Contents 1

Chapter No. Description Page No. Chapter I Introduction Industry profile Company profile 1-2 3-5 6 - 10 11 - 13 Chapter II Research Methodology Need for the study Objectives of the study Sources of data Scope & Limitations of the study Chapter III Chapter IV Data Analysis and Interpretation Findings & Suggestions Conclusion Annexure Bibl iography 14 54 55 56 57 58 59 60 2

INTRODUCTION Financial Management is that managerial activity which is concerned 3

with the planning and controlling of the firms finance. Finance is one of the fou ndations of all kinds of economic activities. Finance is the life-blood of a bus iness. The financial management study deals with the process of procuring necess ary financial resource and their judicious use with a view to maximizing the val ue of the firm and there by the value of the owners i.e. equity share holders in a company. Practicing managers are interest in this subject because among the m ost crucial decisions of the firm are those which relate to finance, and an unde rstanding of the theory of financial management provides them with conceptual an d analytical insights to make those decisions skillfully. FINANCIAL MANAGEMENT Financial Management emerged as a distinct field of study at the turn of this ce ntury many eminent persons defined it in the following ways. DEFINITIONS: According the BONNEVILE AND DEWEY: Financing consists in the rising, providing and managing of all the money, capital or funds of any kind to be use d in connection with the business. According to Prof.EZRA SOLOMAN:Financial Manage ment is concerned with the efficient use of any important economic resource, namely capi tal funds. FINANCE FUNCTIONS: It may be difficult to separate the finance functions from pr oduction, marketing and other functions, but the functions themselves can be rea dily 4

identified. The functions of raising funds investing them in assets and distributing returns earned from assets to shareholders are respectively known a s. 1. Long term assets-mix (or) Investment Decision 2. Capital Mix (or) Financin g Decision 3. Profit allocation (or) Dividend Decision 4. Short term asset Mix (o r) Liquidity Decision GOALS OF FINANCIAL MANAGEMENT: Maximize the value of the firm to its equity share holders. Maximization of profit Maximization of earnings per share. Maximization of return on equity (defined as equity earnings/net worth) Maintenance of liqui d assets in the firm. Ensuring maximum operational efficiency through planning d irecting and controlling of the utilization of the funds. Building up of adequat e reserves for financing growth and expansion. INDUSTRY PROFILE Sugarcane is one of the important crops for the Indian Farmer. Sugar and Jiggery are the main products that we get from sugarcane. Sugarcane 5

belongs to the genus SACCHARAM. The word Sugar is derived from the Sanskrit word SHARKARAM from which the word SACCHARAM seems to have been derived indicates th e antiquity of knowledge of sugarcane in India. Sugar Industry is the second lar gest agro-based industry in India, next to textiles, producing an all time recor d of 186.22 lakh tones of direct plantation sugar as on 30th Arial, 2003. It has emerged as the largest vacuum pan sugar producer in the world. Sugarcane is gro wn in about 102 countries in the world and India occupies the first rank from th e point of area followed by Brazil and Cuba. Andhra Pradesh occupies the fifth p lace with regard to cane and cane production in the country. There are around 49 0 sugar mills across the country with an aggregate installed capacity of 16.2 million tones. The history of sugar industry in India begins in 1903 when a sugar factory was set up in Bih ar and U.P each. In 1932 there were 32 factories operating in the country. In In dia, the cultivation of sugarcane is 10,000 miles tones. The average yield being 56 tones per acre of total cultivating land is occupied by sugarcane cultivatio n. Sugarcane is grown in almost all part of India, except in colder regions and extreme North Jammu& Kashmir, Himachal Pradesh. The industry has developed at a fast rate in Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu. In India U.P leads other States in Sugarcane production, followed by T.N and Maharashtra. Su gar comes under the Essential Commodities Act. Ipso facto, there has been contro l on all facets of the sugar trade. The licensing regime that regulates the inst alled capacity, the minimum support price for cane, the 6

reservation of can area for mills and the control over price and movement of sug ar as well its byproduct molasses, have all triggered a situation totally out of sync with market realities. The Central Government will allot monthly sales sug ar quota for each factory based on the stock available in the concerned factory Godown. The Central Government removed the controls imposed under the Essential Commodities Act, 1955 on stocking and movement and requiring licensing of dealer s in respect of specified commodities with effect from 14th March, 2002 vide gov ernment of Indias Notification No. GSR 104(E), dated 15th February, 2002. With th e coming into effect of the above order any dealer may freely by, stock, sell, t ransport, distribute, dispose, acquire, use or consume any quantity of wheat, pa ddy/rice, coarse grains, sugar, edible oil seeds and edible oil and shall not re quire a permit or license therefore under any order issued under the Essential C ommodities Act, 1955. Area wise distribution of sugar industry in A.P. S.No 1 Sector Co-operative No. of Industries 18 Costal Area 12 Rayalaseem a 4 Telangana 2 7

2 3 Public sector Private sector Total 7 11 36 1 8 21 1 2 7 5 1 8 The list of Co-operative Sugar factories in A.P. 1. The Chittoor Co-operative su gars ltd, Chittoor. 2. The Chodavaram Co-operative sugars ltd, Chodavaram. 3. The Anakapalle Co-oper ative sugars ltd, Anakapalle. 4. The Etikuppaka Co-operative agricultural of ind ustrial society ltd, Ethikuppaka. 5. Sir Vijayarama Gajapathi Co-operative sugar s ltd. 6. The Amadavalasa Co-operative agricultural industrial society ltd, Srik akulam. 7. The West Godavari Co-operative sugars ltd, Eluru. 8. Palakollu Co-ope rative agricultural & industrial society ltd, Palakollu. 9. The Thandara Co-oper ative sugars ltd, Visakapatnam. 10. Nizamabad Co-operative sugars ltd, Nizamabad . 11. Sir Venkateswara Cooperative sugars ltd, Renigunta. 12. The Cuddapah Co-op erative sugars ltd, Chennur. 13. The Nandyal Co-operative sugars ltd, Ponnapuram . 14. The Kovur Co-operative sugars ltd, Nellore. 15. Nagarjuna Co-operative sug ars mills ltd, Gurzala. 16. Nampaneni Venkata Rao Co-operative sugars ltd, Hanum an Junction. 17. Sri Hanuman Co-operative sugars ltd, Hanuman Junction. 18. Pala ir Co-operative sugars ltd, Ammagudem. 8

