INTRODUCTION Financial statements are prepared primarily for decision-making.

They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing between the items of the balance sheet and the profit and loss account. There are various methods or techniques used in analyzing financial statements, such as comparative statements, trend analysis, common-size statements, schedule of changes in working capital, funds flow and cash flow analysis, costvolume-profit analysis and ratio analysis.

1.1. MEANING AND CONCEPT OF FINANCIAL ANALYSIS MEANING The term financial analysis, also known as analysis and interpretation of financial statements, refers to the process of determining financial strength and weaknesses of the firm by establishing strategic relationship between the items Of the balance sheet, profit and loss account and other operative data. Analyzing financial statements, according to Metcalf and Titard, is a process of evaluating the relationship between component parts of a financial statement to obtain a better understanding of a firms position and performance. The purpose of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm. The analysis and interpretation of financial statements is essential to bring out the mystery behind the figures in financial statements. Financial statement analysis is an attempt to determine the significance and meaning of the financial statement data so that forecast may be made of the future earnings, ability to pay interest and debt maturities (both current and long-term) and profitability of a sound dividend policy.

ACCOUNTING PRINCIPLES AND ASSUMPTIONS The accounting data in financial statements are prepared by the firms management according to a set of standards, referred to as generally accepted accounting principles (GAAP). The financial statements of a company whose stock is publicly traded must, by law, be audited at least annually by independent public accountants (i.e., accountants who are not employees of the firm). In such an audit, the accountants examine the financial statements and the data from which these statements are prepared and attestthrough the published auditors opinionthat these statements have been prepared according to GAAP. The auditors opinion focuses on whether the statements conform to GAAP and that there is adequate disclosure of any material change in accounting principles. The financial statements are created using several assumptions that affect how we use and interpret the financial data: Transactions are recorded at historical cost. Therefore, the values shown in the statements are not market or replacement values, but rather reflect the original cost (adjusted for depreciation, in the case of depreciable assets).

The appropriate unit of measurement is the dollar. While this seems logical, the effects of inflation, combined with the practice of recording values at historical cost, may cause problems in using and interpreting these values.

The statements are recorded for predefined periods of time. Generally, statements are produced to cover a chosen fiscal year or quarter, with the income statement and the statement of cash flows spanning a periods time and the balance sheet and statement of shareholders equity as of the end of the specified period. But because the end of the fiscal year is generally chosen to coincide with the low point of activity in the firms operating cycle, the annual balance sheet and statement of shareholders equity may not be representative of values for the year.

 Statements are prepared using accrual accounting and the matching principle. Most businesses use accrual accounting, where income and revenues are matched in timing such that income is recorded in the period in which it is earned and expenses are reported in the period in which they are incurred to generate revenues. The result of the use of accrual accounting is that reported income does not necessarily coincide with cash flows. Because the financial analyst is concerned ultimately with cash flows, he or she often must understand how reported income relates to a companys cash flows.

It is assumed that the business will continue as a going concern. The assumption that the business enterprise will continue indefinitely justifies the appropriateness of using historical costs instead of current market values because these assets are expected to be used up over time instead of sold.

Full disclosure requires providing information beyond the financial statements. The requirement that there be full disclosure means that, in addition to the accounting numbers for such accounting items as revenues, expenses, and assets, narrative and additional numerical disclosures are provided in notes accompanying the financial statements. An analysis of financial statements is therefore not complete without this additional information.

Statements are prepared assuming conservatism. In cases in which more than one interpretation of an event is possible, statements are prepared using the most conservative interpretation. The financial statements and the auditors findings are published in the firms annual and quarterly reports sent to shareholders and the 10K and 10Q filings with the Securities and Exchange Commission (SEC).Also included in the reports, among other items, is a discussion by management, providing an overview of company events. The annual reports are much more detailed and disclose more financial information than the quarterly reports.

1.2. THERE ARE THREE BASIC FINANCIAL STATEMENTS: 1. Balance sheet 2. Income statement 3. Cash Flow statement

THE BALANCE SHEET The balance sheet is a summary of the assets, liabilities, and equity of a business at a particular point in timeusually the end of the firms fiscal year. The balance sheet is also known as the statement of financial condition or the statement of financial position. The values shown for the different accounts on the balance sheet are not purported to reflect current market values; rather, they reflect historical costs. Assets are the resources of the business enterprise, such as plant and equipment that are used to generate future benefits. If a company owns plant and equipment that will be used to produce goods for sale in the future, the company can expect these assets (the plant and equipment) to generate cash inflows in the future. Liabilities are obligations of the business. They represent commitments to creditors in the form of future cash outflows. When a firm borrows, say, by issuing a long-term bond, it becomes obligated to pay interest and principal on this bond as promised. Equity, also called shareholders equity or stockholders equity, reflects ownership. The equity of a firm represents the part of its value that is not owed to creditors and therefore is left over for the owners. In the most basic accounting terms, equity is the difference between what the firms ownsits assetsand what it owes its creditorsits liabilities. ASSETS There are two major categories of assets: current assets and noncurrent assets, where noncurrent assets include plant assets, intangibles, and investments. Assets that do not fit neatly into these categories may be recorded as either other assets, deferred charges, or other noncurrent assets. CURRENT ASSETS

Current assets (also referred to as circulating capital and working assets) are assets that could reasonably be converted into cash within one operating cycle or one year, whichever takes longer. An operating cycle begins when the firm invests cash in the raw materials used to produce its goods or services and ends with the collection of cash for the sale of those same goods or services. Current assets consist of cash, marketable securities, accounts receivable, and inventories. Cash comprises both currencybills and coinsand assets that are immediately transformable into cash, such as deposits in bank accounts. Marketable securities are securities that can be readily sold when cash is needed. Every company needs to have a certain amount of cash to fulfill immediate needs, and any cash in excess of immediate needs is usually invested temporarily in marketable securities. Investments in marketable securities are simply viewed as a short term place to store funds; marketable securities do not include those investments in other companies stock that are intended to be long term. Some financial reports combine cash and marketable securities into one account referred to as cash and cash equivalents or cash and marketable securities. Accounts receivable are amounts due from customers who have purchased the firms goods or services but havent yet paid for them. To encourage sales, many firms allow their customers to buy now and pay later, perhaps at the end of the month or within 30 days of the sale. Accounts receivable therefore represents money that the firm expects to collect soon. Because not all accounts are ultimately collected, the gross amount of accounts receivable is adjusted by an estimate of the uncollectible accounts, the allowance for doubtful accounts, resulting in a net accounts receivable figure. Inventories represent the total value of the firms raw materials, work-inprocess, and finished (but as yet unsold) goods. A manufacturer of toy trucks would likely have plastic and steel on hand as raw materials, work-in-process consisting of truck parts and partly completed trucks, and finished goods consisting of trucks packaged and ready for shipping. There are three basic methods of accounting for inventory, including: FIFO (first in, first out), which assumes that the first items purchased are the first LIFO (last in, first out), which assumes that the last items purchased are the first items Average cost, which assumes that the cost of items sold, is the average of the cost of

items sold, sold, and all items purchased.

