARNING RATIO:

This ratio indicates the market value of every rupee earning in the firm and is
compared with industry average. High ratio indicates the share is overvalued and low ratio
shows that share is undervalued. It is computed by following formula
Price Earnings Ratio = (Market Price Per Equity Share/Earning Per Share) X100

For example, if the company’s share price is Rs. 40 and the earning per share is
Rs. 10 then price earnings ratio is 4 or, it means that the market value of every rupee of
earning is four times.

20
3.PAYOUT RATIO:

This determined as follows;

Pay-out Ratio= (Dividend Per Equity Share/Earning Per Share) X100

This ratio indicates as to what proportion of earning per share has been use for
paying dividend and what has been retained for ploughing back. This ratio is very
44
important from shareholders point of view as it tells him that if a company has used
whole or substantially the whole of its earning for paying dividend and retained nothing
for future growth and expansion purposes, then there will be very dim chances of capital
appreciation in the price of shares of such company.
4.DIVIDIEND YIELD RATIO:

This is computed asunder;

Dividend Yield Ratio= (Dividend Per Share/ Market Price Per Share) X100

This ratio is important for those investors who are interested in the dividend
income. As the shareholder purchases the in the open market, his yield (rate of return)
is not equal to the dividend declared by the company. In fact, he calculates dividend per
share by dividing the rate of dividend by paid – up value of share.

III.COVERAGE RATIOS:

This ratio indicates the extent to which the interests of the persons entitled to get a
fixed return or a scheduled repayment as per agreed terms are safe. The higher the cover,
the better it is. Under this category the following ratios are calculated;
1.FIXED INTEREST COVER:

It really measures the ability of the concern to service the debt. this ratio is very
important from lender’s point of view and indicates whether the business would earn
sufficient profits to pay periodically the interest charges. it is calculated as follows;
Fixed interest dividend cover= Net profit before interest and tax/ Interest charges

For example, if the profit after interest and tax are Rs 32,000 and interest charges
are Rs 4000 then fixed rate interest cover will be 8 times.

2.FIXED DIVIDEND COVER:

This ratio is important for preference shareholders entitled to get dividend at a fixed
rate in priority to equity shareholders. It is calculated as follows;
21
 Fixed dividend cover= Net profit before interest and tax/ Preference dividend

For example, If the profits after interest45 and tax are Rs. 2,70,000 and dividend
on preference share is Rs. 27000, the fixed dividend cover will be 10 times
2.DEBIT SERVICE COVERAGE RATIO:

This ratio is a key financial ratio for the lenders and is calculated in order to know
the ability of a company to make payment of principal amounts on time. It is calculated
as follows;
Debt service coverage ratio=Net Operating Income/ Debt Service

IV.TURNOVER RATIOS:

These ratios are very important for a concern to judge how well facilities at the
disposal of the concern are being used or to measure the effectiveness with which a
concern uses its resources at its disposal. In short, these will indicate position of assets
usage.
1.SALES TO CAPITAL EMPLOYED RATIO :

This ratio shows the efficiency of capital employed in the business by computing
how many times capital employed is turned – over in a stated period. The ratio is
ascertained as follows;
=Sales/ Capital employed (shareholder’s fund + long term liabilities)

The higher the ratio, the greater are the profit. A low capital turnover ratio should
be taken mean that sufficient sales are not being made and profits are lower.

2.SALES TO FIXED ASSETS RATIO:

This Ratio measures the efficiency of the assets use. The efficient use of assets will
generate greater sales per rupee invested in all. The assets of a concern. the inefficient
use of the asset will result in low sales volume coupled with higher overhead charges
and underutilization of the available capacity.
Sales= Net fixed assets (fixed assets – depreciation)

This ratio shows how well the fixed assets are being used to generate sales in the business, the
ratio is important in case of manufacturing concern because sales are produced not only by use
of current assets but also by amount invested in fixed assets.
3.WORKING CAPITAL RATIO:

22
 This ratio shows the number of times working capital is turned – over in a stated period.
It is calculated as follows;
WORKING CAPITAL RATIO =Sales/Net working capital (current assets – current
liabilities)

The higher is the ratio, the lower is the investment in working capital and the greater are
the profits. however, a very high turnover of working capital is a sign of overtrading and may
put the concern into financial difficulties.
4.TOTAL ASSETS TURNOVER RATIO:

