Final Report

A PROJECT REPORT ON
AN ANALYSIS OF FINANCIAL PERFORMANCE

AND CREDIT MANAGEMENT OF KERALA
SIDCO
Submitted in partial fulfillment of the requirement for the

award of
Degree of Master of Business Administration
University of Kerala
By
JUGUNU S NAIR
Register Number:
Under the guidance of
Dr. R. Raveendran Nair
Mr.Sasi. K
Faculty
Finance Head
Guide
ICM
Kerala SIDCO
Poojapura
Trivandrum
Trivandrum
Kerala SIDCO
INSTITUTE OF COOPERATIVE MANAGEMENT, POOJAPURA

UNIVERSITY OF KERALA
THIRUVANANTHAPURAM
JUNE 2015
DECLARATION
I, JUGUNU S NAIR, hereby declare that the project report

entitled, An analysis of financial performance and credit
management of Kerala SIDCO has been done by me under the
guidance of Dr.R.Raveendran Nair faculty member of Institute
of management Poojapura. I also declare that this report had not
been submitted by me, as fully or partially, for the award of any
other degree of this university or any other university.
Place: Thiruvananthapuram
Date:
JUGUNU S NAIR
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Kerala SIDCO
ACKNOWLEDGEMENT
My study at Kerala SIDCO Trivandrum has been quite an enriching and delightful
experience and I wish to acknowledge the people who did extended their help and
support to me.
It gives me a greater pleasure to place on record my sincere thanks and gratitude to

Dr. Jayalakshmi, course coordinator MBA program, ICM campus Poojapura, for
her valuable and timely assistance during the course of my study.
I am extremely thankful to my faculty guide Dr. R. Raveendran Nair

for his timely guidance and endless support throughout the course of study.
I express my sincere thanks to Mr. Sasi.K, Finance Head, Kerala

SIDCO,Trivandrum who guide me throughout the study and offered valuable
advice. I also thank all the staffs at Kerala SIDCO Trivandrum, who has helped me
to complete my study successfully.
I thank my parents and friends for their motivation and support.
I offer my gratitude to GOD almighty with whose grace I could successfully