The choice of inventory accounting method is significant because it affects values recorded on the balance sheet and the income statement, as well as tax payments and cash flows. Another current asset account that a company may have is prepaid expenses. Prepaid expenses are amounts that have been paid but not as yet consumed. A common example is the case of a company paying insurance premiums for an extended period of time (say, a year), but for which only a portion (say, three months) is applicable to the insurance coverage for the current fiscal year; the remaining insurance that is prepaid as of the end of the year is considered an asset. Prepaid expenses may be reported as part of other current liabilities. Companys investment in current assets depends, in large part, on the industry in which they operate. Noncurrent Assets Noncurrent assets are assets that are not current assets; that is, it is not expected that noncurrent assets can be converted into cash within an operating cycle. Noncurrent assets include physical assets, such as plant and equipment, and nonphysical assets, such as intangibles. Plant assets are the physical assets, such as the equipment, machinery, and buildings, which are used in the operation of the business. We describe a firms current investment in plant assets by using three values: gross plant assets, accumulated depreciation, and net plant assets. Gross plant and equipment, or gross plant assets, is the sum of the original costs of all equipment, buildings, and machinery the firm uses to produce its goods and services. Depreciation, as you will see in the next chapter, is a charge that accounts for the using up of an asset over the length of an accounting period; it is a means for allocating the assets cost over its useful life. Accumulated depreciation is the sum of all the depreciation charges taken so far for all the companys assets. Net plant and equipment, or net plant assets, is the difference between gross plant assets and accumulated depreciation. The net plant and equipment amount is hence the value of the assetshistorical cost less any depreciation- according to the accounting books and is therefore often referred to as the book value of the assets.

Intangible assets are the current value of nonphysical assets that represent long-term investments of the company. Such intangible assets include patents, copyrights, and goodwill. The cost of some intangible assets is amortized (spread out) over the life of the asset. Amortization is akin to depreciation: The assets cost is allocated over the life of the asset; the reported value is the original cost of the asset, less whatever has been amortized. The number of years over which an intangible asset is amortized depends on the particular asset and its perceived useful life. For example, a patent is the exclusive right to produce and sell a particular, uniquely defined good and has a legal life of 17 years, though the useful life of a patentthe period in which it adds value to the company-may be much less than 17 years. Therefore the company may choose to amortize a patents cost over a period less than 17 years. As another example, a copyright is the exclusive right to publish and sell a literary, artistic, or musical composition, and is granted for 50 years beyond the authors life, though its useful life in terms of generating income for the company may be much less than 50 years. More challenging is determining the appropriate amortization period for goodwill. Goodwill was created when one company buys another company at a price that exceeds the acquired companys fair market value of its assets. A company may have additional noncurrent assets, depending on their particular circumstances. A company may have a noncurrent asset referred to as investments, which are assets that are purchased with the intention of holding them for a long term, but which do not generate revenue or are not used to manufacture a product. Examples of investments include equity securities of another company and real estate that is held for speculative purposes. Other noncurrent assets include long term prepaid expenses, arising from prepayment for which a benefit is received over an extended period of time, and deferred tax assets, arising from timing differences between reported income and tax income, whereby reported income exceeds taxable income. Long-term investment in securities of other companies may be recorded at cost or market value, depending on the type of investment; investments held to maturity are recorded at cost, whereas investments held as trading securities or available for sale are recorded at market value. Whether the unrealized gains or losses affect earnings on the income statement depend on whether the securities are deemed trading securities or available for sale LIABILITIES

Liabilities, a firms obligations to its creditors, are made up of current liabilities, longterm liabilities, and deferred taxes. Current Liabilities Current liabilities are obligations that must be paid within one operating cycle or one year, whichever is longer. Current liabilities include: Accounts payable, which are obligations to pay suppliers. They arise from goods and services that have been purchased but not yet paid. Accrued expenses, which are obligations such as wages and salaries payable to the employees of the business, rent, and insurance. Current portion of long-term debt or the current portion of capital leases. Any portion of long-term indebtednessobligations extending beyond one yeardue within the year. Short-term loans from a bank or notes payable within a year. The reliance on short-term liabilities and the type of current liabilities depends, in part, on the industry in which the firm operates. LONG TERM LIABILITIES Long-term liabilities are obligations that must be paid over a period beyond one year. They include notes, bonds, capital lease obligations, and pension obligations. Notes and bonds both represent loans on which the borrower promises to pay interest periodically and to repay the principal amount of the loan. A lease obligates the lesseethe one leasing and using the leased assetto pay specified rental payments for a period of time. Whether the lease obligation is recorded as a liability or is expensed as lease payments made depends on whether the lease is a capital lease or an operating lease. A companys pension and post-retirement benefit obligations may give rise to long-term liabilities. The pension benefits are commitments by the company to pay specific retirement benefits, whereas post-retirement benefits include any other retirement benefit besides pensions, such as health care. Basically, if the fair value of the pension plans assets exceeds the projected benefit obligation (the estimated present value of projected pension costs), the difference is recorded as a long-term asset. If, on the other hand, the plans assets are less

than the projected benefit obligation, the difference is recorded as a long-term liability. In a similar manner, the company may have an asset or a liability corresponding to postretirement benefits. DEFFERED TAXES Along with long-term liabilities, the analyst may encounter another account, deferred taxes. Deferred taxes are taxes that will have to be paid to the federal and state governments based on accounting income, but are not due yet. Deferred taxes arise when different methods of accounting are used for financial statements and for tax purposes. These differences are temporary and are the result of different timing of revenue or expense recognition for financial statement reporting and tax purposes. The deferred tax liability arises when the actual tax liability is less than the tax liability shown for financial reporting purposes (meaning that the firm will be paying the difference in the future), whereas the deferred tax asset, mentioned earlier, arises when the actual tax liability is greater than the tax liability shown for reporting purposes. EQUITY Equity is the owners interest in the company. For a corporation, ownership is represented by common stock and preferred stock. Shareholders equity is also referred to as the book value of equity, since this is the value of equity according to the records in the accounting books. The value of the ownership interest of preferred stock is represented in financial statements as its par value, which is also the dollar value on which dividends are figured. Preferred shareholders equity is the product of the number of preferred shares outstanding and the par value of the stock; it is shown that way on the balance sheet. The remainder of the equity belongs to the common shareholders. It consists of three parts: common stock outstanding (listed at par or at stated value), additional paid-in capital, and retained earnings. The par value of common stock is an arbitrary figure; it has no relation to market value or to dividends paid on common stock. Some stock has no par value, but may have an arbitrary value, or stated value, per share. Nonetheless, the total par value or stated value of all outstanding common shares is usually entitled capital stock or common stock. Then, to inject reality into the equity part of the balance sheet, an entry called additional paid-in capital is added; this is the amount received by the corporation for its common stock in excess of the par or stated value.