This ratio is calculated by dividing the net sales by the value of total assets.
TOTAL ASSETS TURNOVER RATIO=Net sales/ Total assets
A high ratio is an overtrading and may put the concern into financial while a low ratio
reveals idle capacity. The traditional standard for the ratio is two times.
5.STOCK TURNOVER RATIO:

It denotes the speed at which the inventory will be converted into sales. Thereby,
contributing for the profits of the concern. When all other factors remain constant, greater the
turnover of inventory more will be efficiency of its management. further, it will be higher when
sales are maximum and the average inventory is minimum.
Stock turnover ratio= Cost of goods sold/ Average stock held during the period
Where,
Cost of goods sold= opening stock + purchases + manufacturing expenses- closing stock or
sales- gross profit.
Average stock= (opening stock + closing stock)/2

6.DEBTORS TURNOVER RATIO:

It indicates the number of times on the average the receivable is turn over in each year. The
higher the value of ratio, the more is the efficient management of debtors.

Debtors turnover ratio= Net credit sales/ Average debtors

This ratio is measure of the collectability of accounts receivable and tells about how the
credit policy of the company is being enforced. Suppose a company allow 30 days credit to its
customers and the ratio is 45;
7.CREDITORS TURNOVER RATIO:

This ratio gives the average credit period enjoyed from the creditor and is calculated as under;

Creditors Turnover Ratio=Creditor purchases/ Avg accounts payable (creditors +b/p)

23
 A low ratio indicates that creditor is not paid in time while a high ratio gives an idea that
the business is not taking full advantage of credit period allowed by the creditors.

V.FINANCIAL RATIOS:

These ratios are calculated to judge the financial position of the concern from long term
as well as – short solvency point of view. These ratios can be divided into two broad categories.

1.Liquidity ratios
2.Stability ratios

1.LIQUIDITY RATIO:

If it is decided to study the liquidity position of the concern, in order to highlight the
relative strength of the concern in meeting their current obligations to maintain sound liquidity
and to pinpoint the difficulties if any in it, then liquidity ratios are calculated. These ratios are
used to measure the firm’s ability to meet48 short term obligations.
The important liquidity ratios are;
A. CURRENT RATIO:
This ratio is most widely used ratio. It is the ratio of current assets to current liabilities. It
shows a firm ‘s ability to cover it’s current liabilities with its current assets. It is expressed as
follows;

Current ratio= Current assets/ Current liabilities

Generally current ratio of 2:1 is considered ideal for a concern current asset should be twice
of the current liabilities. If the current assets are two times of the current liabilities, there
will be no adverse effect on business operations when the payment of current liabilities is
made. If the ratio is less than 2, difficulty may be experienced in the payment of current
liabilities and day-to-day operation of the business may suffer. If the ratio is higher than 2,
it is very comfortable for the creditors but, for the concern, it is indicators of ideal funds and
lack of enthusiasm for work.

B. LIQUID RATIO:
This is the ratio of liquid assets to current liabilities. It shows a firm’s ability to meet
current liabilities with its most liquid assets. 1:1 ratio is considered ideal ratio for concern
because it is wise to keep the liquid assets at least equal to the liquid liabilities at all times. Liquid
assets are those assets which are readily converted into cash and will include cash balances, bills
receivable, sundry debtors and short – term investments.
24
 It is calculated as under;

Liquid ratio= Liquid assets/ Current liabilities

C.ABOSLUTE LIQUIDITY RATIO:

Though receivables are generally more liquid than inventories, there may be debts having
doubt regarding their real stability in time. So, to get idea about the absolute liquidity of
concern, both receivables and inventories are excluded from current assets and only absolute
liquid asset, such as cash, cash at bank and readily realizable are taken into consideration.
Absolute liquidity ratio is calculated as follows;

=Cash in hand and bank + short term marketable securities/ Current liabilities

D.RATIO OF INVENTORY TO WORKING CAPITAL:

In order to ascertain that there is no overstocking, the ratio of inventory to working capital
should be calculated. it is worked out as follows;
Ratio of Inventory to Working Capital =Inventory/ Working capital

Working capital is the excess of current assets over current liabilities. increase in
volume of sale a requires increase in size of inventor, but from a sound financial point of view,
inventory should not excess amount of working capital. The desirable ratio is 1:1.