accomplish the organization study.
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JUGUNU S NAIR
TABLE OF CONTENTS
SL.N
O
1
TITLE
INTRODUCTION
PAGE NO.
7-12
1.1 INTRODUCTION TO THE STUDY
8-9
1.2 BACKGROUND OF THE PROBLEM
9-10
1.3 OBJECTIVES OF THE STUDY
10
1.4 RESEARCH METHODOLOGY
10
1.5 METHOD OF DATA COLLECTION
10-11
1.6 TOOLS AND TECHNIQUES
11
1.7 SCOPE OF THE STUDY
11
1.8 PERIOD OF THE STUDY
11
1.9 LIMITATION OF THE STUDY
12
1.10 CHAPTERISATION
12
INDUSTRY PROFILE
13-19
COMPANY PROFILE
20-36
REVIEW OF LITERATURE
37-56
4.1 REVIEW OF LITERATURE
38-46
4.2 THEORETICAL PERSPECTIVE
47-56
DATA ANALYSIS & INTERPRETATION
57-95
5.1 RATIO ANALYSIS
58-75
5.2 COMPARATIVE BALANCE SHEET
76-83
5.3 COMPARATIVE INCOME STATEMENT
84-91
5.4 TREND ANALYSIS
92-93
5.5 CORRELATION ANALYSIS
94-95
CONCLUSION
96-102
6.1 FINDINGS
97-100
6.2 CONCLUSION
101
6.3 SUGGESTIONS
102
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BIBLIOGRAPHY
104
ANNEXURE
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LIST OF TABLES
TABLE NO
TABLE NAME
PAGE NO.
5.1
CURRENT RATIO
58
5.2
QUICK RATIO
59
5.3
ABSOLUTE LIQUIDITY RATIO
60
5.4
DEBT EQUITY RATIO
61
5.5
PROPRIETARY RATIO
62
5.6
FIXED ASSETS TO SHAREHOLDERS FUND RATIO
63
5.7
INVENTORY TURNOVER RATIO
64
5.8
STOCK VELOCITY
65
5.9
FIXED ASSETS TURNOVER RATIO
66
5.10
WORKING CAPITAL TURNOVER RATIO
67
5.11
DEBTORS TURNOVER RATIO
68
5.12
AVERAGE DEBT COLLECTION PERIOD
69
5.13
CREDITORS TURNOVER RATIO
70
5.14
DEBT PAYMENT PERIOD
71
5.15
GROSS PROFIT RATIO
72
5.16
NET PPROFIT RATIO
73
5.17
RETURN ON TOTAL ASSETS
74
5.18
RETURN ON CAPITAL EMPLOYED
75
5.19
COMPARATIVE BALANCESHEET FOR THE YEAR 2014&20013
76
5.20
78
5.21
80
5.22
82
5.23
COMPARATIVE P&L a/c FOR THE YEAR 2014&2013
84
5.24
86
5.25
88
5.26
90
5.27
TREND ANALYSIS OF NET PROFIT
92
5.28
TREND ANALYSIS OF SLAES
93
5.29
CORRELATION BETWEEN NET PROFIT AND SALES
94
5.30
COMPRESSED BALANCESHEET OF SIDCO
5.31
COMPRESSED INCOME STATEMENT OF SIDCO
LIST OF CHARTS
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CHART NO
CHART NAME
PAGE NO.
5.1
CURRENT RATIO
58
5.2
QUICK RATIO
59
5.3
ABSOLUTE LIQUIDITY RATIO
60
5.4
DEBT EQUITY RATIO
61
5.5
PROPRIETARY RATIO
62
5.6
FIXED ASSETS TO SHAREHOLDERS FUND RATIO
63
5.7
INVENTORY TURNOVER RATIO
63
5.8
STOCK VELOCITY
65
5.9
FIXED ASSETS TURNOVER RATIO
66
5.10
WORKING CAPITAL TURNOVER RATIO
67
5.11
DEBTORS TURNOVER RATIO
68
5.12
AVERAGE DEBT COLLECTION PERIOD
69
5.13
CREDITORS TURNOVER RATIO
70
5.14
DEBT PAYMENT PERIOD
71
5.15
GROSS PROFIT RATIO
72
5.16
NET PPROFIT RATIO
73
5.17
RETURN ON TOTAL ASSETS
74
5.18
RETURN ON CAPITAL EMPLOYED
75
5.19
TREND ANALYSIS OF NET PROFIT
92
5.20
TREND ANALYSIS OF SLAES
93
5.21
CORRELATION BETWEEN NET PROFIT AND SALES
95
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CHAPTER 1
INTRODUCTION
1.1INTRODUCTION TO THE STUDY