There are actually four different labels that can be applied to the number of shares of a corporation on a balance sheet: The number of shares authorized by the shareholders. The number of shares issued and sold by the corporation, which can be less than the number of shares authorized. The number of shares currently outstanding, which can be less than the number of shares issued if the corporation has bought back (repurchased) some of its issued stock. The number of shares of treasury stock, which is stock that the company has repurchased. The outstanding stock is reported in the stock accounts, and adjustments must be made for any treasury stock. The bulk of the equity interest in a company is in its retained earnings. A retained- earnings is the accumulated net income of the company, less any dividends that have not been paid, over the life of the corporation. Retained earnings are not strictly cash and any correspondence to cash is coincidental. Any cash generated by the firm that has not been paid out in dividends has been reinvested in the firms assetsto finance accounts receivable, inventories, equipment, and so forth. THE INCOME STATEMENT An income statement is a summary of the revenues and expenses of a business over a period of time, usually one month, three months, or one year. This statement is also referred to as the profit and loss statement. It shows the results of the firms operating and financing decisions during that time. The operating decisions of the companythose that apply to production and marketing generate sales or revenues and incur the cost of goods sold (also referred to as the cost of sales or the cost of products sold). The difference between sales and cost of goods sold is gross profit. Operating decisions also result in administrative and general expenses, such as advertising fees and office salaries. Deducting these expenses from gross profit leaves operating profit, which is also referred to as earnings before interest and taxes (EBIT), operating income, or operating earnings. Operating decisions take the firm from sales to EBIT on the income statement. The results of financing decisions are reflected in the remainder of the income statement. When interest expenses and taxes, which are both influenced by financing decisions, are

subtracted from EBIT, the result is net income. Net income is, in a sense, the amount available to owners of the firm. If the firm has preferred stock, the preferred stock dividends are deducted from net income to arrive at earnings available to common shareholders. If the firm does not have preferred stock (as is the case with Fictitious and most non fictitious corporations), net income is equivalent to earnings available for common shareholders. The board of directors may then distribute all or part of this as common stock dividends, retaining the remainder to help finance the firm. Companies must report comprehensive income prominently within their financial statements. Comprehensive income is a net income amount that includes all revenues, expenses, gains, and losses items and is based on the idea that all results of the firmwhether operating or none operating should be reflected in the earnings of the company. This is referred to as the all-inclusive income concept. The all-inclusive income concept requires that these items be recognized in the financial statements as part of comprehensive income. It is important to note that net income does not represent the actual cash flow from operations and financing. Rather, it is a summary of operating performance measured over a given time period, using specific accounting procedures. Depending on these accounting procedures, net income may or may not correspond to cash flow. CASH FLOW STATEMENT: It is a statement, which measures inflows and outflows of cash on account of any type of business activity. The cash flow statement also explains reasons for such inflows and outflows of cash so it is a report on a company's cash flow activities, particularly its operating, investing and financing activities.

WHO USES THESE ANALYSES? Financial statements are used and analyzed by a different group of parties, these groups consists of people both inside and outside a business. Generally, these users are: A. Internal Users: are owners, managers, employees and other parties who are directly connected with a company: 1. Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these

statements to provide management with more detailed information. These statements are also used as part of management's report to its stockholders, and it form part of the Annual Report of the company. 2. Employees also need these reports in making collective bargaining agreements with the management, in the case of labour unions or for individuals in discussing their compensation, promotion and rankings. B. External Users: are potential investors, banks, government agencies and other parties who are outside the business but need financial information about the business for numbers of reasons. 1. Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by investors and is prepared by professionals (financial analysts), thus providing them with the basis in making investment decisions. 2. Financial institutions (banks and other lending companies) use them to decide whether to give a company with fresh loans or extend debt securities (such as a long- term bank loan). 3. Government entities (tax authorities) need financial statements to ascertain the propriety and accuracy of taxes and duties paid by a company. 4. Media and the general public are also interested in financial statements of some companies for a variety of reasons.

1.3. FINANCIAL RATIO ANALYSIS Ratio analysis is such a significant technique for financial analysis. It indicates relation of two mathematical expressions and the relationship between two or more things. Financial ratio is a ratio of selected values on an enterprise's financial statement. There are many standard ratios used to evaluate the overall financial condition of a corporation or other organization. Financial ratios are used by managers within a firm, by

current and potential stockholders of a firm, and by a firms creditor. Financial analysts use financial ratios to compare the strengths and weaknesses in various companies. Values used in calculating financial ratios are taken from balance sheet; income statement and the cash flow of company, besides Ratios are always expressed as decimal values, such as 0.10, or the equivalent percent value, such as 10%.

ESSENCE OF RATIO ANALYSIS: Financial ratio analysis helps us to understand how profitable a business is, if it has enough money to pay debts and we can even tell whether its shareholders could be happy or not. Financial ratios allow for comparisons: 1. between companies 2. between industries 3. between different time periods for one company 4. between a single company and its industry average To evaluate the performance of one firm, its current ratios will be compared with its past ratios. When financial ratios over a period of time are compared, it is called time series or trend analysis. It gives an indication of changes and reflects whether the firms financial performance has improved or deteriorated or remained the same over that period of time. It is not the simply changes that has to be determined, but more importantly it must be recognized that why those ratios have changed. Because those changes might be result of changes in the accounting polices without material change in the firms performances. Another method is to compare ratios of one firm with another firm in the same industry at the same point in time. This comparison is known as the cross sectional analysis. It might be more useful to select some competitors which have similar operations and compare their ratios with the firms. This comparison shows the relative financial position and performance of the firm. Since it is so easy to find the financial statements of similar firms through publications or Medias this type of analysis can be performed so easily.