2.STABILITY RATIOS:

These ratios help in ascertaining the long-term solvency of a firm which depends on
firm’s adequate resources to meet its long-term funds requirements, appropriate debt equity
mix to raise long term funds and earning to pay interest and instalment of long-term loans in
time. the following ratios can he calculated for this purpose.

A. FIXED ASSET RATIO:

This ratio explains whether the firm has raised adequate long-term funds to meet its fixed assets
requirements and is calculated as under
Fixed Assets Ratio=Fixed assets/capital employed

This ratio gives an idea as to what part of capital employed has been used in purchasing
the fixed assets for the concern. If the ratio is less than one it is good for ratio is 67.

25
B. CURRENT ASSETS TO FIXED ASSETS:

This ratio is worked out as,

Current assets to fixed assets=current assets /fixed assets

This ratio will differ from industry to industry and, therefore, no standard can be Laid down
in that increase in profit, indicates the. A decrease in the ratio may mean that trading is slack
ratio will or more This differ from industry to industry and, therefore, no standard can
mechanization has been put through. An increase in the ratio may reveal that inventories and
debtors have unduly increased or fixed assets have been intensively used. An increase in the
ratio, accompanied by business is expanding.
C.DEBT EQUITY RATIO:

It measures the extent of equity covering the debt. this ratio is calculated to measure the
relative proportions of outsider’s funds and shareholder’s funds invested in the company. It
calculated as follows;
Debt equity ratio= Long term debts/ (Shareholders funds+ long term debts)

Whether a given debt to equity ratio shows a favourable or unfavourable financial position
of the concern depends on the industry and the pattern of earning. A low ratio is generally viewed
as favourable from long term creditors point of view, because a large margin of protection
provides safety for the creditors.
D.PROPRIETARY RATIO:

A variant of debt to equity ratio is the proprietary ratio which shows the relationship
between shareholders fund and total tangible assets. this ratio is worked out as follows:

Proprietary ratio=Shareholders fund’s/ Total tangible assets

This ratio should be 1:3, one third of the assets minus current liabilities should be
acquired by shareholders fund and the other two third of the assets should be financed by
outsider’s fund.
E. CAPITAL EARNING RATIO:
This ratio establishes the relationship between the fixed interest-bearing securities and
equity shares of company. It is calculated as follows;
Capital earnings ratio=fixed interest-bearing securities/ Equity shareholders fund

VI.LEVERAGE RATIOS:

The leverage ratios explain the extent to which the debt is employed in the capital
structure of the concern. Always concern use debt funds along with equity funds, in order to
maximize the after-tax profits, thereby optimizing earnings available to equity shareholders.
26
 1. OPERATING LEVERAGE:
It occurs when with fixed costs the percentage change in profits due to change in sales
volume is greater than the percentage change in sales volume. it shows the extent of the change
in earnings before interest and tax as a result of change in sales volume.
Operating leverage= Marginal contribution/ Earnings before interest and tax

2. FINANCIAL LEVERAGE:
When a firm procures debt capital to finance its needs, it is said to have financial leverage.
It tells the extent of the change in earning before tax due to change in operating income. It is
calculated with the help of following formula;
Financial leverage= Earnings before interest and tax/ Earning before tax

It may be favourable or un favourable. if the rate of return on investment of firm is higher

than the cost of debt capital, it is said to have favourable financial leverage.

27
 CHAPTER - 4

➢ DATA ANALYSIS AND INTERPRETATION

28
 DATA ANALYSIS AND INTERPRETATION

The principle objectives of this chapter are to examine the working of the SREE
KAMAKSHI ENGINEERING WORKS & SUPPLIES, VISAKHAPATNAM
More specially this chapter which include liquidity, Profitability and solvency ratios

❖ Profitability Ratios
❖ Market Ratios (test)
❖ Coverage Ratios
❖ Turnover Ratios
❖ Financial Ratios
❖ Leverage Ratios

29
 I. PROFITABILITY RATIOS:

1. GROSS PROFIT RATIO:

This ratio tells gross margin on trading and is calculated as under:
Gross profit ratio = (Gross profit/ Net sales) X100
COMPUTATION OF GROSS PROFIT RATIO
(Rs in Lakhs)
GROSS
YEAR PROFIT SALES RATIO

2017-18 9083.45 219510 4.13

2018-19 12091.77 275491 4.38
2019-20 12521.39 269092 4.65
2020-21 13077.21 233248 5.60
2021-22 5958.7 349913 1.70

GROSS PROFIT RATIO

Gross Profit Ratio

400
Thousands

350
300
250
200
150
100
50
0
2017-18 2018-19 2019-20 2020-21 2021-22

GROSS PROFIT SALES RATIO

INTERPRETATION: -

From the above we observe that gross profit is very high in the year 2020- 2021 after that gross
profit is decreased in the year 2021-2022 i.e., 2.08 it indicates that the company following
favourable mark-up policy of the firm.