Smooth functioning of an economy requires the provision of
money at the right time in right quantity. Every enterprise whether it is big, small
or medium needs finance to carry on its operations to achieve its target. In fact,
money is the life blood of the present day world and all our economic activities are
carried out through the use of money. For carrying on business we need resources
which are pooled in the form of money. Managing a firms finance is both art and
science. It requires not only a feel for the situation and analytical skill but also a
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thorough knowledge of the techniques and tools of financial analysis and the
knowledge to apply them and interpret the results.
Financial management is the administrative function in an
organization which relate with the arrangement of cash and credit to the
organization to carry out its objectives as satisfactory as possible. Financial
management, to be more precise, is concerned with investments, financing and
dividend decisions in relation to the objectives of the company.
Financial analysis refers to the process of evaluating the
financial position and the results of operations of a business. It is carried out for the
purpose of decision making, that is evaluating businesses, projects, budgets, and
other finance related entities to determine their suitability for investment.
Typically, financial analysis is used to analyze whether an entity is stable, solvent,
liquid, or profitable enough to be invested in. when looking at a specific company,
the financial analyst may often focus on the income statement, balance sheet and
cash flow statement.
The project study has been done at Kerala Small Industries
Development Corporation (SIDCO) Thiruvananthapuram and the topic for this
study is Financial Performance Analysis and Credit in Kerala SIDCO.
Kerala SIDCO is a promotional agency for small industries, set
up in the 1975 has four decades of services its credit. This corporation is rendering
assistance to Small Scale Industries in the state, like providing infrastructure
facilities, distribution of essential raw materials, marketing of the SSI products,
undertaking civil and electrical works of state and central government owned
enterprises and offices. Moreover, Kerala SIDCO supplies Bitumen to local bodies
as modal agencies and paraffin wax to SSI units.
1.2BACKGROUND OF THE PROBLEM
Kerala SIDCO is a promotional agency providing infrastructure
facilities, distribution of essential raw materials, marketing of the SSI products etc.
Being a promotional agency in public sector it is compelled to offer credit. Credit
means delaying payments for goods or services you have already received until a
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later date. As the SIDCO provides facilities mainly on credit to their customers the
chances of accumulating bad debts are more. From the year 1984 to 2004 SIDCO
faced huge loss and after that it started acquiring profit, but till the date they could
not set off the loss incurred in the past. Proper analysis in requirements of credit
management is essential for SIDCO in order to avoid loss in future due to bad
debts or delay in recovery of debts from customers.
Financial statements are prepared to meet external reporting
obligations and also for decision making purposes. They play an important role in
setting the framework of managerial decisions. But the information provided in the
financial statements is not an end itself as no meaningful conclusions can be drawn
from these statements alone. However, the information provided in the financial
statements is of immense use in making decisions through analysis and
interpretation of financial statements.
The report prepared includes different activities, financial
statements and all the aspects of the research data collected. The study gives me
more confidence in the sense that I could handle or hold the charge of an
organization in future and could make it successful one.
The project study that I had made on Kerala SIDCO is
concentrated to the analysis of financial performance and requirement of
credit of Kerala (SIDCO) for the last five years. Financial statement analysis is
the process of identifying the strength or weakness of the firm by properly
establishing relationship between the items of the Balance sheet and the profit and
loss account.
1.3OBJECTIVES OF THE STUDY
To analyze the financial position of SIDCO.

To find out the liquidity position of the concern.
To analyze the relevance of credit management in SIDCO.
To give suggestions and recommendations in order to improve the
performance of Kerala SIDCO.
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1.4RESEARCH METHODOLOGY
The research methodology is considered as the blue print of the
study which determines the strength, reliability and accuracy of the project. It
refers to the techniques and tools used in performing the research and it deals with
the research design, data collection methods, and various statistical tools. The type
of research undertaken is analytical and descriptive in nature. Research design is
the basic framework that provides guidelines for the rest of the research process. It
specifies the method of data collection and analysis.
Descriptive research includes survey and fact finding enquiries
of different kinds. It gives a detailed interpretation and description of the state of
affairs. In analytical research one has to use the facts or information already
available and analyze these to make a critical evaluation of the material.
1.5METHOD OF DATA COLLECTION
The data that was necessary for the study was collected through
two sources: primary and secondary sources.
Primary source: Primary data are collected through the sources such as direct
observation, conducting direct personal interviews with personnels in finance
department. An informal discussion with the finance department personnel was the
primary source in this study. Observations are systematically planned one and
controlled one.
Secondary sources: Secondary data was collected from company records like
annual reports, financial statements like Balance sheets, profit and loss account.
The general information of the industry was collected from various journals
internet books and other published sources.
1.6TOOLS AND TECHNIQUES
Ratio analysis
Calculation of debt collection period
Comparative balance sheet and profit and loss account
Trend analysis
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Correlation
1.7SCOPE OF THE STUDY
The scope of the study is to make a detailed and comprehensive
analysis of all the financial aspects of the company. The study is based on the tools
mentioned above. Further the study is based on the last 5 year annual report.
The study relates about the financial performance at Kerala SIDCO,
Trivandrum.
It also relates to the management of credit.
1.8PERIOD OF THE STUDY

The study made in Kerala SIDCO, set up as s public sector
undertaking of Government of Kerala was for 30 days.
1.9LIMITATION OF THE STUDY