To determine the financial condition and performance of a firm, its ratios may be compared with average ratios of the industry to which the firm belongs. This method is known as the industry analysis that helps to ascertain the financial standing and capability of the firm in the industry to which it belongs. Industry ratios are important standards in view of the fact that each industry has its own characteristics, which influence the financial and operating relationships. But there are certain practical difficulties for this method. First finding average ratios for the industries is such a headache and difficult. Second, industries include companies of weak and strong so the averages include them also. Sometimes spread may be so wide that the average may be little utility. Third, the average may be meaningless and the comparison not possible if the firms with in the same industry widely differ in their accounting policies and practices. However if it can be standardized and extremely strong and extremely weak firms be eliminated then the industry ratios will be very useful.

WHAT DOES RATIO ANALYSIS TELL US? After such a discussion and mentioning that these ratios are one of the most important tools that is used in finance and that almost every business does and calculate these ratios, it is logical to express that how come these calculations are of no importance. What are the points that those ratios put light on them? And how can these numbers help us in performing the task of management? The answer to these questions is: We can use ratio analysis to tell us whether the business 1. is profitable 2. Has enough money to pay its bills and debts 3. Could be paying its employees higher wages, remuneration or so on 4. is able to pay its taxes 5. Is using its assets efficiently or not 6. has a gearing problem or everything is fine 7. Is a candidate for being bought by another company or investor? But as it is obvious there are many different aspects that these ratios can demonstrate. So for using them first we have to decide what we want to know, then we can decide which ratios we need and then we must begin to calculate them.

WHICH RATIO FOR WHOM:

As before mentioned there are varieties of people interested to know and read these information and analyses, however different people for different needs. And it is because each of these groups has different type of questions that could be answered by a specific number and ratio. Therefore we can say there are different ratios for different groups, these groups with the ratio that suits them is listed below: 1. Investors: These are people who already have shares in the business or they are willing to be part of it. So they need to determine whether they should buy shares in the business, hold on to the shares they already have or sell the shares they already own. They also want to assess the ability of the business to pay dividends. As a result the Return on Capital Employed Ratio is the one for this group. 2. Lenders: This group consists of people who have given loans to the company so they want to be sure that their loans and also the interests will be paid and on the due time. Gearing Ratios will suit this group. 3. Managers: Managers might need segmental and total information to see how they fit into the overall picture of the company which they are ruling. And Profitability Ratios can show them what they need to know. 4. Employees: The employees are always concerned about the ability of the business to provide remuneration, retirement benefits and employment opportunities for them, therefore these information must be find out from the stability and profitability of their employers who are responsible to provide the employees their need. Return on Capital Employed Ratio is the measurement that can help them. 5. Suppliers and other trade creditors: Businesses supplying goods and materials to other businesses will definitely read their accounts to see that they don't have problems; after all, any supplier wants to know if his customers are going to pay them back and they will study the Liquidity Ratio of the companies. 6. Customers: are interested to know the Profitability Ratio of the business with which they are going to have a long term involvement and are dependent on the continuance of presence of that. 7. Governments and their agencies: are concerned with the allocation of resources and, the activities of businesses. To regulate the activities of them, determine taxation policies and as the basis for national income and similar statistics, they calculate the Profitability Ratio of businesses.

8. Local community: Financial statements may assist the public by providing information about the trends and recent developments in the prosperity of the business and the range of its activities as they affect their area so they are interested in lots of ratios. 9. Financial analysts: they need to know various matters, for example, the accounting concepts employed for inventories, depreciation, bad debts and so on. Therefore they are interested in possibly all the ratios. 10. Researchers: researchers' demands cover a very wide range of lines of enquiry ranging from detailed statistical analysis of the income statement and balance sheet data extending over many years to the qualitative analysis of the wording of the statements depending on their nature of research.

1.4. CLASSIFICATION OF RATIOS Financial ratios are categorized according to the financial aspect of the business which the ratio measures. Although these categories are not fixed in all over the world however there are almost the same, just with different names: 1. Profitability ratios which use margin analysis and show the return on sales and capital employed. 2. Rate of Return Ratio (ROR) or Overall Profitability Ratio: The rate of return ratios are thought to be the most important ratios by some accountants and analysts. One reason why the rate of return ratios is so important is that they are the ratios that we use to tell if the managing director is doing their job properly. 3. Liquidity ratios measure the availability of cash to pay debt, which give a picture of a company's short term financial situation. 4. Solvency or Gearing ratios measures the percentage of capital employed that is financed by debt and long term finance. The higher the gearing, the higher the dependence on borrowing and long term financing. The lower the gearing ratio, the higher the dependence on equity financing. Traditionally, the higher the level of gearing, the higher the level of financial risk due to the increase volatility of profits. It should be noted that the term Leverage is used in some texts. 5. Turn over Ratios or activity group ratios indicate efficiency of organization to various kinds of assets by converting them to the form of sales. 6. Investors ratios usually interested by investors

2.1 INTRODUCTION The research design adopted for this study is Exploratory research design. An exploratory study is generally based on the secondary data that are readily available. Some persons hold the view that all small studies are exploratory in nature, which is not true. The fact is that exploratory study uses a different approach to the problem then the conclusively study. It is not the size of the report that is important, but the type research design that is relevant. A basic limitation of the tradition financial performance comprising the balance sheet and the profit and loss account is that they do not give all the information related to the financial operations of a firm. Nevertheless, they provide some extremely useful information to the extent that balance sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owners equity, and so on the profit and loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the cost incurred during the year.

PROFILE OF TOURISM INDUSTRY

3.1. INTRODUCTION

Travel is as old as mankind. It has been a dynamic force, and the most decisive factor, in social, cultural, spiritual and artistic development of society right from the beginning contributing to its gradual integration. Since the earliest time man has traveled in search of food, shelter and the satisfaction of his requirement. Travel is primarily related to trade, the desire for military conquest or the performance of group rites. Travel along the trade routes largely undertaken by group and caravan, was a difficult and even perilous undertaking in ancient times. The journey by roads or in so far as voyages were concerned, to ports led to various kind of creative activity which produced wealth directly and indirectly because service were set up to cater to travelers need. Such services constitute a factor of local economic development because they stimulated agriculture besides art and craft and benefited the local population by creating a variety of jobs. The cultural and commercial contacts between people of different countries, exchange of ideas and commercial of various forms of civilization brought mankind progress and improved living condition and the quality of life.