30
2.OPERATING RATIO

Operating ratio = {(Cost of goods sold + operating expenses)/ Net sales} X100
Here Cost of goods sold=opening stock + purchases + direct expense + manufacturing expenses
– closing stock – gross profit
Operating expenses = administrative expenses + selling and distribution expenses

OPERATING RATIO:

(Rs in Lakhs)

COST OF GOODS SOLD + SALES RATIO

YEAR OPERATING EXP
2017-18 181774.33 219510 82.80
2018-19 206794.6 275491 75.06
2019-20 237001.44 269092 88.07
2020-21 289508.86 233248 124.12
2021-22 286588.28 349913 81.90

OPERATING RATIO

Operating Ratio
400000
350000
300000
250000
200000
150000
100000
50000
0
2017-18 2018-19 2019-20 2020-21 2021-22

COST OF GOODS SOLD + OPERATING EXP SALES RATIO

INTERPRETATION:

From the above we observe that operating ratio is low in the year 2018-19, 2019-20 and
next year it increases. Highest operating ratio we see in the year 2020-2021.Again it is
decreases in current year. Comparing with 2020-2021 remaining are not in better position.
31
 3. EXPENSES RATIOS:

Material consumed ratio= (Material consumed/ Net sales) X100

MATERIAL CONSUMED RATIO:

(Rs in lakhs)

YEAR MATERIAL NET SALES RATIO

CONSUMED
2017-18 7906.82 219510 3.60
2018-19 7089.7 275491 2.57
2019-20 7252.52 269092 2.69
2020-21 8259.81 233248 3.54
2021-22 9270.28 349913 2.64

MATERIAL CONSUMED RATIO:

3.5

2.5

2
RATIO
1.5

0.5

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION:
From the above we can observe the material consumed in stability. The variation of five
year’s is not high. They have little change.

32
 Conversion cost ratio = (Labour expenses + manufacturing expenses)/ Net salesX100

CONVERSION COST RATIO

(Rs in crores)
YEAR
LABOUR EXP + NET SALES RATIO
MATERIAL EXP
2017-18 12906.82 219510 5.87
2018-19 12089.76 275491 4.38
2019-20 13252.52 55269092 4.92
2020-21 14259.81 233248 6.11
2021-22 15270.28 349913 4.36

CONVERSION COST RATIO

RATIO
3

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION:
Conversation cost nothing but labour and manufacturing exp. From the Above five
year’s we can see highest in 2021. In current year it decreases 6.11 to 4.36

33
 Administrative expenses ratio= Administrative expenses/ Net sales*100

ADMINISTRATIVE EXPENSES RATIO:

(Rs in Lakhs)
ADMINISTRATIVE EXP NET SALES
YEAR RATIO

2017-18 4367.65 219510 1.98

2018-19 4378.89 275491 1.58
2019-20 3989.65 269092 1.48
2020-21 4509.32 233248 1.93
2021-22 5087.54 349913 1.45

ADMINISTRATIVE EXPENSES RATIO:

2.5

1.5

RATIO
1

0.5

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION:
From above five year’s we can observe how the reduce the administration exp.
Here we can know the company controlling expenses. By observing the five year’s
ratios.

34
 4.OPERATING PROFIT RATIO:

Operating profit ratio= (Operating profit/ Net sales) X100

Operating profit = net profit + non- operating expenses – non-operating income.
OPERATING PROFIT RATIO:
(Rs in Lakhs)
OPERATING
YEAR NET SALES RATIO
PROFIT
2017-18 6445.56 219510 2.93
2018-19 8503.64 275491 3.08
2019-20 8417.56 269092 3.12
2020-21 8734.71 233248 3.74
2021-22 2416.91 349913 0.69

OPERATING PROFIT RATIO:

3.5

2.5

2
RATIO
1.5

0.5

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION: -
Operating profit indicates the portion remaining out of every rupee worth of
sales after all operating costs and expenses have been met. Higher the ratio is the
better. Here if we observe five year’s we find that 2020-2021 is better than remaining
year’s. Current year the ratio’s is 0.69, here it shows how the company doing the sales.
It’s not better position.

