A Study On

FINANCIAL ANALYSIS OF CLUB 24 LTD

For

Ventura India Pvt Ltd

Kalyani Nagar, Pune-411014.

By

Ms. AFIA KHAN

Submitted to

"University of Pune"
2011-2012

Through

Allana Institute Of Management Sciences (MBA)

Pune-411014

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Declaration
I, the undersigned, Ms. Afia Khan, student of MBA II Year of Allana Institute Of
Management Sciences, Pune as the author of this report, hereby declare that the
dissertation is a result of my own Research work and the same has not been previously
submitted to any examination of this University, or any other University

Date:
Place: PUNE

---------------------(Afia Khan)

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List Of Tables
CERTIFICATE

This is to certify that Project Report titled ________________________

_____________________________________________________________________
_____________________________________________________ (title of project in
inverted comma and underlined) is a bonafide work carried out by
_________________________________________________________________
of our Institute for fulfillment of Master of
Business Administration (MBA) degree of the University of Pune. He
has worked under our guidance and supervision. The material
referred from other sources has been duly acknowledged.
(Name of the student)

Prof. R Ganesan
Guide
Director
Guide

Name of
Signature of

Date:
Place:

1. Current Ratio..38
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2. Quick Test Ratio.....39

3. Net Profit Margin Ratio...40
4. Gross Profit Margin Ratio41
5. Return On Investment Ratio.42
6. Return On Equity Ratio43
7. Earnings Per Share Ratio......44
8. Inventory Turnover Ratio.....45
9. Days Of Inventory Ratio...46
10. Net Working Capital Turnover Ratio.47
11. Asset Turnover Ratio ..48
12. Fixed Asset Turnover Ratio49
13. Debtors Turnover Ratio/ Average Collection Period.50
14. Current Liabilities to Equity Ratio51
15. Trend Analysis54-56

1.
2.
3.
4.
5.

Current Ratio.38
Quick Test Ratio39
Net Profit Margin Ratio.40
Gross Profit Margin Ratio..41
Return On Investment Ratio
42
6. Return On Equity Ratio..43
7. Earnings Per Share
Ratio.44
8. Inventory Turnover Ratio45
9. Days Of Inventory Ratio.46
10. Net Working Capital Turnover Ratio.47
11. Asset Turnover Ratio .48
12. Fixed Asset Turnover Ratio.49
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13. Debtors Turnover Ratio/ Average Collection Period...50
14. Current Liabilities to Equity Ratio..51
15. Trend Analysis54-56

List Of Graphs

INDEX
Chapter 1: Executive Summary..Pg 8
Chapter 2: Introduction...Pg 11
Chapter 3: Company Profile.Pg 15
Chapter 4: Literature Review.Pg 23
Chapter 5: Research Methodology.Pg 35
Chapter 6: Data Analysis & Interpretation.Pg 37
Chapter 7: Findings..Pg 57
Chapter 8: ConclusionPg 59
Chapter 9: Annexure: ..Pg 61
Chapter 10: Bibliography.Pg 66

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ACKNOWLEDGEMENT
Achievement of task is not an individual effort but it is a combined effort of various
factors. Similarly, I would like to show my gratitude to staff members of the college,
for the successful completion of my project in order to pay my respect to all; I would
like to acknowledge them.
To start with, I would like to thank Mr Ankit Patiar, Senior Finance Manager, Ventura
India Pvt Ltd, for giving me a great opportunity to carry out the project in this business
organization.
Secondly, I would like to extend my thanks to Jai Sharma & Ramakanta Sahoo,
Finance Manager, Ventura India Pvt Ltd and to all the employees /staff of the
company for their support.
I am grateful to Prof R. Ganesan, the director of Allana Institute Of Management
Sciences, Pune, for granting me approval to undertake this project
I will be failing in my duty if I do not thank my Professor and Project Guide, Prof
.., who has helped me in reviewing & rectifying my project & giving
me guidance during the course of project work
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Last but not the least this acknowledgement could not be considered complete unless
we record our gratitude to those who have been directly or indirectly helping us in
completing our project.

Thanking you all,

.

Chapter 1:
EXECUTIVE SUMMARY

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Page | 8

CHAPTER 1: EXECUTIVE SUMMARY

The following project gave me a wonderful opportunity to get acquainted with the corporate
environment and practical use of my knowledge. I experienced the culture, the attitude, co
ordination and the professionalism carried in the corporate world. It laid the platform for my
corporate carrier.
The project deals with the understanding of various Ratio its Analysis and its interpretation
for the benefit of investors. It also helped me to understand the calculation, the practical use and in
depth impact of ratios. It portrays a clear picture of the investors who are willing to invest. It
provides information as to how Ratios are calculated, analysed, compared and used to take
management decisions for the success of Business.

OBJECTIVES:

To evaluate the performance of the company by using ratios as a yardstick to measure the
efficiency of the company.

To understand the liquidity, profitability and efficiency positions of the company during the
study period.

To analyze the capital structure of the company with the help of Leverage ratio

To carefully examine financial statements in order to know the financial position of the
company.