TOURISM IN 21ST CENTUARY: During the past decade the tourism industry flourished even as its struggled to cope with difficult situation. Global travel will continue to grow rapidly for at least 20 years. Worldwide international arrivals are from 66 million in 1991 to estimate 700 million in 2000, 1 billion by 2010 and 1.6 billion by 2020. Improving balance of trade means more business for European and Asian tourists destination. Europe will remain the strongest for tourism, with arrival growth holding between 3 %and 4% annually. In the world tourism depends on economic development and opens free societies. The source of data on international tourism is provided by world tourism organization. The data using drawn from the government stores also permit some analysis of the main generators of international tourism demands. The word tourism is related to tour which is derived from Latin word Toruns. It means a tool for describing a circle or turners wheel. This is a word of compass or rather a pay at the end of a stretched string use to describe a circle. It is from this word tornos that the notion of a round tour or a package tour has come which has very much the essence

of tourism. It was as late as 1643 that the term was first used in the sense of going round or travelling from. Tourism in one of the most vibrant and diversify industry which is woven tighter with many other sectors or industries. It gives a feeling of dynamism and development. Tourism not only enable the people to know the places but also gives the varied information or knowledge about a particular place, their tradition, culture and also about its different other aspects. Tourism is not a modern concept but it has route from many ages.

THE NEW DEFINITION OF TOURISM Tourism essentially is an expression of natural human instinct for experience, adventure, leisure, educational, entertainment and others. Thus the definition according to Austrian Economist, Herman. Schullard defined in 1910 for tourism as the sum total of operation mainly of an economic nature which directly relate to the entry. Stay movement of foreigners inside and outside of certain country, city or region. Tourism The New Definition Tourism is defined as the activity of persons travelling to and staying in places outside their usual environment for not more than once consecutive year, for leisure, business and other purpose. The definition incorporates the following three basic criteria. The distance criterion that the person has traveled to a place outside his usual environment.

DETERMINATIONS OF TOURISM Psychological factors: Tourism an essentially an activity to meet the psychological needs of human beings though for business tourist satisfy the business needs may be main motivation. Psychological needs are not only the motivational factors but also determinate of choice of destination and tourist activities. A person desirous of having complete relation may choose a destination, which he believes to be capable of providing such an experience.

 Social factor: Tourism is a social phenomenon of the modern society. Visiting centers of worship at distant places has been a part of Indian traditional centuries as a result, pilgrim tourism is a major component of Indian domestic tourism social factors are also important determinants of inbound tourism as an affable society which treats the tourist valued guests and ensure their security and safety can attract tourist from other regions and countries.

Cultural factor: Each society has its own cultural heritage manifested in the form of arts and crafts, music and dances, painting and frescoes, archeological remains and monuments, etc. regions which rich cultural heritage have been places of tourist interest. India is also primarily a cultural tourist destination though efforts are being made, both by the Government and industry, to project its other tourist attraction like mountain and beach resorts, adventure tourism facilities, wildlife, ecological resources, Ayurveda and other natural health resorts, etc. over the year The Taj Mahal at Agra, Ajanta and Elloras caves and Khajuraho temples have attracted large number of tourists, both from within the country as well as from overseas. Similarly, the palaces and forts of Rajasthan, temples of Tamil Nadu and Orissa, festivals and fair of Kulu, Puskar, Goa, etc., are great tourist attractions in India.

TYPES OF TOURISM: ECO TOURISM: Eco tourism is entirely a new approach in tourism. Eco tourism is a preserving travel to natural areas to appreciate the cultural and natural history of environment, taking care not to disturb the integrity of ecosystem while creating the economic opportunities that makes conservation and protection of natural resources advantages to the local people. In short, ecotourism can categorized as tourism program that is Nature based, ecological sustained where education and interpretation is major constituent and where local people are benefited. Eco tourism is derived from two words Ecosystem & Tourism. Together it is made Eco tourism.

 MEDICAL TOURISM: Going for health purpose like to take spa treatment in mineral water to improve the health and medicinal bath it is good for drinking, spa massage it improves health.

SPIRITUAL PURPOSE: Mysore is called as the city of Palaces as a result of the number of palaces situated in the city, some of them are: The original main palace of Mysore was burnt down in 1897 and the present day structure was built over the same site. The present day Palace exhibits a mixture of architectural style from Dravidian, Indo-Saracenic, Roman and Oriental. Even though the government of Karnataka now maintains the Mysore palace.

BUSINESS TOURISM: Person who travels for business and meeting purpose officially called as Business tourism.

PILIGRIMAGE TOURISM: People who travel pilgrimage purpose like especially old people like yatra, to Dharmastala, Tirupathi, Kaashi, Rameshvaram etc.

I.

LIQUIDITY RATIO

4.6. Current ratio This ratio is commonly used to perform the short term financial analysis. This ratio matches the current assets of the firm to its current liabilities. It throws good light on the short term financial position and policy. It is an indicator of a firms ability to promptly meet its short term liabilities. A relatively high current ratio indicates that the firm is liquid and has the ability to meet its current liabilities. On the other hands, a relatively low current ratio indicates that the firm will find it difficult to pay its bills.

PARTICULAR 2005 - 2006 CURRENT 514141 ASSETS CURRENT LIABILITIES RATIO 311683 1.649564

2006 2007 487622 228942 2.129893

2007 - 2008 477254 225340 2.117929

2008-2009 377595 279458 1.351169

2009-2010 327933 225994 1.451069

From the above table we can know that the current assets as constantly decreased from 514141 in 2005 2006 to 327933 in 2009 2010 And the current liabilities as decreased from 311683 in 2005 2006 to 228942 in 2006 2007 and further reduced to 225340 in 2007-2008 but in got increased to 279458 in the year 2008-2009 but again got decreased to 225994 in the year 2009-2010.

From the above chart it is clear that the ratio has increased from 1.649564 in the year 2006 2007 to 2.129893 in the year 2006-2007. And again it has constantly decreased from 2.117929 in the year 2007 2008 to 1.351169 in 2008-2009 this shows that the company is not able to meet its current liabilities in this year effectively. The reduction in the ratio in the year 2008 2009 may have created difficulty in payment of bills. But in the year 2009-2010 the ratio as increased to 1.451069.

4.7. ABSOLUTE LIQUID RATIO This is also known as super quick ratio or cash ratio. In calculating this ratio, both inventories and receivables are deducted from current assets to arrive at absolute liquid assets such as cash and easily marketable investments in securities. Higher the ratio, the higher is the cash liquidity. A low ratio is not a serious matter because the company can always borrow from banks for short term requirements.

PARTICULAR 2005 2006 CASH IN 806859.62

2006 - 2007 886845.11

2007 - 2008 920409.83

2008-2009 874454.86

2009-2010 1289566.37

HAND AT BANK. 107216436.39 1.CURRENT ACCOUNT 2.FIXED DEPOSIT CURRENT LIABILITIES RATIOS 359055498.00 311682999.47 1.498570

7984271.75

9862683.83

19456834.68

14376613.03

434987241.91 228942050.28 1.938738

391996508.39 225340172.11 1.787429

247998244.16 279458442.97 0.960177

241673370.7 225994180.9 1.138699

From the table we can know that the cash in hand and as increased from 806859.62 during the year 2005 2006 to1289566.37 during the year 2009 2010. And the current liabilities as decreased from 311682999.47 during the year 2005 2006 to 225994180.9 during the year 2009 2010

II.