35
NET PROFIT RATIO: -
Net profit ratio= (Net profit after tax/ Net sales) X100
(Rs in Lakhs)

YEAR NET PROFIT NET SALES RATIO

AFTER TAX
2017-18 7218 219510 0.032
2018-19 6029 275491 0.021
2019-20 2637 269092 0.009
2020-21 10664 233248 0.045
2021-22 6383 34991358 0.018

NET PROFIT RATIO:

0.05

0.045

0.04

0.035

0.03

0.025
RATIO
0.02

0.015

0.01

0.005

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION:
The best net profit ratio for APPM is identified in the year 2021. This is highest
among the period under study. The reason could be admissible to the raise in market
price of paper. By the year 2020 the ratio reached to the least during the period under
study. The current year net profit in lower than previous year’s so, firm try to improve
the profit of firm.
36
RETURN ON CAPITAL EMPLOYED:

Return on capital employed= Operating profit/ Capital employed*100

Here, capital employed = equity share capital + preference share capital+
undistributed profit + reserves and surplus+ long term liabilities – fictitious assets –
non-business assets.

(Rs in Lakhs)

CAPITAL
YEAR OPERATING RATIO
EMPLOYED
PROFIT
2017-18 6445.56 28634.2 22.51
2018-19 8503.64 42496.95 20.01
2019-20 8417.56 147936.02 5.69
2020-21 8734.71 43717.2659 19.98
2021-22 2461.91 22159.40 11.11

RETURN ON CAPITAL EMPLOYED RATIO:

25

20

15

RATIO
10

0
2017-18 2018-19 2019-20 2020-21 2021-22

37
INTERPRETATION: -
They capital employed tells about capital how the efficiency is used. Higher capital is favourable.
Above ratio’s 2017-2018 is the better one among five years. and it’s gradually decrease. Current
year it decreases from 19.98 to 11.11 compare with previous year. But seeing this five year’s
company has to improve more.

38
RETURN ON SHAREHOLDER’S FUND:
Return on shareholder’s fund= Net profit after interest and tax/ Shareholder’s fund*100
(Rs in Lakhs)

NET PROFIT AFTEE SHAREHOLDER’S RATIO

YEAR INTEREST AND TAX FUND

2017-18 7218 23948.22 30.14

2018-19 6029 28174.82 21.39
2019-20 2637 28962.36 9.11
2020-21 10664 36186.11 29.46
2021-22 6383 38677.04 16.50

RETURN ON SHARE HOLDER’S FUND RATIO:

35

30

25

20

RATIO
15

10

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION:

The shareholder fund shows the profitability of company. if we observe above five year’s
ratio the 2017 -2018 is the good and better. And it gradually decreases.

Here it shows the company performance is not good. It should rise’s it funds and improve the
share value.

39
RETURN ON TOTAL ASSETS:

Return on total assets= Net profit after tax/ Total assets X 100
RETURN ON TOTAL ASSETS RATIO:
(Rs in Lakhs)

NET PROFIT TOTAL ASSETS RATIO

YEAR AFTER TAX
2017-18 7218 89671.75 8.04

2018-19 6029 5.81

103750.85
2019-20 2637 114010.83 2.31

2020-21 10664 134159.71 7.94

2021-22 6383 154628.19 4.12

RETURN ON TOTAL ASSETS RATIO:

RATIO
4

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION:

Here it shows the invested-on assets are used proper way or no. among this five
year’s 2017-18 is the higher one. The remaining are too less. Current year its ratio is 4.12.
Company has to use their assets in a proper way to achieve more profit’s. but it’ is too bad
position when compare with 2018. So, it should take care on this.

40
 II. MARKET TEST RATIOS:

• PAY OUT RATIO:

This determined as follows;

Pay-out ratio= Dividend per equity share/ Earning per share*100
(Rs in Lakhs)

YEAR DIVIDEND PER E.P.S RATIO

EQUITY SHARE
2017-18 17 47.37 0.35
2018-19 15.9 43.91 0.36
2019-20 9.75 17.32 0.56
2020-21 22.75 73.43 0.30
2021-22 14 51.42 0.27

PAYOUT RATIO:

0.6

0.5

0.4

0.3
RATIO

0.2

0.1

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION: -

From the above five-year ratios, the 2019-2020 is the highest pay-out ratio. Pay-out
is totally based upon the dividend and shareholder. here Company will pay ratio to the
holders. Current year its low compare with remaining four year’s. it has to improve the
earning per share.