Majority of the data is collected through secondary source ie, financial
statements, journals, websites etc.. so that accuracy cannot be assured
All the limitations of the tools of analysis used effects the study
The results may not be applicable for other organizations as it is limited to
Kerala SIDCO Ltd.
1.9CHAPTERISATION
CHAPTER 1: includes Introduction, Background of the problem, Objectives,
Methodology, Scope, Limitation.
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CHAPTER 2: Deals with industry profile

CHAPTER 3: Deals with company profile
CHAPTER 4: Deals with review of literature and theoretical framework
CHAPTER 5: Deals with data analysis and interpretation
CHAPTER 6: Deals with findings conclusion and suggestions.
CHAPTER 2
INDUSTRY PROFILE
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2.1 SMALL SCALE INDUSTRY

Government has recognized the important role of entrepreneurs in the
industrial development of the country, especially through the small scale industries
(SSIs). SSIs are essential for Indian economy in terms of employment generation,
foreign exchange earnings, and its share in industrial output, and contribution to
national income. The Government of India and State Governments provide a
number of special facilities and incentives. The incentives not only motivate
entrepreneurs to set up industries in the small scale sector, but also strengthen the
entrepreneurial base in the economy. The new entrepreneurs face a number of
problems on account of inadequate infrastructure facilities and other support
services.
The Government offers a package of services through its specialized
institutions and motivates entrepreneurs to take advantage of the various facilities
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and establish enterprises and flourish. This package includes assistance in

obtaining finance, help in marketing, technical guidance, training, and technology
up gradation etc. It is hoped that institutional incentives would play a key role in
the promotion of small enterprises and ensure their self-sustained growth.
Small scale industry has been accorded an important place in the national
economy by the national decision makers. Small units generate employment at
relatively small capital cost, mobilize recourses of capital and skill at micro levels
and are expected to meet the rising demand for various goods and services required
by the economy. Small scale industry forms an important sector constituting nearly
40 percent of the total output in the private sector. Much more significant is the
employment generation capacity of small scale industry.
The problem of industrial sickness is the outcome of varying degrees of the
role failure of the entrepreneurs and the social entities in their environment.
Effective role performance of the social entities in the environment could have
potentially prevented the role performance of the enterprises from worsening. The
poor performance and role failure of the sick units who cannot repay the borrowed
funds in turn depletes the resource base of the state agencies and adversely affects
their capacity to help the needy units more effectively and adequately.
2.1.1 NATURE AND CHARACHTERISTICS OF SSIs