SOLVENCY OR GREAING RATIO

4.8. DEBT EQUITY RATIO = LONG TERM DEBTS

SHARE HOLDERS FUNDS.

This ratio attempts to measure the relationship between long term debts and shareholders funds. In other words this ratio measures the relative claim of long term creditors and the one hand and owners and the other hand, on the assets of the company.

PARTICULARS 2005 - 2006 LONG TERMS 45140333.70 LOANS SHARE HOLDER FUNDS TOTAL 0.160258 281673476.97

2006 - 2007 71698521.47 341402366.11

2007 - 2008 249840706.96 374648854.39

2008-2009 130658268.1 411851828.51

2009-2010 140854892.95 491007332.45

0.210012

0.666866

0.317246

0.286869

From the table we can know that the long term loans as increased from 45140333.70 to 71698521.47 and increased to 249840706.96 in the year 2007 2008 and decreased to 130658268.1 and again increased to 140854892.95 during the year 2009 2010. But the shareholder funds as increased every year from 281673476.97 during 2005 2006 to 491007332.45 during the year 2009 2010.

4.9. PROPRIETARY RATIO

This is a variant of debt equity ratio. It measures the relationship between shareholders funds and total assets. Proprietary ratio shows the extent to which shareholders own the business and thus indicates the general financial strength of the business. The higher the proprietary ratio the greater the long term stability of the company and consequently greater protection to creditors. However, a very high proprietary ratio may not necessarily be good because if funds of outsider are not used for long term financing, a firm may not be able to take advantage of trading on equity.

PARTICULAR 2005 - 2006 SHARE 281673 HOLDERS FUNDS TOTAL ASSETS RATIOS 638496 0.441151

2006 2007 341402

2007 - 2008 374649

2008-2009 411852

2009-2010 491007

642043 0.531743

849829 0.440852

821969 0.501055

857856 0.572365

This table indicates that the shareholder fund has increased from 281673 during the year 2005 2006 to 491007 in the year 2009 2010. And the total assets also increased from 638496 during the year 2005 2006 to 857856 in the year 2009 2010.

From the graph we can know that the ratio as increased from 0.441151 to 0.531743 which shows to what extent the shareholders have hold on the company and the financial strength of the company . But the ratio has decreased to 0.440852 in the year 2007 2008. And again increased to 0.572365 in the year 2009-2010

4.10 .INTEREST COVERAGE RATIO This ratio indicates whether the business earns sufficient profit to pay periodically the interest charges. This ratio also indicates the extent to which the profits of the company may decrease without in any way affecting its ability to meet its interest obligations. The standard for this ratio an industrial company is that interest charges should be covered six to seven times.

PARTICULAR EBIT INTREST CHARGES TOTAL

2005 - 2006 42896380.76 2418638.00 17.735759

2006 -2007 54219401.3 1768697.00 30.654997

2007 - 2008 46887034.97 2541170.00 18.450964

2008-2009 56354132.52 1894186.00 29.751108

2009-2010 33995674.14 4638452.62 7.3290981

From the table we can know that the EBIT as increased from 42896380.76 to 54219401.3 but it has decreased to 33995674.14 in the 2009-2010 and interest charges as also increased from 124168638 to 4638452.62 in the year 2009 2010.

From the above graph we can know that the company is highly affected by its interest burden due to its debt expenses. The company has to maximize its EBIT or minimize its debt level in order to maintain a cushion in its interest coverage as if has its ratio just more than 1 in the current situation which increases the bankruptcy risk of the company.

III.

TURNOVER RATIO

4.11. FIXED ASSETS TURN OVER RATIO This ratio indicates the efficiency with which the firm is utilizing its investments in fixed assets plant and machinery, land and building etc. the term net fixed assets means depreciated value of fixed assets. Here the high ratio indicates efficient utilization of fixed assets in generating sales and a low ratio may signify that the firm has an excessive investment assets.

PARTICULAR 2005 - 2006 SALES 177613598.5 NET FIXED 43666790.1 ASSETS TOTAL 4.067475

2006 - 2007 195378761.3 60158886.9 3.247712

2007 - 2008 217119671.7 65286187.92 3.325660

2008-2009 320152911.20 118451574.49 2.702817

2009-2010 326910212.23 120714377.34 2.708130

From the table we can know that the sales of the company as increased from 177613598.56 during the year 2005 20046 to 326910212.23 in 2009 2010. And the investment on net fixed assets as increased from 43666790.16 in the year 2005 2006 to 120714377.34 in 2009 2010.

The fixed asset turnover considers only the investment in property, plant, and equipment and is extremely important for a manufacturing company with heavy investment in long-lived assets. In the year 2005 2006 the company has increased or invested more on the fixed assets and it as reduced to 3.32566 in the year 2007 2008. This indicates that the company as reduced its investment on fixed assets. And further reduced to 2.70813 in the year 20092010

4.12. CURRENT ASSET TURNOVER RATIO It is almost like the fixed asset turnover ratio, it calculates the capability of organization to earn sales with usage of current assets. So it indicates with what ratio current assets are turned over in the form of sales

Current asset turnover ratio

PARTICULAR 2005 - 2006 SALES 177613598.5 CURRENT 514140646.4 ASSET TOTAL 0.345457

2006 - 2007 195378761.3 487622279.5 0.400676

2007 - 2008 217119671.7 477254071.6 0.454935

2008-2009 320152911.2 377594839.9 0.847874

2009-2010 326910242.23 327932505.24 0.996882

From the above table we can know that the sales as increased from 177613598.58 during the year 2005 2006 to 326910242.23 in the year 2009 2010. The current asset has decreased from 514140646.48 to 477254071.69 during the year 2007 2008 But the current assets as further reduced from 327932525.24 in the year 2009-2010.

From the above chart we can know that the rate of investment on current assets as increased to 0.34547 in the year 2005 2006 but then it as again increased to 0.400676 and 0.454935 during the year 2007 2008 it may be due to increase in the investment on new projects. and further increased to 0.99 in the year 2009-2010.

4.13. WORKING CAPITAL TURN OVER RATIO This ratio indicates the efficiency or inefficiency in the utilization of working capital in making sales. A high working capital turnover ratio shows the efficient utilization working capital in generating sales. A low ratio, on the other hand, may indicate excess of net working capital. This ratio thus shows whether working capital is efficiently utilized or not. This ratio is considered better than stock turnover ratio because it shows the utilization of the entire working capital whereas stock turnover ratio indicates only the turnover of inventories which is only a part of the working capital.