COMPANY PROFILE INTRODUCTION: The Chittoor Co-operative Sugars Limited, Chittoor is the first ag robased major Industry in Rayalaseema area. 22.08.1955 under the APCS Act. It wa s first registered on Its area of operation comprises of 192 villages in 21 Mandals. Factory is located along Cudalore - Kurnool National Hig h way No 18, 3 KM towards Kurnool from Chittoor town. It owns 85.96 acres of land. It was first commissioned on 18.1.1963 with a licensed and instal led capacity of 1000 tones cane crushing per a day. During 1974 its cane crushin g capacity has been expanded to 1600 tones a day. Since 1989 modernization is be ing done in phases. Presently factory is working at an average cane crushing of 1800-2000 tones a day. Capital Structure: Original project cost was RS.128.50 lakhs. Present value of t he Assets as on 31.3.2000 Rs.lakhs a) Land b) Buildings c) Plant & Machinery d) Other Assets e) Transport Vehicles f) Total 497.19 423.85 1155.70 34.73 19.94 21 31.41 9

Management: At present the elected board has assumed charge on 06.04.2000. The p resent board of Directors as detailed below: President Board of Directors Employ ees Director Total 1 14 1 16 Chief Executive & Functioning of various Departments: a) Chief executive of the society is Managing Director having a seat on the Board. b) There are five major departments: 1. Administrative 2. Engineering 3. Manufacturing 4. Agriculture 5 . Accounts & finance c) All aspects of Accounting, sugar cane weighment and labo ratory analysis reports are computerized during 1989-90. For better cane regulat ion, wireless System was also introduced during 1989. At all 8 division Head Qua rters and at Administrative Office Wireless Stations and sets are installed. d) All policy matter is decided by Board/person-in-charge. 10

Cane price: Before commencement of sugar cane crushing season, Government of Ind ia notifies statutory minimum cane price payable by each sugar factory. This is to be paid with in 14 days from the date of purchases. Over and above the statut ory minimum cane price state Government announces a State advisory price payable by each Sugar Factory. This SAP is being paid by us. We have crushed cane for t he season 1999-2000 is 2, 82,202,592 Mts with an average recovery 9.03%. Sugar: Out of total sugar production of each season, 30% shall be delivered to G overnment nominees for public distribution system at notified levy price. For ev ery season Government of India Notifies levy sugar price applicable to each Suga r Factory. Every month. Open market sugar is sold on tender system and is delive red against payment of cost plus duties. Molasses: Molasses is a by product in the courses of manufacture of sugar. From 1993 June molasses prices are decontrolled. Molasses is sold by inviting tenders on All India basis by publishing Tender notice. Engineering & Manufacturing Departments: During off season engineering and manuf acturing departments attend to overhauling and preventive maintenance and keep r eady the plant for Cane Crushing. During season factory works round the Clock in three shifts. 11

Cane Department:Cane department is provided with sufficient executive staff. The y collect cane supply offers, from cane growers. Offers are being accepted restric ting the quantities to individual members 5 years supply average. Crop loans ar e sanctioned by Banks under tie up arrangements with factory. One month before c ommencement of Cane crushing, prepares maturity survey is conducted by drawing c ane samples from agreement Cane fields. They are analyzed in Factorys laboratory. Based on the analysis, cane harvest & supply permits are issued to cane supply members limiting to factories daily cane crushing capacity. Factory provides abo ut 60 to 80 hired Lorries to needy growers. 50% of transport charges up to 40km distance are subsidized by factory. Transport charges beyond 40 km are subsidize d 100%. Liaison Farm: Factory is having a sugar cane liaison farm in an extent 4.80 Hec. Factory brings improved varieties from sugar Cane research stations multiplies in its liaison farm and supplies seed to growers. Total Strength of the Establishment:1. Permanent (Non Seasonal) 2. Seasonal Perm anent 3. Consolidate Wages (Seasonal) 4. Daily Wager (NMR) 5. Total 68 94 167 24 4 573 12

Wage Structure: The Wages of workers are covered by "Sugar Wage Board" recommend ations at All India level". The minimum monthly wage of an unskilled worker at starting of timescale is Rs.3901/-.Sugar year (season) is re corded from 1st Oct to 30th Sep next year. Generally cane crushing operations are commenced during 3rd week of November and continued up to end of April next year. From May to October is off-season. 13

14

RESEARCH METHODOLOGY NEED OF THE STUDY Financial statements are prepared for the purpose of presenting a periodical rev iew or report by the management and deal with the state of investment in busines s and result achieved during the period under review. They reflect a combination of recorded facts, accounting conventions and personal judgments. The Ratio Ana lysis is the most powerful tool of the financial analysis. These people use rati ons to determine those financial characteristics of the firm in which they are i nterested. With the help of ratios, one can determine: 1. The ability of the fir m to meet its current obligations. 2. The extent to which the firm has used its along-term solvency by borrowing funds. 3. The efficiency with which the firm is utilizing its assets ingenerating sales revenue. 4. The overall operating efficiency and performance of the firm. OBJECTIVES OF THE STUDY The following are the objectives of the study: To assess the liquidity and profi tability of CCS Ltd. To study financial position of the CCSL Ltd. To analyses th e turn over efficiency of The CCS Ltd. To know the impact of liquidity solvency and turnover efficiency on the shareholders of The CCS Ltd. To suggest feasible solution to improve the overall efficiency of The 15