Small Scale Industries have some special features on its own: The main
characteristics of Small Scale Business are as follows:
1) Personal character: In small business concerns, the owner himself is
considered as the manager. He actively participates in all aspects of business
such as planning, organizing, decision making etc.
2) Limited Area of Operation: The operations of small scale industrial units
are generally localized. It may usually cater to the local and regional
demands. Its product may be sometimes being exported.
3) Labor intensive: They are labor intensive and so they can provide plenty of
employment opportunities. Capital investment is limited to its small size.
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4) Closely Held: A Small Scale Industrial Unit is generally owned by one man.
Sometimes it is owned by a group of persons. These persons supply the
required capital.
5) Simple Organization: Usually a small scale unit has no division of labour
because of its limited resources. It has only few layers of management.
6) Indigenous Resources: These units are indigenous resources. The required
materials and labour are obtained by the firm locally.
7) Limited scale of operation: A small scale unit has a limited share in the
market. The size of the business is small and it has low gestation period.
8) Simple Technology: highly sophisticated technologies and machineries are
rarely employed. Machinery which can be handled manually is more in use
under this sector.
9) Limited Investment: Capital investment in SSIs is generally limited
because they are not capital intensive, but labour intensive.
2.2 GLOBAL SCENARIO
The prospect of development in the sector of small business has importance
because of its beneficial impact on the industrial economy of the world. In
developing economies, entrepreneurship in small scale industries has special
importance in context to environment potential, equitable distribution of wealth,
balanced regional development and growth and above all, the preservation and
development of ancient culture, art and craft.
The small scale industrial sector is capable of addressing itself to the basic
problems of global economy viz. unemployment and disparities in the regional
development. The process of liberalization and the economic reforms has crested
wide range of opportunities for the development of small scale sector. However, at
the same time, changes in the world scenario have thrown up new challenges to the
very existence of this sector, as the integration of global markets has made
competitiveness both in terms of quality and cost vitally important as restoring of
quality goods at highly competitive prices has become the order of the day.
Currently, knowledge based industries like information technology and bio
technology are considered to be the thrust areas for the growth. Industrial output is
increasingly becoming knowledge driven, by developing new ideas and products,
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based on a strong research the small scale could make a substantial contribution,
providing they are able to develop a good marketing network.
The comparison of the performance of healthy and sick units in respect of
their basic functional subsystems like finance, production, material inputs,
manpower and marketing reveals that their performance in their respective
functional subsystems differs markedly. Their performance can be deteriorated due
to internal and external factors. Among the internal factors, the most important is
the inability of the entrepreneurs to stabilize and consolidate their relationship with
the market. It led them to a situation where they failed to secure adequate orders
and volume of business to cover their operational costs. Disturbed labour relations
brought about by their poor financial position further aggravated their low capacity
utilization and led them a situation of continuing losses. The external factors
include the non-availability of assistance regarding marketing, shortages of basic
raw materials and working capital, needs from the state agencies apart from the
damaging delays in the units dealing with the state agencies.
2.3 NATIONAL SCENARIO
The small scale industries play a vital role in the growth of the country. It
contributes almost 40 % of the gross industrial value added in the Indian economy.
By less capital intensive and high labour absorption nature, SSI sector has made
significant contribution to employment generation and also rural industrialization.
Under the changing economic scenario, SSI has to face number of diverse
problems like vast population, large scale unemployment and underemployment
and scarcity of capital resources and the like. Hence, the Govt. has been providing
some special facilities through different policies and programmes to overcome the
problems and for the growth and development of small scale industries. The efforts
of the Govt. have resulted in the phenomenal increase in the number of units in the
small scale sector. The Govt. also introduced various schemes and incentives for
the promotion of SSIs. Constant support to SSI sector by the Govt. in terms of
infrastructure development, fiscal and monetary policies have helped to emerge as
dynamic and vibrant sector of Indian economy. Over the past five decades, Govt.
policies and schemes have been to protect the interests of the SSIs and facilitate its
rapid development from time to time.
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Historically, villages in India have been self reliant. Every village used to
have its own cottage and small industry which fulfilled the requirement of the
villages. Not only these, small scale industries were also exported products all over
the world specifically to South Asia, Arab and Central Asia. Since the time of
independence, small scale industries received special privileges in the Indian
economic system. Indian government encouraged small scale industries to transfer
the economic power to the gross root levels, to generate employment, to have
balanced regional growth, and to check concentration of wealth diversification
sector owes its definition to the industries.
2.3.1 Development of SSIs In India
Since the time of independence, small scale sector in India has been a major
contributor to countrys Gross Domestic Products (GDP). This traditional sector in
India which is considered to have huge growth prospect with its wide range of
products, with 40% share in total industrial output and 35% share in exports, the
small scale industrial sector in India is acting as the engine of growth in the new
millennium
India operates today in sheer size what is perhaps the largest small industries
programme in any developing country. Small scale sector as a priority sector of the
national economy is protected and promoted in a number of ways. The growth of
small industry has been sought to be promoted over years through various Govt.
policies and measures.
However, presently, the small scale industrial sector suffers from a high rate
of mortality and growing incidence of sickness. According to latest estimates, the
percentage of sick unit in the small scale industry varies from 10 to 50 % in
various states. The closure of debilitated existence of an industrial unit involves
heavy cost to the society: it renders idle its man power; lays waste scarce financial
and material resourced invested in land and buildings, machinery and equipment
inventories and stocks. The definition of small scale industrial undertakings has
changed over years. Initially, they were classified into two categories those using
power with less than 50 employees and those using power with the employee
strength being more than 50 but less than 100. However, the capital resources
invested on plant and machinery, building has been the primary criteria to
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differentiate the SSIs. An industrial unit can be categorized as small scale unit if it
fulfills the capital investment limit fixed by the Govt. of India for the Small Scale
Sector.
2.3.2 Objectives of SSI Units
The main objectives of developing Small Scale Industrial Units in India are:
To generate large scale employment opportunities with relatively low capital
investment.
To eradicate the unemployment problems existing in the country.
To encourage the balanced regional development of the nation.
To bring the backward and rural areas too in the mainstream of national
Development.
To ensure more equitable distribution of Income & Wealth.
To improve the standard of living of the people.
To encourage easily dispersal of industries all over the country.
To reduce the concentration of economic power and wealth in a few.
To reduce the pressure on the countrys balance on payment position.
2.3.3 The Importance of promoting Small Scale Industries
The promotion of SSIs is important due to the following reasons:
As SSIs are labour intensive, it provides the possibilities for creating
employment opportunities.
In a country like India, where capital resources are scarce SSIs which has
less capital requirements is more suitable.
They can be successfully operated in rural and backward areas.
They are quick yielding.
They can act as a catalyst to enhance the growth of entrepreneurship.
Decentralization of authority is very easy to put into practice in the
management of small scale industrial units.
2.4 STATE SCENARIO
Kerala has an investor friendly environment with well structured policies
and pioneering initiatives. It boasts of a world class infrastructure. Among the
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Kerala SIDCO
leading commercial and trading centres of India, Kerala offers conducive