PARTICULAR 2005 2006 SALES 177613598.3 NET 202457647.0 WORKING CAPITAL TOTAL 0.877288

2006 - 2007 195378761.3 258680229.2

2007 - 2008 217119671.7 251913899.5

2008-2009 320152911.2 98136396.99

2009-2010 326910242.23 101938324.34

0.755291

0.861880

3.262324

3.206941

From the above table we can know that the sales as increased from 177613598.36 to 326910242.23 i.e. from 2005-2006 to 2009-2010. On the other hand net working capital as increased from 202457647.01 to 101938324.34 in the year 2009 2010.

From the above graph we can know that the working capital ratio as decreased from 0.877288 during the 2005 2006 to 0.755291 in the year 2006 2007 which clearly shows that the low ratio indicates excess of net working capital and the working capital is not efficiently utilized by the company. But it increased to 3.206941 in the year 2009-2010 which indicates that the

company has utilized its working capital efficiently compared to previous year (2008-2009) where the ratio was 3.262324.

4.14. CAPITAL EMPLOYED TURNOVER RATIO The capital employed turnover ratio tells us the state of the relationship between the shareholders' investment in the business and the sales that the management of the business has been able to generate from it. Capital employed can be expressed in different terms, all generally refer to the investment required for a business to function. By "employing capital" you are making an investment. So, capital employed indicated the long term funds supplied by creditors and owners of the firms. So it can be computed as:

Capital Employed = share capital + Long term liabilities + reserve and surpluses

PARTICULAR 2005 - 2006 NET SALES 177613598.5 CAPITAL 246124437. EMPLOYED TOTAL 0.721641

2006 - 2007 195378761.3 323966417.1 0.603083

2007 - 2008 217119671.7 312072786.4 0.695725

2008-2009 320152911.2 411851828.5 0.777349

2009-2010 326910212.23 491007332.45 0.665795

From the above table we can know that the sales as increased from 177613598.58 during the year 2005 2006 to 326910242.23 in the year 2009 2010. And the capital employed as increased from 246124437.2 during the year 2005 2006 to 323966417.18 in the year 2006 2007. But in the year 2007 2008 it reduced to 312072786.48 an further it got increased to 491007332.45 in the year 2009-2010.

This ratio shows the efficiency of the firm with which the capital employed is being utilized. A high ratio is a sign of capability of firm to earn maximum sales with minimum amount of capital employed by the firm 2005 -2006 but gradually it started to reduce to 10% in the year 2009-2010 it is due to current economic slowdown prevailing in the country as well as in the world

IV.

PROFITABILITY RATIO

4.15. GROSS PROFIT RATIO This ratio expresses the relationship between gross profit and sales. This ratio indicates the average margin on the goods sold. It shows whether the selling prices are adequate or not. It also indicates the extent to which selling prices may be reduced without resulting in losses.

PARTICULAR GROSS PROFIT NET SALES TOTAL

2005 - 2006 39162725.5 177613598.5 22.05

2006 2007 20026466.2 165378761.3 10.25

2007 - 2008 17404911.0 217119671.7 8.02

2008-2009 (25083499.0) 320152911.2 0.078

2009-2010 (40022141.7) 326910242.2 0.12

From the above table we can know that the gross profit as decreased from39162725.55 to17404911.03 during the year 2005 2006, 2007-2008 respectively. But in the year 2008 2009 the company as occurred loss of (25083499.04) and further to (40022141.70) in 2009 2010. The net sales as increased from 177613598.56 during the year 2005 2006 to 326910242.23 in the year 2009 2010.

The Gross Profit Margin ratio shows the profits related to sales after the direct production costs are deducted. It can be used as an indicator of the efficiency of the operation and the relation between operating costs and selling price. The gross profit margin ratio for KSTDC over the years shows an unhealthy margin. Except for the year 2005 - 2006 which showed some increase in the gross profit margin the ratios were not so good enough and showed above industry trends.

4.16. NET PROFIT RATIO The net ratio is the overall measure of a firms ability to turn each rupee of sales into profit. It indicates the efficiency with which a business is managed. A firm with a high net profit is in an advantageous position to survive in the face of rising cost of production and falling selling prices. Where the net profit ratio is low, the firm will find it difficult to withstand these types of adverse conditions. Comparison of net profit with other firms in the same industry or with the previous year will indicate the scope for improvement. This will enable the firm to maximize its efficiency.

PARTICULAR 2005 2006 NET PROFIT/ 26176484.7 LOSS NET SALES TOTAL 177613598.5 14.737883

2006 2007 11864101.6 165378761.3 6.072360

2007 - 2008 9910189.4 217119671.7 4.564390

2008-2009 (19081695.1) 320152911.2 (0.059602)

2009-2010 (55238538.9) 326910242.2 (0.168971)

From the above table we can know that the net profit as decreased from 26176484.76 to in the year 2007 2008 but it has occurred loss of 19081695.14 in the year 2008-2009 further loss of 55238538.90 in the year 2009 2010. And the net sales as increased from 177613598.56 during the year 2005 2006 to 326910242.23 in the year 2009 2010

From the above table we can know that the net profit ratio as decreased from 14.74% to 6.07% in the year 2006 2007 but it gradually decreased to 4.56% in the year 2007 2008 and further decreased to 0.17% in the year 2009-2010 .which shows that the company is finding difficult to withstand the adverse conditions like increase in the price of operation of tours etc.

V.

ROR RATIOS

4.17. RETURN ON EQUITY This ratio also known as return on shareholders funds or return on proprietors funds or return on net worth indicates the percentage of net profit available for equity shareholders to equity shareholders funds and not on total capital employed. It shows the ratio of net profit to owners equity.

PARTICULAR 2005- 2006 PROFIT AFTER 26176 TAX SHAREHOLDERS 281673 FUNDS TOTAL 9.29

2006- 2007 11864 341402 3.48

2007- 2008 9910 374649 2.64

2008-2009 491007 (19082) 25.7341422

2009-2010 411852 (55239) 7.45539

From the above table we can know that the profit after tax as decreased from 26176 to 9910 in the year 2008 2009 but it has increased to 491007 in 2009 2010 and further decreased to 411852 in the year 2009 2010. And the shareholders funds as increased from 281673 during the year 2005 2006 to 374649 in the year 2007 2008. From this we can know that the shareholders funds or investment on shares as increased. But it reduced to (55239) during the year 2009-2010.