FINDINGS :
Sr
no.
1
2
3
4
5
6
7
8
9

Particulars

Jan ' 08

Jan ' 09

Jan ' 10

Jan ' 11

Current Ratio
Quick Test Ratio
Net Profit Margin Ratio
Gross Profit Margin
Ratio
Return On Investment
Ratio
Return On Equity Ratio
Earnings Per Share
Ratio
Inventory Turnover
Ratio
Days Of Inventory Ratio

1.35
1.35
10.43

1.54
1.54
2.14

1.30
1.30
1.09

1.53
1.53
0.03

38.58

32.33

35.50

33.29

24.36

2.28

1.08

0.25

78.28

11.78

8.52

0.24

76.70

13.09

5.82

0.17

5254.
18
0.00

3138.
26
2.58

11901.
44
2.46

0.00
12.70

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10
11
12
13
14

Net Working Capital

Turnover Ratio
Asset Turnover Ratio
Fixed Asset Turnover
Ratio
Debtors Turnover Ratio/
Average Collection
Period
Current Liabilities to
Equity Ratio

8.58

5.82

8.37

7.20

2.44

2.15

2.11

2.75

11.64

10.78

10.98

16.10

0.00

0.10

0.09

0.08

2.50

1.76

3.13

2.12

CONCLUSION :
The companys overall position looks bad. Particularly the current years position shows that
company hardly made any profits. It is better for the organization to go for auction looking at the
present market scenario.

SUMMARY :
1) After the analysis of Financial Statements, the company status seemed to be bad, because the Net
working capital of the company shows falling from the last years position.
2) The company hardly made any profits in the current year; so the decision to go for auction was
right on the part of management in order to prevent the company from suffering losses.

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CHAPTER 2
INTRODUCTION

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Ratio Analysis and Interpretation

An Introduction
The ratio analysis and industry analysis tools below are very useful for individuals to instantly
assess a company or industry by making two basic types of comparisons. First, the analyst can
compare a present ratio with past (or expected) ratios for the organization to determine if there
has been an improvement or deterioration or no change over time. Second, the ratios of one
organization may be compared with similar organizations or with industry averages at the same
point in time. This is a type of "benchmarking" so that one may determine whether the
organization is "average" in performance or doing better or worse than others. For the
professional, conducting such in-depth analyses is critical, allowing an analyst to make an
informed business or investment decision.

In assessing the significance of various financial data, experts engage in financial analysis, the
process of determining and evaluating financial ratios. A ratio is a relationship that indicates
something about a company's activities.

Ratios are only meaningful when compared with other financial information. A ratio is a "flag"
indicating areas of strength or weakness.

In trend analysis, financial ratios are compared over time, typically years. Year-to-year
comparisons can highlight trends and point up the need for action. Trend analysis works best
with minimum three to maximum five years of ratios. When it comes to investing, the massive
amount of numbers in a company's financial statements can be bewildering and intimidating to

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many investors. However, through financial ratio analysis, you will be able to work with these
numbers in an organized fashion. . However, through financial ratio analysis, you will be able to
work with these numbers in an organized fashion.

NEED FOR THE STUDY

1.The study has great significance and provides benefits to various parties whom directly or
indirectly interact with the company.
2.It is beneficial to management of the company by providing crystal clear picture regarding
important aspects like liquidity, leverage, activity and profitability.
3.The study is also beneficial to employees and offers motivation by showing how actively they are
contributing for companys growth.
4.The investors who are interested in investing in the companys shares will also get benefited by
going through the study and can easily take a decision whether to invest or not to invest in the
companys shares.
OBJECTIVES
The major objectives of the resent study are to know about financial strengths and weakness of Club
24 through ratio analysis and trend analysis.

To evaluate the performance of the company by using ratios as a yardstick to measure the
efficiency of the company.

To understand the liquidity, profitability and efficiency positions of the company during the
study period.

To analyze the capital structure of the company with the help of Leverage ratio

To evaluate and analyze various facts of the financial performance of the company. To make
comparisons between the ratios during different periods.

To offer appropriate suggestions for the better performance of the organization

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LIMITATIONS

1. The study provides an insight into the financial statement. Every study will be bound with
certain limitations.
2. The below mentioned are the constraints under which the study is carried out.
3. One of the factors of the study was lack of availability of ample information. Most of the
information has been kept confidential and as such as not assed as art of policy of company.
Time is an important limitation. The whole study was conducted in a period of 60 days,
which is not sufficient to carry out proper interpretation and analysis.

METHODOLOGY

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CHAPTER 3
COMPANY PROFILE

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Ventura India Pvt Ltd

Club 24 Limited - PROFILE

COMPANY OVERVIEW
Club 24 Limited, doing business as Ventura, provides business process outsourcing services. It offers
customer management outsourcing services, which include securing new customers, setting up new
customer accounts, providing customer service for general enquiries and complaints, advice lines,
handling technical queries, up-grading customer accounts, up-and cross-selling, promoting loyalty
and retaining customers, and chasing and processing customer payments, as well as taking orders,
reservations, and bookings. The company also provides debt management services, which include
incoming and outgoing calls to collect payments, payment reminders for forgetful customers,
payment collection from non paying customers, early and late stage collections, risk management,
advising customers with financial difficulties, tracing customers that don't want to be found,
litigation, and in-house debt collection. In addition, it offers document and payment management
services, such as automated mail opening and sorting, mail and paperwork scanning, processing of
Web and paper based applications, responding to customer letters, banking, and print and fulfillment,
as well as cheque, giro, and gift voucher batching and processing. Further, the company provides IT
services, which include billing, payment collections, commercial credit, and CRM systems. It serves
government, public, private, charity, telecom, technology and media, financial services, utilities,
retail, leisure, automotive, and travel sectors. The company was founded in 1968 and is based in
Leeds, the United Kingdom. It has locations in Leeds, Leeds Valley Park, Dearne Valley, Cardiff, and
Milton Keynes, the United Kingdom, as well as an offshore centre in Pune, India. Club 24 Limited
operates as a subsidiary of Next Group plc.