41
 III. COVERAGE RATIOS:

1.FIXED INTEREST COVER:

Fixed interest dividend cover= Net profit before interest and tax/ Interest charges

(Rs in Lakhs)

INTEREST
YEAR NET PROFIT BEFORE RATIO
CHARGES
INTEREST AND TAX
2017-18 6445.56 653.65 9.86
2018-19 8503.64 535.65 15.42
2019-20 8417.56 566.71 14.85
2020-21 8734.71 725.94 12.03
2021-22 2461.91 1081.72 2.27

FIXED INTEREST COVER RATIO:

18

16

14

12

10

8 RATIO

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION: -
From the above table interest coverage ratio is decreasing from 12.02 to 2.27
this indicates the firm was pay back outside funds therefore interest charges are
reduced. The standard norm is 6:1 if the ratio is 1:1 than EBIT will be just sufficient
to pay the interest expenses. At present the firm is have capacity to meet the interest
expenses.

42
 IV. TURNOVER RATIOS:

1.SALES TO CAPITAL EMPLOYED RATIO:

Sales to Capital Employed Ratio= Sales/ Capital Employed (Shareholder’s Fund + Long Term
Liabilities)

(Rs in Lakhs)
CAPITAL
RATIO
YEAR SALES EMPLOYED
2017-18 219510 28634.2 7.66
2018-19 275491 42496.95 6.48
2019-20 269092 147936.02 1.81
2020-21 233248 43717.26 5.33
2021-22 349913 22159.40 15.7

CAPITAL EMPLOYED RATIO:

18

16

14

12

10
RATIO
8

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION: -
From the above five year’s 2021-2022 is higher. If the capital employed is high profits will be better.
Here we can see last four years are not better. So, company is increasing their sales to meet high
profit’s.

43
SALES TO FIXED ASSETS RATIO:

Sales to Fixed Assets Ratio= Sales/ Net Fixed Assets (Fixed Assets – Depreciation)

(Rs in Lakhs)

NET FIXED ASSETS RATIO

YEAR SALES
2017-18 219510 38695 5.67
2018-19 275491 41642 6.61
2019-20 269092 48952 5.49
2020-21 233248 50912 4.58
2021-22 349913 58126 6.01

SALES TO FIXED ASSETS RATIO:

RATIO
3

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION: -
From the above the graph represents that the firm reducing and increases the
investment in fixed assets gradually during the period. The reason is the company using
funds towards to meet current obligations.

1. WORKING CAPITAL RATIO;

Working Capital Ratio = Sales/ Net Working Capital (Current Assets – Current Liabilities)
(Rs in Lakhs)
44
 NET WORKING
YEAR SALES CAPITAL RATIO

2017-18 219510 10423 21.06

2018-19 275491 13730 20.06
2019-20 269092 19714 13.6
2020-21 233248 18213 12.81
2021-22 349913 21690 16.13

WORKING CAPITAL RATIO:

25

20

15

RATIO
10

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION: -

Working capital turnover ratio is increased in the current year from 12.81 to 16.13.
This is indicating that the firm used efficient utilization of working Capital to meet its
daily obligations. In the year 2017-2018 the firm has healthy ratio.

45
2. TOTAL ASSETS TURNOVER RATIO:

TOTAL ASSETS TURNOVER RATIO = Net sales/ Total assets

(Rs in Lakhs)

TOTAL ASSETS RATIO

YEAR NET SALES
2017-18 219510 89671.75 2.44
2018-19 275491
103750.85 2.65
2019-20 269092 114010.83 2.36
2020-21 233248 134159.71 1.73
2021-22 349913 154628.19 2.26

TOTAL ASSETS TURNOVER RATIO:

2.5

1.5
RATIO

0.5

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION: -
By observing five year’s total assets turnover ratio is stable. Here the low ratios show reveals ideal
capacity. Current year ratio is 2.26.