CCS Ltd. SOURCES OF DATA Primary Data The primary data was collected mainly with the interactions and discussions with the companys executives. Secondary Data Most of the calculations are made on the financial statements of the company and the company provided financial statements for 5 years. Some of the information regarding to the theoretical aspects were collected by referring standards texts and through internet. SCOPE OF THE STUDY This project is as a reference guide or as a source of information. It gives the idea about the financial analysis of a firm. The study aims to study the liquid ity position of the firm. Ratio Analysis has been used to analyses the financial position of a firm. It deals with analysis an interpretation of data collected through the sources primary and secondary data. Graphs and diagrams and tabulation method are used to analyze and interpret the data collected. LIMITATIONS OF THE STUDY The information used is primarily from historical reports available to the 16

public and the same doesnt indicate the current situation of the firm. Detailed a nalysis could not be carried for the project work because of the limited time sp an. Since financial matters are sensitive in nature these same could not be acqu ired easily. 17

RATIO ANALYSIS Ratio Analysis is one of the powerful tools of the financial analysis. A ratio c an be defined as The indicated quotient of two mathematical expressions and as the relationship between two or more things. Ratio is 18

thus, the numerical or an arithmetical relationship between two figures. Ratio is , thus, the numerical or an arithmetical relationship between two figures. It is expressed where on figure is divided by another. In finance analysis ratio is u sed as a benchmark of a firm. A ratio is the relationship between two accounting items expressed mathematically. Ratio analysis helps the analyst to make quanti tative judgment with regard to concerns financial position and performance. This relatio nship can be expressed as a percentage or as quotient. Ratio analysis is the sys tematic use of ratio to interpret the financial statements so that the strengths and weakness of a firm as well as its historical performance and current financ ial position can be determined. Undisputedly the ratio analysis occupies place o f prime importance. DEFINITION:According to Prof. Spring field, Prof. Mass & Merrium, a ratio is def ined as The indicated quotient of two mathematical impression and as The relationsh ip between two (or) more things SIGNIFICANCE OF RATIO ANALYSIS Ratio analysis is of great help of commercial bankers, trade creditors and insti tutional lenders. They judge the ability of borrowing enterprises by observing v arious ratios like the current ratio, acid test ratio, and turnover of 19

receivables, inventory turnover, and coverage of interest by the level of earnin gs. Ratio analysis also helps long term creditors in knowing the ability of a bo rrowing 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. Inv estors 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 sha re, dividends per share etc. Lastly, ratio analysis is of great use of the manag ement of the firm. Management of the firm is interested in every aspect of ratio analysis as it is their over all responsibility to see that the resources of th e firm are used most efficiently and effectively and that the firms financial co nditions is sound. STANDARDS FOR COMPARISON For making a proper use of ratios, it is essential to have fixed standard for co mparison. A ratio by itself has very little meaning unless it is compared to som e appropriate standard. Selection of proper standards of comparison is a most im portant element is ratio analysis. The four most common standard used in ratio a nalysis are as follows: 1. Absolute 3. Horizontal 2. Historical 4. Budgeted 1. Absolute: Absolute standards are those, which become generally recognized as being desirable regardless of the type of the company, the time, stage of busine ss cycle, or the objectives of the analyst. 20

2. Historical: Historical standards involve comparing a companys own past perform ance as a standard for the present or future. But this standard may not provide sound basis for judgment, as the historical figure a may not have represented an acceptable standard. 3. Horizontal: Incase of horizontal standards one company is compared with anoth er or with average of other companies of the same nature. It is also called as i ntra-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 budget to examine the degree of accomplishment to the anti cipated targets of the firms. ADVANTAGES OF RATIO ANALYSIS 1. It facilitate inter firm comparison. It reveals how well it serves. As a usef ul aid in financial forecasting future trends can be known in advance based on r atios relating to part sales, profits and financial position. 2. It facilitates comparative study of the performance and, progress of a firm over a period of ye ars. Such a study will reveal the directions in which the firm is moving. 3. It serves as a useful tool for cost control. It reveals now efficiently a 21

firm is managed and how effectively its assets are utilized. It serves as a mean s of communication to report on the strength and financial standing of a firm to the management and external parties. It facilitates trend analysis. It reveals the progress or decline of a firm over the years. It serves as diagnostic too to assess the financial health of a firm. It through light on its liquidity, solve ncy, profitability and capital gearing position. OBJECTIVES OF RATIO ANALYSIS Ratio Analysis is the principal tool for analysis of financial statements. Other conducts it not only by management but also like suppliers, banks tending, and institutions, prospective investors etc. The following are usually the objective s for which ratio analysis is conducted. I. II. III. IV. To evaluate financial p osition and performance of a firm. To indicate the trend or progress or down fal l of a firm. To assess the credit worthiness of a firm, To assess the efficiency with which working capital is being used in a firm. LIMITATIONS OF RATIO ANALYSIS Standards for Comparison Ratios of a company have meaning only when they are compared with some standards and it is always a challenging job to find and adequate 22

standard. Company Differences Situations of two companies are never same. Similarly the factors influencing the performance of a company in one year change in another year. Thu s, the comparison of the ratios of two companies becomes difficult and meaning l ess when are operating in different situations. Price Level Challenges The interpretation and comparison of the ratios are also rendered invalid by the changing value of money; a change in the price level can seriously affect the v alidity of comparison of ratios computed for different time periods. A STUDY OF RATIO ANALYSIS Several ratios, calculated from the accounting date, can be grouped into various classes according to financial activity or function to be evaluated. Ratios are complied and studied for profitabilitys, assessment of financial position suffic iency of working capital strategies perused by the organization short term and l ong term solvency. Liquidity etc TYPES OF RATIOS Classification according to nature of accounting statements is divided into thre e categories there are: 23

1. Balance sheet Ratios 2. Profit and Loss A/C Ratios 3. Combined Ratios 24

1. Balance sheet Ratios: These ratios are calculated to judge the financial posi tion of the concern from long-term as well as short-term solvency point of view. These ratios can be divided into two broad categories. A. Liquidity Ratios: If it is decided to study the liquidity position of the con cerns, in order to highlight the relative strength of the concerns in meeting th eir current obligations to maintain sound liquidity and to pin point the difficu lties if any in it, then liquidity ratios are calculated. These ratios are used to measure the firms ability to meet short-term obligations. The important liquid ity ratios are: CURRENT RATIO:This is the most widely used ratio. It is the ratio of current ass ets to current liabilities. It shows a firms ability to cover its current liabili ties with its current assets. This is also known as Working Capital Ratio. It is expressed as follows: 25