Ventura is one of the UKs largest customer management outsourcing

companies. We are trusted to manage over 80million customer contacts
each year for 28 clients from the private and public sector through
our contact centres

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We have been managing customers for our clients for over 40 years.
Our outsourcing services include:

Customer Management

Sales & Customer Acquisition

Debt Collection

Back Office Processing

We work with a wide range of clients including O2, Google, British Gas and the Department for
Work and Pensions (DWP).
With over 8,000 employees and five large-scale contact centres in the UK and India, Ventura is one
of the largest companies of its kind.
Ventura are part of the Capita Group.

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REWARDS & RECOGNITIONS

AWARDS

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Ventura Values

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Goals
The goals should remain central to the way we do things on a daily basis they demonstrate how we should
carry out our work on a local and business level.
Create a great place to work
Provide a great customer experience
We see the world through the eyes of our People, our Clients and their Customers
Be experts in our fields
We build world class capability to deliver the needs of our People, our Clients and their Customers
Offer great value
We drive continuous improvement - delivering great results
Exceed client expectations
We create long term competitive advantage for our clients

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Deliver our promises

We deliver our commitments and we always follow through

VISION
It is important to remember that the future of Ventura is not just based on how we do things. This enables us to
be successful, but we must have a focus and a strategy to get us there. The focus of that future is to be:

"First choice for customer management outsourcing"

Future success will be driven by performance in six key areas:

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Our Clients

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Page | 23

CHAPTER 4
LITERATURE
REVIEW

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RATIO ANALYSIS
FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial strengths and weaknesses of the firm and
establishing relationship between the items of the balance sheet and profit & loss account. Financial
ratio analysis is the calculation and comparison of ratios, which are derived from the information in a
companys financial statements. The level and historical trends of these ratios can be used to make
inferences about a companys financial condition, its operations and attractiveness as an investment.
The information in the statements is used by
Trade creditors, to identify the firms ability to meet their claims i.e. liquidity position of the
company.
Investors, to know about the present and future profitability of the company and its financial
structure.
Management, in every aspect of the financial analysis. It is the responsibility of the management to
maintain sound financial condition in the company.
RATIO ANALYSIS
The term Ratio refers to the numerical and quantitative relationship between two items or
variables. This relationship can be exposed as
Percentages
Fractions
Proportion of numbers
Ratio analysis is defined as the systematic use of the ratio to interpret the financial statements. So
that the strengths and weaknesses of a firm, as well as its historical performance and current financial
condition can be determined. Ratio reflects a quantitative relationship helps to form a quantitative
judgment.
STEPS IN RATIO ANALYSIS
The first task of the financial analysis is to select the information relevant to the decision under
consideration from the statements and calculates appropriate ratios.
To compare the calculated ratios with the ratios of the same firm relating to the past or with the
industry ratios. It facilitates in assessing success or failure of the firm.
Third step is to interpretation, drawing of inferences and report writing conclusions are drawn after
comparison in the shape of report or recommended courses of action.

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BASIS OR STANDARDS OF COMPARISON

Ratios are relative figures reflecting the relation between variables. They enable analyst to draw
conclusions regarding financial operations. They use of ratios as a tool of financial analysis involves
the comparison with related facts. This is the basis of ratio analysis. The basis of ratio analysis is of
four types.
Past ratios, calculated from past financial statements of the firm.
Competitors ratio, of the some most progressive and successful competitor firm at the same point
of time.
Industry ratio, the industry ratios to which the firm belongs to
Projected ratios, ratios of the future developed from the projected or pro forma financial statements
NATURE OF RATIO ANALYSIS
Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of
establishing and interpreting various ratios for helping in making certain decisions. It is only a means
of understanding of financial strengths and weaknesses of a firm. There are a number of ratios which
can be calculated from the information given in the financial statements, but the analyst has to select
the appropriate data and calculate only a few appropriate ratios. The following are the four steps
involved in the ratio analysis.
Selection of relevant data from the financial statements depending upon the objective of the
analysis.
Calculation of appropriate ratios from the above data.
Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios
developed from projected financial statements or the ratios of some other firms or the comparison
with ratios of the industry to which the firm belongs.
INTERPRETATION OF THE RATIOS
The interpretation of ratios is an important factor. The inherent limitations of ratio analysis should be
kept in mind while interpreting them. The impact of factors such as price level changes, change in
accounting policies, window dressing etc., should also be kept in mind when attempting to interpret
ratios. The interpretation of ratios can be made in the following ways.
Single absolute ratio
Group of ratios
Historical comparison
Projected ratios
Inter-firm comparison

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GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS

The calculation of ratios may not be a difficult task but their use is not easy. Following guidelines or
factors may be kept in mind while interpreting various ratios are
Accuracy of financial statements
Objective or purpose of analysis
Selection of ratios
Use of standards
Caliber of the analysis
IMPORTANCE OF RATIO ANALYSIS
Aid to measure general efficiency
Aid to measure financial solvency
Aid in forecasting and planning
Facilitate decision making
Aid in corrective action
Aid in intra-firm comparison
Act as a good communication
Evaluation of efficiency
Effective tool

LIMITATIONS OF RATIO ANALYSIS

Differences in definitions
Limitations of accounting records
Lack of proper standards
No allowances for price level changes
Changes in accounting procedures
Quantitative factors are ignored
Limited use of single ratio
Background is over looked
Limited use
Personal bias
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CLASSIFICATIONS OF RATIOS
The use of ratio analysis is not confined to financial manager only. There are different parties
interested in the ratio analysis for knowing the financial position of a firm for different purposes.
Various accounting ratios can be classified as follows:
1. Traditional Classification
2. Functional Classification
3. Significance ratios
1. Traditional Classification
It includes the following.
Balance sheet (or) position statement ratio: They deal with the relationship between two balance
sheet items, e.g. the ratio of current assets to current liabilities etc., both the items must, however,
pertain to the same balance sheet.
Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship between
two profit & loss account items, e.g. the ratio of gross profit to sales etc.,
Composite (or) inter statement ratios: These ratios exhibit the relation between a profit & loss
account or income statement item and a balance sheet items, e.g. stock turnover ratio, or the ratio of
total assets to sales.

2. Functional Classification
These include liquidity ratios, long term solvency and leverage ratios, activity ratios and profitability
ratios.
3. Significance ratios

Some ratios are important than others and the firm may classify them as primary and secondary
ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios that
support the primary ratio are called secondary ratios.

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IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOSARE

1. Liquidity ratio
2. Leverage ratio
3. Activity ratio
4. Profitability ratio
1. LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current obligations as & when there
becomes due. The short term obligations of a firm can be met only when there are sufficient
liquid assets. The short term obligations are met by realizing amounts from current, floating
(or)circulating assets The current assets should either be calculated liquid (or)near liquidity.
They should be convertible into cash for paying obligations of short term nature. The
sufficiency (or) insufficiency of current assets should be assessed by comparing them with
short-term current liabilities. If current assets can pay off current liabilities, then liquidity
position will be satisfactory.
To measure the liquidity of a firm the following ratios can be calculated
2. Current ratio
3. Quick (or) Acid-test (or) Liquid ratio
4. Absolute liquid ratio (or) Cash position ratio
Components of current ratio
CURRENT ASSETS

CURRENT LIABILITIES

Cash in hand

Outstanding or accrued expenses

Cash at bank

Bank over draft

Bills receivable

Bills payable

Inventories

Short-term advances

Work-in-progress

Sundry creditors

Marketable securities

Dividend payable

Short-term investments

Income-tax payable

Sundry debtors
Prepaid expenses
Formula:

Current Ratio

Current Asset

Current Liabilities

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(b) QUICK RATIO

Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the ability of a firm
to pay its short-term obligations as & when they become due. Quick ratio may be defined as the
relationship between quick or liquid assets and current liabilities. An asset is said to be liquid if it is
converted into cash with in a short period without loss of value.
Components of quick or liquid ratio
QUICK ASSETS

CURRENT LIABILITIES

Cash in hand

Outstanding or accrued expenses

Cash at bank

Bank over draft

Bills receivable

Bills payable

Sundry debtors

Short-term advances

Marketable securities

Sundry creditors

Temporary investments

Dividend payable
Income tax payable

Formula:
Quick Test (dec.)

Quick Asset

Current Liabilities

2. LEVERAGE RATIOS
The leverage or solvency ratio refers to the ability of a concern to meet its long term obligations.
Accordingly, long term solvency ratios indicate firms ability to meet the fixed interest and costs and
repayment schedules associated with its long term borrowings.
The following ratio serves the purpose of determining the solvency of the concern.
Proprietory ratio
(a) PROPRIETORY RATIO
A variant to the debt-equity ratio is the proprietory ratio which is also known as equity ratio. This
ratio establishes relationship between shareholders funds to total assets of the firm.
Proprietory ratio = Shareholders funds
Total assets

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SHARE HOLDERS FUND

TOTAL ASSETS

Share Capital

Fixed Assets

Reserves & Surplus

Current Assets
Cash in hand & at bank
Bills receivable Inventories
Marketable securities
Short-term investments
Sundry debtors
Prepaid Expenses

3. ACTIVITY RATIOS
Funds are invested in various assets in business to make sales and earn profits. The efficiency with
which assets are managed directly effect the volume of sales. Activity ratios measure the efficiency
(or) effectiveness with which a firm manages its resources (or) assets. These ratios are also called
Turn over ratios because they indicate the speed with which assets are converted or turned over
into sales.
Working capital turnover ratio
Fixed assets turnover ratio
Capital turnover ratio
Current assets to fixed assets ratio

(a) WORKING CAPITAL TURNOVER RATIO

Working capital of a concern is directly related to sales.
Working capital = Current assets - Current liabilities
It indicates the velocity of the utilization of net working capital. This indicates the no. of times the
working capital is turned over in the course of a year. A higher ratio indicates efficient utilization of
working capital and a lower ratio indicates inefficient utilization.
Working capital turnover ratio=cost of goods sold/working capital.