environment for setting up any industry.
Prominent sectors in Kerala are IT, Tourism, Agro based business including
food processing, readymade garments, ayurvedic medicines, mining, marine
products, light engineering, biotechnology and rubber based industries.
The key sectors in Kerala according to their contribution to the State GDP
are: Rubber, Coir, Tourism, Food processing, and Chemicals & Fertilizers.
There are nearly 1274 food processing units in Kerala alone. The processed
food units operate mainly in the Small Scale sector. Kerala is rich in coconut,
spices, fruit juices, vegetables, sea foods and processed foods. The spices, pickles
and marine products are major food products exports from Kerala. The state could
emerge as plantation based food products exporter through Value Addition. Its
share in the countrys total food products export is almost 20 % despite processing
limited to land mass. Two thirds of Keralas total export income comes from
processed food. The net sales have grown approximately by 11 % for the 9 months
ended 31st December 2004. The food processing sector in the state commands
nearly Rs 5000crore in exports and has a potential to become Rs 30000crore worth
industry. The industry maintains high inventory since it is dependent on a seasonal
raw material.
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Kerala SIDCO
CHAPTER 3
COMPANY PROFILE
ABOUT SIDCO
Kerala SIDCO, a promotional Agency wholly owned by Government of
Kerala was set up in November, 1975 for the development and promotion for
Small Scale Industries. Kerala SIDCO, a Public Sector Undertaking of the
Government of Kerala has four decades of servicing to its credit as a Promotional
Agency for Small Scale Industries. This Corporation is rendering valuable
assistance to Small Scale Units in the State, including consultancy at the beginning
of the project to the identification of industrial site, commissioning of project,
providing Infrastructure facilities, distribution of essential raw materials, marketing
of the SSI products, maintenance of 17 major Industrial estates, 36 Mini Industrial
Estates and undertaking Civil and Electrical works etc.
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Kerala SIDCO
Kerala SIDCO apart from its activities for development of Small Scale
industries in the State runs production units engaged in the manufacture of
wooden, steel, hospital furniture, computer furniture, laboratory equipments, and
aluminum fabrication of any design. Also marketing products manufactured by SSI
units in the state under their Marketing Assistance Scheme. Moreover Kerala
SIDCO is supplying Bitumen to Local Bodies as Nodal Agency and Paraffin Wax
to Small Scale Industries.
Currently, SIDCO is expanding its area of works by diversification to give
new vision to the small scale industries. Gods own Country, Kerala, is gifted with
abundant natural resources essential for establishing Industrial Units and SIDCO is
taking the initiative to set up industrial units. Kerala SIDCO is the Total Solution
Provider for Small Scale Sector as it offers all facilities and help to set up a Small
Scale Unit. Kerala SIDCO is now in the path of profit and is now granting basic
facilities and marketing security to the industrialists and new entrepreneurs through
its diversified activities and new working style. In the year 2012-13, Kerala
SIDCO achieved the highest turnover among state Indian SIDCOs with a turnover
of 253 crores.
3.1 History of the Company