Current Assets Current Ratio = Current Liabilities Generally current ratio of 2:1 is considered ideal for a concern i.e., Current A ssets should be twice of the Current Liabilities. TABLE 4.1 Year Wise Total Curr ent Assets and Current Liabilities of The CCSL Ltd., Chittoor. YEAR 2002-2003 20 03-2004 2004-2005 2005-2006 2006-2007 CURRENT ASSETS 28,77,42,756 17,58,61,331 2 0,80,30,364 38,19,73,121 37,30,29,183 CURRENT LIABILITIES 18,91,05,178 14,23,09, 387 14,87,32,016 18,96,05,315 27,31,27,341 RATIO IN % 1.52 1.20 1.40 2.00 1.40 (Source: Annual Reports of the CCSL) 26

RATIOS 2.5 2 1.5 1 0.5 0 2003 2004 2005 2006 2007 2006-07 2005-06 2004-05 2003-04 200203 YEARS INTERPRETATION: Current ratio measures the firms short-term solvency. The standar d norm for current ratio is (2:1). It is evident that in the year 2005-06 Curren t Ratio 2.00 is satisfactory. In remaining years current ratio is less then 2 is not satisfactory. There fore it can be calculated that the liquidity performanc e of the company is poor. QUICK RATIO: It shows a firms ability to met current Liabilities with its most li quid (quick) Assets. Liquid Assets are those assets, which are readily converted 27

into cash. This is also known as Liquid Ratio and Acid Test Ratio. It is calcula ted as under; LiquidRatio = Liquid Assets CurrentLiabilities TABLE 4.2 Year Wise Liquid Assets and Current Liabilities of The CCSL Ltd., Chit toor. YEAR LIQUID ASSETS CURRENT LIABILITIES RATIO IN % 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 6,80,79,952 7,90,11,591 9,79,87,205 7,66,08,657 9,34,86,511 18,91,05,178 14,23,09,387 14,87,32,016 18,96,05,315 27,31,27,341 0.36 0.55 0.66 0.40 0.34 (Source: Annual Reports of the CCSL) 28

YEARS RATIOS 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2003 2004 2005 2006 2007 2006-07 2005-06 2004-05 2 003-04 2002-03 INTERPRETATION: This is the more penetrating test of liquidity than the current ratio. Generally a quick ratio is 1:1 it considered to represent a satisfactory current financial condition. The quick ratio has never exceeded the standard rat io. Empirically the quick ratio has increased from 0.36 to 0.66 in 2002-03 to 20 04-05 and declined from 0.40 to 0.34 in 2005-06 to 2006-07. Therefore it can be concluded the liquidity performance of the company is absolutely poor. CASH RATIO: Cash is most liquid Asset, a financial analyst may examine cash rati o and its equivalent to current liabilities. Trade investment or marketable 29

securities are equivalent of cash; therefore, they may be included in the comput ation of cash ratio. This Ratio also known as Absolute and Super Quick Ratio. SecuritiesCashRatio = CashandBank Balance + Short termmarketable CurrentLiabilities TABLE 4.3 Year Wise Cash and Bank Balance plus short term securities and Current Liabilities of The CCSL Ltd., Chittoor. RATIO YEAR 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 CASH AND BANK 53,79 ,219 1,59,03,765 2,00,18,969 73,90,813 1,79,39,018 CURRENT LIABILITIES IN % 18,9 1,05,178 1,23,09,387 14,87,32,016 18,96,05,315 27,31,27,341 0.028 0.11 0.13 0.03 0.06 (Source: Annual Reports of the CCSL) 30

YEARS RATIOS 0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 2003 2004 2005 2006 2007 2006-07 2005-06 200 4-05 2003-04 2002-03 INTERPRETATION: The desirable norm for cash ratio is 1:2. The cash ratio is very low in 2002-03, 2005-06 and 2006-07 years. There after it is increased slightly that is 0.028, 0.11 and 0.13 on the years 2002-03 to 2004-05 respectively and d eclined in 2005-06 to 0.03 then increases in 2006-07 to 0.06. Anyway finally the company failed in keeping sufficient cash and bank balance and marketable secur ities. B. CAPITAL STRUCTURE RATIOS: These ratios help in ascertaining the long term sol vency of a firm which depends on firms adequate resources. To meet its long term funds 31

requirements, appropriate debt equity mix to raise long term and earnings to pay interest and installment of long term loans in time. The following ratios can b e calculated for this purpose: DEBT EQUITY RATIO: This ratio is calculated to me asure the relative proportions of outsiders funds and shareholders funds invested in the company. This ratio is determined to ascertain the soundness of long-term financial policies of the com pany and is also known as external equity ratio. follows. Term liabilities + Cur rent Liabilities Total Debt Ratio = Equity Debt to equity Ratio of 2:1 in case o f (i) and 2:3 in cases (ii) are acceptable. TABLE 4.6 Year Wise Fixed Assets and Capital Employed of The CCSL Ltd., Chittoor. YEAR 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 LONG TERM DEBTS 26,44,52,746 25,26,34,919 29,52,27,768 43,5 3,64,852 44,09,04,310 SHAREHOLDERS FUNDS 36,03,55,888 36,96,88,184 38,90,49,404 39,30,37,111 39,81,47,818 RATIO IN % 0.73 0.68 0.76 1.10 1.10 It is calculated a s (Source: Annual Reports of the CCSL) 32

RATIOS 1.2 1 0.8 0.6 0.4 0.2 0 2006-07 2005-06 2004-05 2003-04 2002-03 YEARS 2003 2004 2005 2006 2007 INTERPRETATION: This ratio gives results relating to the capital structure of th e firm. 2:3 is the acceptable Debt Equity Ratio. Empirically the debt equity rat io declined only in the year of 2003-04 (0.68) remaining that all years were inc reased from 0.78 to 1.10. Therefore 1.10 means lenders have financed of CCSL Cap ital Employed in 2006-07. PROPRIETORY RATIO: A variant of debt to equity ratio is the proprietary ratio, w hich shows the relationship between shareholders funds and total tangible assets . It focuses the attention on the general financial strength of the business ent erprise. This ratio is worked out as follows: 33