Components of Working Capital

CURRENT ASSETS

CURRENT LIABILITIES
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Cash in hand

Out standing or accrued expenses

Cash at bank

Bank over draft

Bills receivable

Bills payable

Inventories

Short-term advances

Work-in-progress

Sundry creditors

Marketable securities

Dividend payable

Short-term investments

Income-tax payable

Sundry debtors
Prepaid expenses
(b) FIXED ASSETS TURNOVER RATIO
It is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning
capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio
means under-utilization of fixed assets.
Fixed assets turnover ratio = Cost of Sales
Net fixed assets
Cost of Sales = Income from Services
Net Fixed Assets = Fixed Assets - Depreciation

(c) CAPITAL TURNOVER RATIOS

Sometimes the efficiency and effectiveness of the operations are judged by comparing the cost of
sales or sales with amount of capital invested in the business and not with assets held in the business,
though in both cases the same result is expected. Capital invested in the business may be classified as
long-term and short-term capital or as fixed capital and working capital or Owned Capital and
Loaned Capital. All Capital Turnovers are calculated to study the uses of various types of capital.
Capital turnover ratio = Cost of goods sold
Capital employed
Cost of Goods Sold = Income from Services
Capital Employed = Capital + Reserves & Surplus

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(d) CURRENT ASSETS TO FIXED ASSETS RATIO

This ratio differs from industry to industry. The increase in the ratio means that trading is slack or
mechanization has been used. A decline in the ratio means that debtors and stocks are increased too
much or fixed assets are more intensively used. If current assets increase with the corresponding
increase in profit, it will show that the business is expanding.
Current Assets to Fixed Assets Ratio =

Current Assets
Fixed Assets

Component of Current Assets to Fixed Assets Ratio

CURRENT ASSETS

FIXED ASSETS

Cash in hand

Machinery

Cash at bank

Buildings

Bills receivable

Plant

Inventories

Vehicles

Work-in-progress
Marketable securities
Short-term investments
Sundry debtors
Prepaid expenses
4. PROFITABILITY RATIOS
The primary objectives of business undertaking are to earn profits. Because profit is the engine, that
drives the business enterprise.
Net profit ratio
Return on total assets
Reserves and surplus to capital ratio
Earnings per share
Operating profit ratio
Price earning ratio
Return on investments
(a) NET PROFIT RATIO
Net profit ratio establishes a relationship between net profit(after tax) and sales and indicates the
efficiency of the management in manufacturing, selling administrative and other activities of the
firm.
Net profit ratio = Net profit after tax
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Net sales
Net Profit after Tax = Net Profit () Depreciation () Interest () Income Tax
Net Sales = Income from Services
It also indicates the firms capacity to face adverse economic conditions such as price competitors,
low demand etc. Obviously higher the ratio, the better is the profitability.
(b) RETURN ON TOTAL ASSETS
Profitability can be measured in terms of relationship between net profit and assets. This ratio is also
known as profit-to-assets ratio. It measures the profitability of investments. The overall profitability
can be known.
Return on assets =

Net profit
Total assets

Net Profit = Earnings before Interest and Tax

Total Assets = Fixed Assets + Current Assets
(b) RESERVES AND SURPLUS TO CAPITAL RATIO
It reveals the policy pursued by the company with regard to growth shares. A very high ratio
indicates a conservative dividend policy and increased ploughing back to profit. Higher the ratio
better will be the position.
Reserves & surplus to capital = Reserves& surplus
Capital

(d) EARNINGS PER SHARE

Earnings per share is a small verification of return of equity and is calculated by dividing the net
profits earned by the company and those profits after taxes and preference dividend by total no. of
equity shares.
Earnings per share = Net profit after tax
Number of Equity shares
The Earnings per share is a good measure of profitability when compared with EPS of similar other
components (or) companies, it gives a view of the comparative earnings of a firm.

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(e) OPERATING PROFIT RATIO

Operating ratio establishes the relationship between cost of goods sold and other operating expenses
on the one hand and the sales onthe other.
Operation ratio =

Operating cost
Net sales

However 75 to 85% may be considered to be a good ratio in case of a manufacturing under

taking.Operating profit ratio is calculated by dividing operating profit by sales.
Operating profit = Net sales - Operating cost
Operating profit ratio = Operating profit
Sales
(f) PRICE - EARNING RATIO
Price earning ratio is the ratio between market price per equity share and earnings per share. The
ratio is calculated to make an estimate of appreciation in the value of a share of a company and is
widely used by investors to decide whether (or) not to buy shares in a particular company. Generally,
higher the price-earning ratio, the better it is. If the price earning ratio falls, the management should
look into the causes that have resulted into the fall of the ratio.
Price Earning Ratio =

Market Price per Share

Earnings per Share

Market Price per Share =

Capital + Reserves & Surplus

Number of Equity Shares

Earnings per Share = Earnings before Interest and Tax

Number of Equity Shares
(g) RETURN ON INVESTMENTS
Return on share holders investment, popularly known asReturn on investments (or) return on share
holders or proprietors funds isthe relationship between net profit (after interest and tax) and the
proprietors funds.
Return on shareholders investment = Net profit (after interest and tax)
Shareholders funds
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The ratio is generally calculated as percentages by multiplying the above with 100.