46
DEBTORS TURNOVER RATIO:

Debtors turnover ratio= Net credit sales/ Average debtors

(Rs in Lakhs)

AVERAGE RATIO
YEAR NET CREDIT SALES
2017-18 219510 5587.02 39.28
2018-19 275491 5652.64 48.73
2019-20 269092 3922.72 68.5
2020-21 233248 6869.99 33.95
2021-22 349913 6340.31 55.18

DEBTORS TURNOVER RATIO:

80

70

60

50

40
RATIO

30

20

10

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION: -

From the above table it indicates that debtor’s turnover ratio is increase in the current
compare to the previous year and all other years expect 2019-20020, this implies that firm was
decreased the credit sales. The firm ratio at industry level satisfactory.

47
FINANCIAL RATIOS:

LIQUIDITY RATIO:

CURRENT RATIO:

Current ratio= Current assets/ Current liabilities

(Rs in Lakhs)
RATI O
YEAR CURRENT CURRENT LIABILITES
ASSETS
2017-18 37140.96 47564.45 0.78
2018-19 43184.52 56914.57 0.75
2019-20 37292.57 57007.39 0.65
2020-21 44167.08 62380.33 0.70
2021-22 49749.85 71439.57 0.69

CURRENT RATIO:

0.8

0.75

0.7

RATIO
0.65

0.6

0.55
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION: -
As inferred from the table current liabilities have full back up of current assets. The
trend in the ratio is around industry standard. The graph indicates an uptrend towards
the year 2018.But a narrow decline being identified in the year 2020 only. by the year
2020 short term liquidity of the organization is much improved. Even though there is
a slight decrease in the year 2020, liquidity is still healthy. The graph indicates
fluctuations and the range of such fluctuation is very narrow.

48
LIQUID RATIO:

Liquid ratio= Liquid assets/ Current liabilities

LIQUID ASSETS:

Excluding stock and prepaid expenses.

CURRENT LIABILITIES: Cash, Bills payable, outstanding expenses, banker (short term)
provisions.

LIQUID RATIO:
(Rs in Lakhs)

CURRENT LIABILITES RATIO

YEAR LIQUID ASSETS
2017-18 47564.45
20452.43 0.42

2018-19 56914.57
23769.54 0.41

2019-20 57007.39
20985.62 0.36

2020-21 62380.33
31843.98 0.51

2021-22 71439.57
43523.56 0.60

LIQUID RATIO:

0.7

0.6

0.5

0.4
RATIO
0.3

0.2

0.1

0
2017-18 2018-19 2019-20 2020-21 2021-22

49
INTERPRETATION: -
In the case of liquid ration the backup available for current liabilities is
insufficient in all study period. Graph indicates fluctuations in this ratio. In the year
2019-2020 the ratio had high amount of suffering compared to other years. The
recovery in the year 2021 could be maintained in the year 2022. The management must
try to maintain liquid assets back up of at least 0.90p for 1/- of current liabilities.
During the current year 2022 ratio is very high compare to other years.

RATIO OF INVENTORY TO WORKING CAPITAL:

=Inventory/ Working capital

(Rs in Lakhs)

WORKING CAPITAL RATIO

YEAR INVENTORY
2017-18 18612.23 10423 1.78
2018-19 20193.42 13730 1.47
2019-20 19141.19 19714 0.97
2020-21 28763.90 18213 1.57
2021-22 35514.71 21690 1.63

INVENTORY TO WORKING CAPITAL RATIO:

2
1.8
1.6
1.4
1.2
1 RATIO
0.8
0.6
0.4
0.2
0
2017-18 2018-19 2019-20 2020-21 2021-22
INTERPRETATION: -

Remaining are stability and healthy. Working capital is the excess of current assets over
current liabilities. Increase in volume of sale requires increase in size of inventory, but from a sound
financial point of view, inventory should not excess amount of working capital. Current year ratio
is 1.63.

50
STABILITY RATIOS:

FIXED ASSETS RATIO:

= Fixed assets/ Capital employed

CAPITAL EMPLOYED RATIO

YEAR FIXED ASSETS
2017-18 38695 28634.2 1.35
2018-19 41642 42496.95 0.97
2019-20 48952 147936.02 0.33
2020-21 50912 43717.26 1.16
2021-22 58126 22159.4 2.62

FIXED ASSETS RATIO:

2.5

1.5 RATIO
1

0.5

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION: -
The ideal ratio is the 0.67. But here if we observe expect 2020 year all are higher
than the ideal ratio 0.67. current year ratio is 2.26.