Shareholders Funds Proprietary Ratio = Total tangible Assets TABLE 4.7 Year Wise Shareholders funds and Tangible Assets of The CCSL Ltd., Chi ttoor. YEAR SHAREHOLDERS FUNDS 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 36,03,55,888 36,96,88,184 38,90,49,404 39,30,37,111 39,81,47,818 TOTAL TANGIBLE ASSETS 44,71,78,755 33,48,90,237 35,26,39,909 53,78,62,810 51,71,71,520 RATIO I N % 0.80 1.19 1.10 0.73 0.76 (Source: Annual Reports of the CCSL) 34

RATIOS 1.2 1 0.8 0.6 0.4 0.2 0 2006-07 2005-06 2004-05 2003-04 2002-03 YEARS 2003 2004 2005 2006 2007 INTERPRETATION:The proprietary ratio is variant of Debt Equity ratio. The standa rd norm for proprietary Ratio is 1:3. The shareholder funds are high then compar e to total tangible assets. Empirically in the years 2003-04 and 2004-05 it is v ery high that is 1.19 and 1.10. Therefore the company having a poor proprietary ratio. 2) PROFITABILITY RATIO: Profitability is the overall measure of the companies wi th regard to efficient and effective utilization of resources at their command. 35

A company should earn profits to survive and grow over a long period of time. Pr ofitability reflects the final result of business operation of the business, to be able to funds from investors and for expansion and growth and to contribute toward social overheads for the welfare of the society. GROSS PROFIT RATIO: The gross profit should be adequate to cover fixed expenses dividends an d building up of reserves. Higher the ratio, the better it is. A low ratio indic ates unfavorable trend in the form of reduction in selling prices. This ratio te lls gross margin on trading and is calculated as under: GrossPr ofitRatio = GrossPr ofit 100 Net Sales TABLE 4.25 Year Wise Gross Profit and Net Sales of The CCSL Ltd., Chittoor. RATI O IN % -0.186 -0.191 -0.07 0.399 -0.098 YEAR 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 GROSS PROFIT -3,76,45,558 -2,50,57,043 -53,23,482 4,96,30,153 -3,64,74,371 NET SALES 20,14,86,573 13,05,17,437 6,99,20,394 12,40,87,187 36,88,53,567 (Source: Annual Reports of the CCSL) 36

RATIOS 0.4 0.3 0.2 0.1 0 -0.1 -0.2 2006-07 2005-06 2004-05 2003-04 2002-03 YEARS 2003 2004 2005 2006 2007 INTERPRETATION: It expresses the relationship of gross profit on sales. A high g ross profit ratio indicates a sign of good management as it implies that the cos t of production is kept at low level. The GP Ratio seems negative balance accept the year 2006-07 of 39.9. The CCSL is maintaining poor grass profit ratio. 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 ope rating 37

expenses (i.e., Administration, Selling and Distribution Expenses) which have ma tching relationship with sales. It is calculated as Follows: OperatingRatio = Cost of GoodsSold + OperatingExpenses 100 Net Sales TABLE 4.26 Year Wise Cost of Goods Sold, Operating Expenses and Net Sales of The CCSL Ltd., Chittoor. COST OF GOODS SOLD + OPERATING EXP., 180854056 43149294 126380237 297 068848 399471811 RATIO NET SALES IN % 201486573 130517437 69920394 124087187 368 853567 0.897 0.330 1.807 2.394 1.083 YEAR 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 (Source: Annual Reports of the CCSL) 38

RATIOS 2.5 2 1.5 1 0.5 0 2006-07 2005-06 2004-05 2003-04 2002-03 YEARS 2003 2004 2005 2006 2007 INTERPRETATION: The lower ratio is better then higher the ratio, the less favour able it is because it would have a smaller margin of operating profit for the pa yment of dividends and the creation of reserves. The above table shows in the ye ar 2005-06 is high operating ratio 239.4. The less operating ratio was recorded in 2003-04 33. Therefore the poor performance of CCSL in Operating Ratio. 3) COMBINED RATIOS: NET WORKING CAPITAL RATIO: 39

The difference between Current Assets and Current Liabilities excluding short-te rm bank borrowing in called Net Working Capital or Net Current Assets. Net Worki ng Capital is some times used as a measure of a firms Liquidity. Net WorkingCapit al Net Assets Net WorkingCapitalRatio = TABLE 4.5 Year Wise Net Working Capital and Net Assets of The CCSL Ltd., Chittoor. YEAR 20 02-2003 2003-2004 2004-2005 2005-2006 2006-2007 NET WORKING CAPITAL 9,86,37,579 3,35,51,944 5,92,98,349 19,23,69,866 9,99,01,841 RATIO NET ASSETS IN % 62,48,08, 634 6,22,32,103 68,42,77,172 82,84,01,963 83,53,54,221 0.158 0.54 0.86 0.23 0.20 (Source: Annual Reports of the CCSL) 40

RATIOS 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2003 2004 2005 2006 2007 2006-07 2005-06 2 004-05 2003-04 2002-03 YEARS INTERPRETATION: The Net Working Capital Ratio declined from 0.86 in 2004-05 to 0 .12 in 2006-07 and increased 0.16 in 2002-03 to 0.86 in 2006-07. The company has not sufficient working capital. The lowest ratio in the year 2006-07 is 0.20 an d the highest ratio in the year 2004-05 is 0.86. FIXED ASSETS TURNOVER RATIO: It measures the efficiency of the Assets use. The e fficient use of assets will generate greater sales per rupee invested in all the Assets of a 41

concern. This ratio shows how well the fixed assets are being used to generate sales in the business. The ratio expresses the number of times fixed as sets are being turnover in a stated period. It is calculated as under: Sales Net Fixed Assets Fixed Assets Turnover Ratio = TABLE 4.11 Year Wise Sales and Net Fixed Assets of The CCSL Ltd., Chittoor. RATI O YEAR 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 SALES 20,14,86,573 13,0 5,17,437 6,99,20,394 12,40,87,187 36,88,53,567 NET FIXED ASSETS IN % 22,21,36,73 2 22,21,36,732 22,25,77,781 22,51,07,533 23,58,34,849 0.91 0.59 0.31 0.55 1.56 (Source: Annual Reports of the CCSL) 42