CHAPTER 5
RESEARCH
METHODOLOGY

Page | 36

METHODOLOGY
Research design: Descriptive Research.
Descriptive research design is a scientific method which involves observing and describing the
behavior of a subject without influencing it in any way.
In order to gather sufficient information on the topic, and to get the practical knowledge of the subject matter
and the way it is analyzed, both the sources of data, that is Primary Source and Secondary Source have been
used.
Primary Data: A Primary Data is a Data, which is collected by the researcher himself, through his discovery
and findings.
Secondary Data: A secondary data is a data, which is collected from other sources; he can take help of
different reference books, or any other person for his research.

First hand Information is collected 1. Way the business decisions are taken based on various Ratios.
Secondary Information
The basic source for these ratios is the company's financial statements that contain figures on assets,
liabilities, profits, and losses.

1. Information received from Annual Reports.

2. Various Financial books
3. Experts and Internet

Page | 37

CHAPTER 6
DATA ANALYSIS
&
INTERPRETTIONS

Page | 38

LIQUIDITY RATIOS

CURRENT RATIO:
Formula:
Current Ratio

Year
Jan ' 08
Jan ' 09
Jan ' 10
Jan ' 11

Current Assets
66186
60197
55665
45834

Current Asset
Current Liabilities
Current Liabilities
49034
39173
42865
29965

Ratio
1.35
1.54
1.30
1.53

GRAPHICAL REPRESENTATION:

Interpretation:
The higher the current ratio, the better is the liquidity/short-term solvency of the company. From the above
graph it can be concluded that the company always maintained a steady current ratio. Although there is no
hard and fast rule, conventionally , a current ratio of 2:1(current assets twice current liabilities) is considered
satisfactory. A current ratio of 1.5:1, can be interpreted , on the basis of conventional rule, to be inadequately
liquid from the point of view of its ability to always satisfy the claims of short-term creditors.
Since the ratio of Club 24 ltd shows 1.54 & below it can be said that the company is inadequately liquid.

Page | 39

QUICK TEST/ACID TEST RATIO:

Formula:

Quick Test

Quick Asset
Current Liabilities

GRAPHICAL REPRESENTATION:

Interpretation:
The acid-test ratio is a rigorous measure of a companies ability to service short-term liabilities. Generally an
acid-test ratio of 1:1 is considered satisfactory as a firm can easily meet all current claims.

PROFITABILITY RATIOS
Page | 40

NET PROFIT MARGIN (%):

Formula:
Net Profit Margin
(%)

Year
Jan ' 08
Jan ' 09
Jan ' 10
Jan ' 11

Net Profit After

Tax
15340
2618
1165
34

Net profit After

Taxes
Net Sales
Net Sales

Ratio

147117
122392
107113
114277

10.43
2.14
1.09
0.03

GRAPHICAL REPRESENTATION:

Interpretation:
A high net profit margin would ensure adequate return to the owners as well as enable a company to withstand
adverse conditions when selling price is declining, cost of production is rising & demand for the product is
falling. A low net profit margin has the opposite implications.
Here in this case it can be observed that the companies net profit is decreasing each year therefore the
company took the decision to sell it to Capita.
One of the reasons of falling Net Profit Margin is declining sales & increased cost of sales.

GROSS PROFIT MARGIN (%):

Formula:
Gross Profit
Margin (%)

Sales Cost of Goods Sold

Net Sales

Page | 41

Year

Net Sales

Sales

Cost of
Goods
Sold

Jan ' 08

147117
122392
107113
114277

203871
161962
145135
152317

147117
122392
107113
114277

Jan ' 09
Jan ' 10
Jan ' 11

Ratio
38.58
32.33
35.50
33.29

GRAPHICAL REPRESENTATION:

Interpretation:
A company should have a reasonable gross profit margin to ensure adequate coverage for operating expenses
of the company & sufficient return to the owners of the business. Without an adequate gross margin, a
company will be unable to pay its operating and other expenses and build for the future.
The Gross Profit Margin shows a fluctuating trend due to fluctuation in the sales & Cost of goods sold.

RETURN ON INVESTMENT:
Formula:
Page | 42

Year
Jan ' 08
Jan ' 09
Jan ' 10
Jan ' 11

Return On
Investment (%)

EBIT
Total Assets

EBIT
20387
1712
741
140

Total Assets
83706
75219
68884
55293

Ratio
24.36
2.28
1.08
0.25

GRAPHICAL REPRESENTATION:

Interpretation:
This is the ratio between net profits and shareholders funds. The ratio is generally calculated as
percentage multiplying with 100.
ROI measures the overall effectiveness of management in generating profits with its available assets.
From the above graph it can be interpreted that the company had a very small return of investment in the years
2009, 2010 & 2011.
This means that the company had no source for investment or was unable to generate profit with its available
assets & therefore Club 24 approached Capita for auction in order to protect itself from suffering losses.

RETURN ON EQUITY:
Formula:

Page | 43

Year
Jan ' 08
Jan ' 09
Jan ' 10
Jan ' 11

Return On Equity
(%)

Net Profit After taxes

Shareholders Equity

Net Profit After

Tax

Shareholders Equity

15340
2618
1165
34

19597
22221
13681
14136

Ratio
78.28
11.78
8.52
0.24

GRAPHICAL REPRESENTATION:

Interpretation:
The return on shareholders equity measures exclusively the return on the owners funds.
The ratio reveals how profitably the owners funds have been utilized by the company.
From the graph, it can be observed that the company had a high ratio in the year 2008 & than it started
declining drastically. The reason could be the impact of recession on the company.