Kerala SIDCO is actually an amalgamation of two former companies
namely Kerala State Small Industries Corporation formed in July 1961 and Kerala
Employment Promotion Corporation formed in 1974. The authorized share capital
of the company is 30 crores divided into 3 lakh equity shares of Rs. 1000 each. At
present Kerala SIDCO possesses industrial lands in 12 sites, best suited for
industrial purposes. Kerala SIDCO is in the lookout for more suitable areas across
Kerala which will be made available to investors suiting their requirements.
3.1.1 Kerala SIDCO
The Board of Directors manages the company and Government of Kerala
constitutes them, unless otherwise determined by the Government. The number of
members shall not be less than two or not more than nine. The Govt. appoints all
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Kerala SIDCO
the Directors including full time MD. The organization structure of the company is
of pyramid in shape with Chairman on the top. The MD shall execute the affairs of
the company through line managers in different steps such as finance, accounts,
marketing, production, etc.
The BODs is responsible for the overall control and supervision of the
company. The GM shall be in charge of the day to day management of the business
of the company and in the absence of MD, he shall take decisions on the financial
matter in consolidation with the finance controller.
BODs consists of:
The Chairman
Managing Director
The GM of SIDBI (2)
Non Officials (2)
Additional Secretary from Industrial Department
President of Kerala Small Scale Industrial Association
Additional Secretary from Finance Department
Governing Body & Executive Committee (as on 2013)
Chairman & Director
Sri. C.T Ahammed Ali
Managing Director
Dr. Saji Basheer
Directors:
Dr. B. Ashok
Shri. P.C Kassim
Smt. K.P Sreelakumari
Shri. N. Samuel john
Shri. K.M.A Shukkur
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Shri. C.J Joseph

Shri. K.M Abdul Majeed
Shri. K.P Hussain
Shri. K. Balanarayanan
Auditors B. Maheswari & Company
Chartered Accountants
Thiruvananthapuram
Legal Advisor Shri. R.T Pradeep
Bankers:
State Bank of India
State Bank of Travancore
Canara Bank
Bank of India
Union bank of India
Catholic Syrian Bank
UCO Bank
Indian Bank
Bank of Baroda
Federal bank
HDFC Bank
ICICI Bank
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Kerala SIDCO
District Treasury, Thiruvananthapuram.

3.1.2 Functions of Kerala SIDCO
From the very inception of the new company Kerala SIDCO, was assisting
the department of Industries in the implementation of thousands of industrial
programs.
Kerala SIDCO started in a big way with the following divisions
Technical Consistency
Research and Development
Entrepreneurs Development
Raw material Supply
Finance (Share Participation and Margin Money Loan)
Sick Unit Revival
Import and Export
Marketing
Machinery
Manufacturing
Information and Publicity
Industrial Estate and Infrastructure
3.1.3 Kerala SIDCO offers
Factory sheds and developed land in all districts of Kerala.
Industrial raw material through district depots.
Marketing assistance through district level sales emporia.
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Non ferrous die cast component, precision machine parts and