RATIOS 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2003 2004 2005 2006 2007 2006-07 2005-06 2004-05 2003-04 2002-03 YEARS INTERPRETATION: This ratio measures the efficiency of the assets use. The high r atio is the better performance. On the other hand, a low ratio indicates that fi xed assets are not being efficiently utilized. Therefore the CCSL did not utiliz e well. Only in the years 2002-03 and 2006-07 utilized the fixed Assets effectually. TOTAL ASSETS TURNOVER RATIO: This ratio is calculated by dividing the net sales by the value of total assets. A higher ratio is an indicator of over-trading of total assets while a low 43

reveals idle capacitor. The traditional standard for the ratio is two times. Net Sales Total Assets Total Assets Turnover Ratio = TABLE 4.12 Year Wise Net Sales and Total Assets of The CCSL Ltd., Chittoor. RATIO YEAR 2002 -2003 2003-2004 2004-2005 2005-2006 2006-2007 SALES 20,14,86,573 13,05,17,437 6, 99,20,394 12,40,87,187 36,88,53,567 TOTAL ASSETS IN % 51,46,60,808 40,27,85,783 43,59,05,864 60,98,74,373 61,16,60,751 0.39 0.32 0.16 0.20 0.60 (Source: Annual Reports of the CCSL) 44

RATIOS 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2006-07 2005-06 2004-05 2003-04 2002-03 YEARS 2003 2004 2005 2006 2007 INTERPRETATION: The traditional standard for the ratio is two times. In the year 2006-07 got the higher total Assets Turnover ratio 0.60 on other hand lower rat io got in the year 2004-05 of 0.16. Therefore the CCSL indicates idle capacity o f total Assets. CURRENT ASSETS TURNOVER RATIO: By calculating this ratio we can that, for genera ting a sale of one rupee 45

we can know how much they company invested in current assets. Current Assets Turnover Ratio = Sales Current Assets TABLE 4.13 Year Wise Sales and Current Assets of The CCSL Ltd., Chittoor. RATIO YEAR 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 SALES 20,14,86,573 13,05, 17,437 6,99,20,394 12,40,87,187 36,88,53,567 CURRENT ASSETS IN % 28,77,42,756 17 ,58,61,331 20,80,30,364 38,19,73,121 37,30,29,183 0.70` 0.74 0.34 0.32 0.99 (Source: Annual Reports of the CCSL) 46

RATIOS 1.2 1 0.8 0.6 0.4 0.2 0 2003 2004 2005 2006 2007 2006-07 2005-06 2004-05 2003-04 2002-03 YEARS INTERPRETATION: The higher CATR more efficient in management and utilization of assets. Empirically the current asset turnover ratio is declined from 0.74 to 0. 32 in years 2003-04 to 20005-06. The higher turnover recorded in the year 2006-0 7 i.e. 0.99. Therefore we conclude that the current Asset turnover ratio of comp any shows poor results. INVENTORY TURNOVER RATIO: It denotes the speed at which the inventory will be co nverted into sales, thereby contributing for the profits of the concern. When al l other factors remain constant, greater the turnover of inventory more will be efficiency of its 47

management. This ratio is calculated as follows: Cost of GoodsSold Average Stock heldduring thePeriod Inventory Turnover Ratio = TABLE 4.14 Year Wise Cost of Goods Sold and Average Stock held during the period of The CCSL Ltd., Chittoor. COST OF GOODS SOLD 16,82,44,221 3,26,16,707 1,15,24 ,675 26,08,49,917 38,23,18,650 RATIO AVERAGE STOCK IN % 23,41,47,891 13,75,97,98 2 8,28,84,312 18,27,22,687 26,48,82,289 0.718 0.237 0.139 1.427 1.443 YEAR 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 (Source: Annual Reports of the CCSL) 48

RATIOS 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2003 2004 2005 2006 2007 2006-07 2005-06 2004-05 2003-04 2002-03 YEARS INTERIPRETATION: The inventory turnover ratio indicates the efficiency of the fi rm in producing and selling its products. A low inventory turnover implies exces sive inventory levels than required for production. The company have high ratio of inventory except in the 2005-06 i.e. 0.139 it is not good. That is all stock stored in god owns. CAPITAL TURNOVER RATIO: It shows the efficiency of capital employed in the busin ess by 49

computing how many times capital employed is turned-over in a stated period. The ratio is ascertained as follows:Sales CapitalEmployed CapitalTurnover Ratio = TABLE 4.15 Year Wise Sales and Capital Employed of The CCSL Ltd., Chittoor. RATIO YEAR 2002 -2003 2003-2004 2004-2005 2005-2006 2006-2007 SALES 20,14,86,573 13,05,17,437 9, 69,20,394 12,40,87,187 36,88,53,567 CAPITAL EMPLOYED IN % 62,48,08,634 62,23,23, 103 68,42,77,172 82,84,01,963 83,90,52,028 0.32 0.21 0.14 0.15 0.44 (Source: Annual Reports of the CCSL) 50