EARNINGS PER SHARE:

Formula:
Page | 44

Earnings per
Share ($)

Year
Jan ' 08
Jan ' 09
Jan ' 10
Jan ' 11

Net Profit After

Tax
15340000
2618000
1165000
34000

(Net Profit After Tax

Preferred stock Dividends)
Average Of Common
Shares

No. Of Shares
200001
200001
200001
200001

Ratio
76.70
13.09
5.82
0.17

GRAPHICAL REPRESENTATION:

Interpretation:
Earnings per share ratio are used to find out the return that the shareholders earn from their shares.
After charging depreciation and after payment of tax, the remaining amount will be distributed by all
the shareholders.
EPS is the measure of profitability of a firm from the owner point of view.
EPS of Ventura shows a continuous fall due to the impact of recession on the company.

ACTIVITY RATIOS
INVENTRY TURNOVER RATIO
Page | 45

Formula:
Days Of Inventory
(days)

Cost Of Goods Sold

Average Inventory

Year

Cost Of
Goods Sold

Average
Inventory

Jan ' 09

114277

4.5

Jan ' 10

107113

24

Jan ' 11

122392

19.5

Ratio
25374.
88
4463.0
4
6276.5
1

GRAPHICAL REPRESENTATION:

Interpretation:
Since it is an service company it has the high inventory turnover ratio. It serves the customer based
on its demand. Hence the inventory turnover ratio is high in all the years.

NET WORKING CAPITAL TURNOVER:

Page | 46

Formula:

Year
Jan ' 08
Jan ' 09
Jan ' 10
Jan ' 11

Net Working
Capital Turnover

Net Sales
Net Working Capital

Net Sales
147117000
122392000
107113000
114277000

Net Working Capital

17152000
21024000
12800000
15869000

Ratio
8.58
5.82
8.37
7.20

GRAPHICAL REPRESENTATION:

Interpretation:
A measurement comparing the depletion of working capital to the generation of sales over a given
period. This provides some useful information as to how effectively a company is using its working
capital to generate sales.
In the year 2009, there is a fall in the net working capital turnover ratio.

Page | 47

ASSET TURNOVER RATIO:

Formula:
Asset
Turnover

Year
Jan ' 08
Jan ' 09
Jan ' 10
Jan ' 11

Sales
203871000
161962000
145135000
152317000

Sales
Total Assets

Total Assets
83706000
75219000
68884000
55293000

Ratio
2.44
2.15
2.11
2.75

GRAPHICAL REPRESENTATION:

Interpretation:
This will show how fully a company is utilising its assets. A low turnover shows that a company is
not generating a sufficient volume of business for the size of the asset base. This may be remedied by
increasing sales or by disposing of some of the assets or both.
From the above graph it can be seen that the asset turnover ratio, was almost the same in all four
years.

Page | 48

FIXED ASSET TURNOVER RATIO:

Formula:
Fixed Asset
Turnover

Year
Jan ' 08
Jan ' 09
Jan ' 10
Jan ' 11

Sales
203871000
161962000
145135000
152317000

Sales
Fixed Assets

Fixed Assets
17520000
15022000
13219000
9459000

Ratio
11.64
10.78
10.98
16.10

GRAPHICAL REPRESENTATION:

Interpretation:
Fixed assets are used in the business for producing the goods to be sold. This ratio shows the firms
ability in generating sales from all financial resources committed to total assets. The ratio indicates
the account of one rupee investment in fixed assets.
Year 2011 shows the highest fixed asset turnover .

Page | 49

DEBTORS TURNOVER RATIO /AVERAGE COLLECTION PERIOD:

Formula:
Debtors Turnover
Ratio(DTR)

Net Credit Sales

Average Debtors
Average
Collection Period

Year
Jan ' 09
Jan ' 10
Jan ' 11

Net Credit
Sales
161962
145135
152317

Average Debtors

33616.5
25537.5
26566

DTR
4.82
5.68
5.73

Day
s
360
360
360

Days
Debtors
Turnover Ratio

Average Collection
Period
75
63
63

GRAPHICAL REPRESENTATION:

Interpretation:
To assess the efficiency in the management/collection of Accounts receivable. It shows how quickly
receivables are converted into cash. The higher the turnover ratio & the shorter the average collection
period. The better is the trade credit management & the better is the liquidity of the debtors, as short
collection period & high turnover ratio imply prompt payment on the part of the debtors. Average
collection period in all the years is constant and it is more than two months in all the financial years.
.

Page | 50

LEVERAGE RATIOS

CURRENT LIABILITIES TO EQUITY RATIO:

Formula:

Year
Jan ' 08
Jan ' 09
Jan ' 10
Jan ' 11

Current Liabilities
to equity (%)

Current Liability
Shareholders Equity

Current
Liabilities
49034000
39173000
42865000
29965000

Shareholders
Equity
19597000
22221000
13681000
14136000

Ratio
2.50
1.76
3.13
2.12

GRAPHICAL REPRESENTATION:

Interpretation:
Assess the short-term financing portion versus that provided by owners.