From the above chart we can know that the ROE ratio as increased from 9.29 to 3.48 during the year 2005 2006, 2006 2007 respectively. But the ratio has decrease to 2.64 during the following years. This indicates that the company is not able to pay more to its shareholders or the profit of shareholders as decreased and this may lead to disinterest of public towards the company and which may lead to reduction in the investment from the public towards the companys shares. But in the year 2008-2009 the ROE was 25.73 but gain decreased to 7.46 in the year 2009-2010

4.18. RETURN ON ASSET RATIO This ratio actually measures the profitability of the investments in the firm

PARTICULAR PROFIT/LOSS AFTER TAX TOTAL ASSEST TOTAL

2005- 2006 26176 638496 4.09

2006 2007 11864 642043 1.85

2007- 2008 9910 849829 1.17

2008-2009 (19082) 821969 (2.32)

2009-2010 (555239) 857856 (64.72)

From the above table we can know that the net profit as decreased from 26176484.76 in the year 2005 2006 to but it 9910189.48 in the year 2007 2008 further it started occurring loss from the year 2008-2009 . The PBIT as increased from 42896380.76 during the year 2005 2006 to 54219401.3i n the year 2006 2007. And then it as further reduced to 46688703.97 in the year 2007 2008.but in the year 2008-2009 it got increased to 56354132.52 which was recorded highest when compared to last 3 years but again it reduced to 33995674.12 in 2009-2010 which was the lowest record when compared to last 4years.

This table reveals that in the case of KSTDC it has a very low ratio over the last 3 years as it has a very high interest charges to be paid on its debt. This reduces the companys earnings available to the shareholders and also it impacts the companys retained earnings also. And we can also know that the company had highest rate in the year 2005 2006 when compared with other years. But the highest rate was recorded in the year 2009-2010 i.e. 1.62 when compared to last 4 years.

4.19. RETURN ON INVESTMENT OR RETURN ON CAPITAL EMPLOYED This is the most important test of profitability of a business. It measures the overall profitability. It is ascertained by comparing profit earned and capital or funds employed to earn it.

PARTICULAR 2005 - 2006 PBIT 4289380.7 CAPITAL 246124437.2 EMPLOYED TOTAL 17.428737

2006 - 2007 54219401.3 323966417.1 16.736118

2007 - 2008 46887031.9 312072786.4 15.024391

2008-2009 56354132.52 411851828.5 13.683108

2009-2010 33995674.14 491007332.45 6.923659

From the above table we can know that the PBIT as increased from 4289380.76 to 54219401.3 in 2006 2007 and decreased to 46887031.97 in the year 2007 2008but in the year 2008-2009 the PBIT got increased to 56354132.52. And the capital employed as increased from 246124437.2 during the year 2005 2006 to 323966417.18 in the year 2006 2007. But in the year 2007 2008 it reduced to 312072786.48 an further it got increased to 491007332.45 in the year 2009-2010.

From the above chart we can know that the company had good profit in the year 2005 2006. But the profit or ROI ratio as gradually reduced to 21% to 10% during the year 2007-2008 and 2009 2010, respectively. This may be due to the investment on golden project in the year 2006 2007.

4.20. CURRENT ASSET / TOTAL ASSET

PARTICULAR 2005 - 2006

2006 - 2007

2007 - 2008

2008-2009

2009-2010

CURRENT ASSET TOTAL ASSET TOTAL

514141 638496

477254 642043

487622 849829

377595 821969

327933 857856

0.805238

0.743336

0.573788

0.459379

0.382270

From the above table we can know that the current assets as decreased from 514141 to 327933 in the year 2005 2006 to 2009-2010. The total assets as increased from 638496 during the year 2005 2006 to 849829 in the year 2006 2007. But it decreased to 821969 in the year 2008 2009 and again increased to 587856 during the year 2009-2010.

The current asset and total asset turnover are two approaches to assessing managements effectiveness in generating sales from investments in assets. The current asset considers only the investment on stock debtors etc...

The total asset measures the efficiency of managing a companys entire asset. Generally, the higher these ratios, the smaller are the investment required to generate sales and thus the more profitable is the company. For KSTDC a decrease in the ratio is observed in the year 2006 which implies that the companys investment in assets is too heavy as the sales figure has not gone down. This decline in the ratio is due to increase in fixed assets and total assets as the result of investment on the Golden chariot project. But in the year 2007-2008 there was increase in the ratio to 0.759485 but again it decreased to 0.382270 in the year 2009-2010

FINDINGS: 1. The decrease in the asset turnover ratio indicates that the management of assets in the company is not good 2. The decline in the asset turnover ratio is due to increase in fixed assets and total assets as the result of investment on the Golden chariot project. 3. The debt equity ratio is less than 1Re. which implies that the company is protected by the creditors. 4. The company has a comparatively higher borrowed fund to its internal fund. This may be due to the lack of any improvement in its retained earnings of the company. 5. In case of KSTDC the ROI as decreased which indicates that the earning power of the company is reduced. 6. In the case of KSTDC interest coverage ratio has reduced it shows that the company as a high interest charges to be paid on its debt when compared with the last year. 7. The company is not able to pay more to its shareholders as the profit on shareholders as decreased and return on equity as also decreased. 8. As there is decrease in the return of equity this may lead to disinterest of public towards the company and which may lead to reduction in the investment from the public towards the companys shares.

9. The decreased in the repayment of debts indicates that the companys retained earnings are also been affected. 10. The decrease in the gross profit also indicates that the company has the lower cost and is a sign of good management. 11. There is a decrease in the net profit ratio which indicates that company is finding difficult to withstand the adverse conditions like increase in the price of operation of tours etc 12. The increase in the debt equity ratio indicates that the company is meeting its fixed obligation properly and there is no problem to the company. 13. The increase in debt equity ratio indicates that the claims of the creditors are greater than those of the owner. 14. The company has the very high interest charges to be paid on their debt which in turn reduces the companys earnings available to the shareholders. 15. The net profit ratio of the company is less which indicates that the scope for improvement of the company is less. This will also decrease the firm to maximize its efficiency. 16. The companys current ratio is more than one and it is enough to meet the current liability. 17. The low net profit of the company will find it difficult to withstand the adverse conditions like rising cost of production and falling selling price. 18. The working capital turnover ratio of the company has increased when compared with the previous which in turn shows that the company is utilizing its working capital efficiently. 19. The companys proprietary ratio as decreased when compared with the last year which indicates that the general financial stability of the company as reduced. 20. The companys Absolute liquid ratio as decreased which indicates that the liquidity of cash in the company is less or it is reduced.

21. The reduction in the current ratio indicates that the company may find difficulty in paying its bills.