0.5 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 RATIOS 2006-07 2005-06 2004-05 2003-04 2002-03 YEARS 2003 2004 2005 2006 2007 INTERPRETATION: The high capital turnover ratio it indicates greater profit on o ther hand when it is low it indicates sufficient sales are not being made and pr ofits and lower. Empirically, the actual capital turnover ratio has declined fro m 0.32 to 0.14 and increased from 0.15 to 0.44 in 2005-06 to 2006-07. Finally th e CCSL capital Turnover Ratio is not Satisfactory. In the year 2006-07 is 0.44 t he CTR recorded. WORKING CAPITAL TURNOVER RATIO: This ratio is also known as Sales to Working Cap ital. It shows the number of times working capital is turned-over in a stated pe riod. The higher 51

is the ratio, the lower is the investment in working capital and the greater are the profits. It is calculated as follows. Sales Net WorkingCapital WorkingCapitalTurnover Ratio = TABLE 4.16 Year Wise Sales and Net Working Capital of The CCSL Ltd., Chittoor. NET WORKING CAPITAL 9,86,37,578 3,35,51,944 5,92,98,348 19,23,67,806 9,99,01,842 RATIO IN % 2.04 3.89 1.18 0.64 3.69 YEAR 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 SALES 20,14,86,573 13,05,17,437 6,99,20,394 12,40,87,187 36,88,53,567 (Source: Annual Reports of the CCSL) 52

RATIOS 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2006-07 2005-06 2004-05 2003-04 2002-03 YEARS 2003 2004 2005 2006 2007 INTERPRETATION: This ratio measures the relationship between sales and net worki ng capital. In the years2003-04 and 2006-07 recorded as the highest working capi tal turnover ratio i.e. 3.89 and 3.69 respectively. In the year 2005-06 recorded as the lowest working capital turnover ratio. The higher indicates more favorab le it is for the company. In CCSL WCTR is highly fluctuating in the ratios DEBTORS TURNOVER RATIO: It indicates the number of times on the average the rece ivable is turn over in each year. The higher the value of ratio, the more is the efficient 53

management of debtors. It measures the accounts receivables in terms of number o f days of credit sales during a particular period. It is calculated as follows; Debtors Turnover Ratio = Credit Sales AverageDebtors TABLE 4.18 Year Wise Credit Sales and Average Debtors of The CCSL Ltd., Chittoor . RATIO YEAR 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 SALES 20,14,86,57 3 13,05,17,437 6,99,20,394 12,40,87,187 36,88,53,567 AVERAGE DEBTORS IN % 5,38,4 0,312 5,46,53,535 6,09,75,610 6,28,32,487 5,90,67,738 3.74 2.39 1.15 1.97 6.24 (Source: Annual Reports of the CCSL) 54

RATIOS 7 6 5 4 3 2 1 0 2003 2004 2005 2006 2007 2006-07 2005-06 2004-05 2003-04 2002-03 YEARS INTERPRETATION: The debtors turnover ratio indicates the rate of which cash is ge nerated by turnover of debtors. The debtor turnover ratio indicates a nonsatisfa ctory collection program. Empirically the debtors turnover ratio was declined fro m 3.74 to 1.15 in the years 2002-03 to 2004-05. Then it is increased form 1.97 t o 6.24 in the years 2005-06 and 2006-07 respectively. The high value of DTR was more efficient in management of credit. Therefore we conclude that there is bein g poor debtors turnover ratio maintained by CCSL. DEBTORS COLLECTION PERIOD:It indicates on an average that credit sales are pendi ng uncollected by 55

the concern. The also reflects the credit policy and terms of the concern. It sh ows the quality of debtors since it ventilates the speed at which debtors are co llected. The collection period will be calculated as under. Daysina year Debtors Turnover Ratio CollectionPeriod = TABLE 4.19 Year Wise Days in a year and Debtors Turnover Ratio of The CCSL Ltd., Chittoor. DEBTORS TURNOVER RATIO 0.74 2.39 1.15 1.97 6.24 97.59 152.72 317.39 1 85.28 58.49 RATIO YEAR 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 DAYS IN A YEAR 365 365 365 365 365 (Source: Annual Reports of the CCSL) 56

RATIOS 350 300 250 200 150 100 50 0 2006-07 2005-06 2004-05 2003-04 YEARS 2003 2004 2005 2006 2007 2002-03 INTERPRETATION: Collection period measures the rapidity or slowness with which m oney is collected from them. The average number of days for which the debtors re main outstanding. Empirically the average collection period rose from 97.9 to 31 7.39 in the years from 2002-03 to 2004-05. Then reduced slightly from 185.28 to 58.49 in the years from 2005-06 to 2006-07 CREDITORS TURNOVER RATIO:This ratio gives the Average Credit period enjoyed from the creditors. A low ratio indicates that creditors are not paid in time while a high ratio gives an 57

idea that the business is not taking full advantages of credit period allowed by the creditors. RATIOS 2 1.5 1 0.5 0 CreditPurchases 2006-07 Aberage AccountsPayable 2005-06 2004-05 TA BLE 4.20 2003-04 2002-03 Year Wise Credit Purchases and Average Account Payable of Creditors Turnover Ratio = YEARS The CCSL Ltd., Chittoor. 2003 2004 YEAR 2005 2006 2007 PURCHASES 10,57,81,021 4, 74,68,010 5,68,36,705 17,43,54,860 24,08,95,871 Average Accounts Payable 9,45,03 ,276 7,11,05,381 7,43,16,695 9,47,53,345 13,65,14,358 RATIO IN % 1.12 0.66 0.80 1.84 1.76 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 (Source: Annual Reports of the CCSL) INTERPRETATION: The creditors turnover ratio on the basis of credit purchases. Lo w ratio indicates that creditors are not paid in time. In the period of 2003-04 company did not purchase raw material so in that period the creditors ratio is ni l. In 58

2004-05 recorded low ratio i.e. 0.80 it is not good. In the year 2005-06 and 200 6-07 recorded high ratio 1.84 and 1.76 respectively 59