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CURRENT ASSETS TO FIXED ASSETS:
(Rs in Lakhs)

FIXED ASSETS RATIO

YEAR CURRENT ASSETS
2017-18 37140.96 38695 0.95
2018-19 43184.52 41642 1.03
2019-20 37292.57 48952 0.76
2020-21 44167.08 50912 0.86
2021-22 49749.85 5812673 0.85

CURRENT ASSETS TO FIXED ASSETS RATIO:

1.2

0.8

0.6
RATIO

0.4

0.2

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION: -

This ratio will differ from industry to industry. From the above ratios 2018-
2019 is higher than reaming year’s. Higher ratio indicates reveal of inventories and debtors,
fixed assets. Least ratio’s indicates trading slack or mechanization.

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 • DEBT EQUITY RATIO:

Debt equity ratio= Long term debts/ Shareholders’ funds

(Rs in crore)
HOLDERS
SHARE
YEAR LONG TERM RATIO
FUND
DEBTS
2017-18 8830.78 23948.22 0.36

2018-19 11317.22 28174.82 0.40

2019-20 22287.17 28962.36 0.76

2020-21 27069.72 36186.11 0.74

2021-22 31226.98 38677.04 0.80

DEBT EQUITY RATIO:

0.9

0.8

0.7

0.6

0.5

0.4 RATIO

0.3

0.2

0.1

0
2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION:

A firm may wish to calculate leverage ratio in terms of the long –term capitalization.
A long –term capitalization will include long term Debt and net worth (shareholder’s
fund). From the above table the ratio increases from 0.74 to 0.80 in the year 2022, the
company increases the long - term debt to it activities.

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 CHAPTER - 5

➢ FINDINGS

➢ SUGGESTIONS

➢ CONCLUSION

➢ BIBLIOGRAPHY

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 FINDINGS
The purpose of this study is to present major findings identified in course of the study and to
give suggestions. That may be with while for further strengthening the financial position of SREE
KAMAKSHI ENGINEERING WORKS & SUPPLIES

1. The SREE KAMAKSHI ENGINEERING WORKS & SUPPLIES is depending a

lot of external sources of finance. They must be control over the loans and they are to be
properly utilizing the loans.
2. There is a research and development wing inside the company to give latest technology
improvement that are relevant to SREE KAMAKSHI ENGINEERING WORKS &
SUPPLIES.

3. The fixed assets ratio was keeps on increasing and was highest in the year 2021-22

4. The net profit ratio was high in the year 2020-21and decreases in the year 2021-22

5. The company current ratio is not satisfactory and liquid ratio is good according to the
theoretical information.

6. In case of operating ratio each year operating cost increases it is not satisfactory to the company

7. The solvency condition of SKEWS corporation limited is good while considering the net worth
ratio or shareholder equity ratio

8. Overall efficiency of the firm is good by considering return on investment ratio.

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 SUGGESTIONS
1. The company current ratio is below standard (General standard 2:1) so that the company
will better to increase this ratio.

2. The company should increase the liquid assets to meet the current liabilities according
to the standard level (1:1)

3. The total debt and equity of the firm increasing. But when compare to the growth of the
Debt Equity debt is higher than the Equity. In future the company may suffer a lot due
to the EBIT of firm decreased.

4. The company should maintain high ratio of working capital turnover for generating
sales.

5. The company should try to maintain the good relations with the creditors because they
providing good credit facilities and duration of pay the amount due to them.

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 CONCLUSION
Ratio analysis is as in-depth analysis, overages the entire financial management with

reference to integrated approach. The SREE KAMAKSHI ENGINEERING WORKS & SUPPLIES

is a company which gives preference to the common man’s privilege. Hence, it is on integrated

approach and a constant measure may be adopted for better managerial performance. Ratio analysis

and its criteria is distinctive work while and commendable technique in postulating the financial

behavior of a business enterprise.

Thus, ratio analysis which is integrated, internal, and intermediate and organization based

financial & analytical measurement the study is always a strategic measurement with reference

in the performance, growth, expansion and modernization of the business.

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 BIBLIOGRAPHY

➢ Financial Management by I.M. PANDEY, 11th Edition, Vikas Publications.

➢ Financial Management by M.Y. KHAN & JAIN, 11th Edition, Tata McGraw-Hill.
➢ Financial Management by Ravi Kishore,12th Edition,Taxmann Publications.
➢ Management Publications by R.S.N PILLAI, S.Chand Publications.

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