Page | 51

Other Leverage Ratios:

Long Term Debt to

Capital Structure
(%)

L T debt
Sharehold
ers Equity
Debt to Asset Ratio
(%)

Debt to Equity
Ratio (%)

Total Debt
Shareholders
Equity

Total Debt
Total assets

Interpretation:
The company is a debt free company.

Page | 52

TREND ANALYSIS

Page | 53

Trend Analysis
Trend analysis is valuable when one wants to use historical data to predict future values or to calculate
expected values for comparison to actual current values.
Trend analysis is also useful for identifying unexpected variances that may indicate strategic or operational
changes or entity weaknesses worthy of additional exploration and analysis.
TREND BALANCE SHEET
Liabilities
Share Capital
Retained Earnings
Other liabilities
Deferred tax liability
Trade & other payables
Current income tax liabilities

2011
0.36
25.20
20.24
0.00
54.07
0.12

2010
0.29
19.57
17.91
0.00
61.99
0.24

2009
0.27
29.28
17.92
0.46
50.34
1.74

2008
0.24
23.17
16.87
1.14
50.81
7.77

GRAPHICAL REPRESENTATION:

INTERPRETATION:
From the above graph, the pattern of increase & decrease in the liabilities can be observed.
It can be observed that the companies Retained Earnings was lowest in the year 2010, however trade
& other payables was high in the same year.

Page | 54

Assets
Property,plant & equipment
Intangible Assets
Investments in subsidiaries
Deferred tax asset
Trade & Other receivables
Inventories
Cash & short term deposits

2011
14.70
1.10
0.01
1.30
68.87
0.00
14.02

2010
13.88
0.84
3.96
0.51
0.01
61.17
19.63

2009
15.55
0.80
3.63
0.00
0.05
53.21
26.77

2008
16.40
1.27
3.26
0.00
0.03
55.85
23.18

GRAPHICAL REPRESENTATION:

INTERPRETAION:
It can be observed that the companies trade & other receivables is high in the year 2008, & than from
the year 2009 there is a drastic fall.
A fluctuating trend in property, plant & equipment can be observed.

Page | 55

INCOME STATEMENT:

Particulars
Revenue
Gross Profit
Operating
Profit
Net Profit

Income Statement
2011
2010
152317 145135
38040
38022
140
34

741
1165

2009
161962
39570

2008
203871
56754

1712
2618

20387
15340

GRAPHICAL REPRESENTATION:

INTERPRETAION:From the above graph it can be concluded that the Net Profit of the company is
falling drastically every year which leaves the company only with 2 options either to come up with
some new business or go for auction. Company took a wise decision to sell itself to Capita.The net
profit & the gross profit is decreasing due to decline in the sales.

Page | 56

CHAPTER 7
FINDINGS

Page | 57

FINDINGS OF THE STUDY :

1. The current ratio has shown steady trend as 1.35, 1.54, 1.30 & 1.53.
2. The quick ratio has also shown steady trend throughout the period 2008-2011 resulting as
1.35, 1.54, 1.30 & 1.53.
3. The net profit margin ratio was highest in the year 2008 & after that showed continuous fall
in the net profit.
4. The gross profit margin ratio showed a fluctuating trend throughout the period 2008-2011
resulting as 38.58, 32.33, 35.50 & 33.29. It showed the highest in the year 2008.
5. The return on investment showed a continuous falling trend as 24.36 in 2008 to 0.25 in 2011.
6. The return on equity ratio also shows a falling trend from 78.70 in 2008 to 0.17 in 2011.
7. The earnings per share ratio was very high in the year 2008 i.e. 76.70. That is decreased in
the following years.
8. The inventory turnover ratio shows a fluctuating trend as 5254.18, 3138.26 & 11901.44 in
2010. The inventory turnover ratio is zero in the year 2011 as the inventory is 0.
9. The Days of inventory ratio also shows a fluctuating trend.
10. The Net Working Capital Turnover ratio is in a fluctuating manner. It decreased in the current
year compared with the previous year from 8.58 to 7.20
11. The Asset turnover ratio shows a slight fluctuation in the ratios from 2.11 in 2008 to 2.75 in
2011.
12. The Fixed asset turnover ratio is the highest in the current year i.e. 16.10 in 2011
13. The Days of cash ratio shows a greater fluctuation throughout the period 2008-2011 resulting
as 0.05, 60.05, 46.08 & 24.77
14. The current liabilities to equity ratio is the highest in the year 2010.
Page | 58

CHAPTER 8
CONCLUSION

Page | 59

CONCLUSION :
The companys overall position looks bad. Particularly the current years position shows that
company hardly made any profits. It is better for the organization to sale the stake and hence the
stake had been sold to the capita.

Page | 60

CHAPTER 9
ANNEXURE

Page | 61

Page | 62

Page | 63

Page | 64

Page | 65

BIBLIOGRAPHY

Page | 66

Bibliography:

Sr
no
1

Author
Name
M Y Khan
P K Jain
Satish
Inamdar

Book Name
Financial Management
Text,Problem & Cases
Financial Management

Editio
n
Fifth
-

Page | 67

WEB SITES VISITED

Page | 68

 http://www.investopedia.com/university/ratios/liquiditymeasurement/ratio3.asp

http://www.ventura-uk.com/
http://www.nos.org/srsec320newE/320EL27.pdf

Page | 69