FINDINGS The standard cash ratio is 0.50:1. The company is not able to maintain sufficien t cash at bank and cash in hand. having the ratio 0.07 only. The CCSL is not mai ntaining the sufficient working capital. It is more fluctuating in net working c apital ratio. Lenders have contributed more funds then owners. Lenders In 2005-0 6 company is contribution is 1.10 times of owner contribution. Total Liabilities have increas ed year by year except in 2004-05. The total Liability is 1.65 times more than t he total asset. The current Assets are used very will in the year 2006-07 is 0.9 9. And the years from 2004-05 to 2005-06 is decreased to 0.32. Remaining that two years current Assets utilization is satisfied. The Inventory turnover ratio has increased in this study but it has declined to 0.139 in 2004-05. The company fa iled to maintain the efficiency of selling and producing its products. The Gross Profit margin is in very poor position in this study and it was 60

increased to 39.90 in 2005-06, but it was not sufficient to the company. It is s hows very poor performance of the company. Remaining years are shows loss. The o perating expenses are too high in this study. The operating expenses are very large than the sales. The position is very danger to the CCSL. SUGGESTIONS The CCSL has to increase its current asset such as cash in hand and cash at bank etc. By disposing off the unutilized assets such as old machinery and there by increase its liquidity position. The company has to maintain standard liquidity ratios to meet the liquidity obligation. The company is maintaining the lower eq uity fund. But, the CCSL having the insolvency position for increasing the debt fund. It is suggest that the company has to convert the reserves to assets. The Debtor Turnover Ratio has decreased from 5.07 times to 1.98 times. Generally, th e higher the value of Debtor Turnover, the more efficient to the management of c redit. The CCSL has to improve the debt collection ratio. The lower gross profit margin might reflect higher cost of goods sold due to the firms inability to pur chase raw material (can etc.,) at favorable term, inefficient utilization of pla nt and machinery of over investment in plant and machinery, resulting in higher cost of production. It suggests the Chief Account Officer has detected the cause s of a falling Gross margin and initiate action to improve the Gross Margin. 61

The CCSL has the higher operating Expenses. A higher Operating Expenses Ratio is unfavorable. The Operating Expenses are more than the sales ar e danger to the company; the CCSL must decrease the operating expenses. 62

CONCLUSION The Preponderance of current liabilities over the current assets has escalated t he net working capital requirement of CCSL. Substantial amount capital is blocke d in the inventory sugar of longer period partially due to policies of governmen t and partially associated with tender quotations. CCSL turns its fixed assets f aster than current assets. In fact it is because of such a relative faster turno ver of fixed assets that it becomes break even long ago. Despite the companys lif etime sourcing strategy where by its purchases sugar cane from the farmer in the vicinity of CCSL on ensured long term basis so as to have smooth inflow of raw materials sugar as quite prequel for its assistance to farmers such as finance a nd provision of agricultural inputs such as fertilizers seeds and pesticide prof it of CCSL escalated because of excessive overhead and polling up interest on. R emain due to erection of new sugar factories in the vicinity of CCSL, there has been a shortage of sugar cane and as a result a significant chunk of its capacit y unutilized. 63

64

BALANCE SHEET OF THE CHITTOOR COOPERATIVE SUGARS LTD., AS ON 31ST MARCH 2003 TO 1ST APRIL 2007. Liabilities Share Capital Deposits & Borrowings Deposits Borrowings Outstanding Interest Pay able Adjusting Heads Due by Reserves Undistributed Profits Audit Fund Reserve Fund yet to be Invested Difference between Assets & Liabilities 2003 14,09,58,700 2004 14,09,60,300 2005 14,09,61,400 2006 14,11,40700 2007 14,25,53,600 2,88,36,536 23,56,12,210 2.88.12.457 .22,38,22,462 2,91,54,180 26,60,73,588 3,10,24,046 40,43,40,806, 3,52,01,887 405702423 60,94,478 2,71,90,688 4,05,25,798 4,90,24,989 4,69,27,852 18,29,12,074 21,93,57,188 64,227 9,695 11,50,20,074 22,87,27,884 64,227 9,695 10,81,07,592 24,80,88,004 64,227 9,695 14,04,81,701 2,51,896,411 64,227 9,695 22,61,00,864 25,55,94,218 64,227 9,695 24,703 24,703 24,703 24,703

24,703 29,92,13,004 36,18,46,708 40,27,85,782 39,71,03,323 43,59,05,864 40,81,32,905 60,98,74,373 50,05,18,718 611660751 Total 51,46,60,807 Assets 2003 2004 2005 2006 65 2007

Cash on Hand Balance with Bank:Current Account Saving Account Shares in other Co operative Institutions Deposits with various Agencies Fixed Deposits with Banks Loans & Advances to Members Loans to other Co-op., Sugar Factories Adjusting Head s Due to Interest Receivable Value of Assets Value of Closing Stock 1. Stores Stoc ks 2. Packing Material 3. Stationery 4. Sugar 5. Sugar in Process 6. Molasses 7. Molasses in Process 8. FMP Raw Material & Feed 9. Pesticides 10. Fertilizers 12,83,980 17,15,099 23,80,140 2,28,550 12,54,826 2,50,000 64,61,883 30,00,000 5, 44,12,361 18,26,489 12,62,06,460 2,02,69,709 1,78,240 26,375 19,19,96,948 2,54,3 82 69,07,475 65 22,575 13,49,422 1,45,31,768 2,28,550 12,61,226 22,50,000 63,86,630 10,00,000 5, 48,94,708 18,26,489 12,62,06,460 2,01,00,2 21 1,78,240 18,671 7,60,05,445 2,34,8 02 2,86,092 18,78,931 91,72,861 89,67,176 2,28,550 12,71,226 27,50,000 90,85,236 10,00,000 6 ,70,56,512 18,26,489 1266,47,509 2,00,46,5 93,100 43,727 7,88,6,404 00 1,06,60,6 83 141,219 1,66,827 70,82,767 2,28,550 12,67,226 2,50,000 87,82,893 10,00,000 586,0 8,462 18,26,489 12,91,77,261 200,66,210 6,85,016 28,366 26,77,46,257 82,93,497 8 2,22,629 3,02,613 95,083 33,68,313 2,28,550 12,67,226 2,50,000 1,41,93,990 10,00,000 5,95,27,013 18,26,489 13,99,04 ,578 1,88, 22,314 22,784 40,809 24,67,11,289 62,98,461 66,19,003 8,01,5 9,200 50 20,474 00 00 5,7 00 20,474 00 00 20,474 362250 00 20,474 00 00 74 97 20,4 00 205940 Deficits Total 47,944 47,944 47,944 47,944 47,944 51,46,60,807 40,27,85,782 43,59,05,864 60,98, 74,333 611660751 66

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