various types of furniture through production units.
3.1.4 Kerala SIDCO Objectives
The main objective of the corporation which was delineated in the Article of
Association is extracted below:
To aid, counsel, finance and protect and promote the interest of small
industries in the state, stabilizes and run any industrial undertakings, projects or
enterprise whether owned or run by Government, statutory body, company, cooperative society, firm or individuals by providing them with capital, credit, means,
resources, supply of machinery and equipments on hire purchase, procurement and
distribution of scarce raw materials, advice on Import Control Policy and Export
Promotion procedures, marketing and sales of the products, revitalization of sick
units and rehabilitation of defunct units, adequate information and publicity,
construction, maintenance, and management and administration of Industrial
Estates and Development Plots, provision of all infrastructural facilities, technical
and managerial assistance for the prosecution of their work and business.
To promote employment and entrepreneurship among the skilled, semiskilled, trained, experienced and educated members of the public by promoting,
establishing and undertaking the development of small scale and medium
industries, industrial estates, development areas and plots, growth centres, common
facility or service centres or other infrastructural works on its own or as agents of
Government or any other co-operative society or person.
To promote and operate schemes for industrial development and to develop
entrepreneurship by providing package consultancy service, including preinvestment services, investment services and post-investment services and for that
purpose to prepare and get or cause to be prepared reports, studies, surveys,
procedures, designs, blue-prints, statistics and other information necessary for
successful implementation of industrial projects.
3.1.5 Opportunities available for prospective business partners
Availability of industrial land
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New business avenue through joint venture partnership

Facilities for outsourcing parts and components.
Training to business aspirants and entrepreneur
3.1.6 Important Activities of Kerala SIDCO
It is a promotional agency for small scale industries, set up as a public sector
undertaking of Government of Kerala in 1975. This corporation is rendering
assistance to SSIs in the State, like providing infrastructure facilities, distribution
of essential raw materials, marketing of SSI products, maintenance of 17 industrial
estates, 36 mini industrial estates and undertaking Civil and Electrical works for
industries department and Govt. agencies. It is supplying Bitumen to Local Bodies
as Nodal Agency and Paraffin Wax to Small Scale Industries.
Major Functional Division & Activities under Kerala SIDCO are:
The major activities of SIDCO are under the following divisions.
Raw Material Division
Production Division
Marketing Division
Construction Division
Industrial Estate & Industrial Park Division
Information technology & telecommunication Division
Export, Import & Special projects Division
Consultancy Division
Trading Division
Training Division
Raw Material Division
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Kerala SIDCO is a promotional agency formed for promoting business

opportunities of the state to the MSME entrepreneurs and to highlight the ideal
business climate prevailing in Kerala with the main objects to counsel, finance,
protect and promote the interest of the MSME units in the state, by providing
steady uninterrupted supply of scarce, indigenous and imported raw materials and
also providing marketing assistance for their products. Kerala SIDCO works
harmoniously with MSME units in Kerala with the supports offered by the
Government of Kerala. SIDCO provides operational flexibility and act as support
mechanism for MSME units and Industries Department of the State Government.
For the effective implementation of the cardinal object, a separate division
namely Raw Material division was formed at its initial stage with 14 outlets for the
time bound supply of raw materials at nominal rate by ensuring quality.
SIDCO Raw Material Division is engaged in the distribution of various
industrial raw materials to the small scale industries sector and PSUs in Kerala, at
competitive prices.
The Raw Materials Division distributes material through 14 District Level
Depots in Kerala State.
Being a government agency set up for the development of the MSME sector
in Kerala, Raw Material Division is focusing attention and providing due
consideration to serve the MSME sector. The major items handled by the Raw
Material division are paraffin wax, wire rode, Iron and steel, Pig iron, plastic
granules, cement, coal, Galvanized Iron pipes, Aluminum sheets, Titanium dioxide,
Petroleum products especially Bitumen, Paints, Oil and Lubricants, Rubber process
oil, Agricultural implements and tools.
During the fiscal year 2012-13 Raw Material division could achieve a
turnover of Rs. 88.96 Crores compared to 79.43 Crores in 2011-12. For the current
year R.M division aimed at a target of 125.00 Crores.
Production Division
SIDCO has 8 production units spread all over Kerala. In addition to the other
activities, SIDCO is directly manufacturing some items through this Production
Units. The main customers are Government Departments, Public Sector
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undertakings and other Government/Quasi Government agencies and general

public. The Government Departments and agencies can purchase articles from
production units without tender formalities. This division manufactures Wooden
and Steel Furniture, Survey equipments, Pressure Die Cast Components, Jigs and
fixtures and machining of precision component.
Marketing Division
The Marketing Division of Kerala SIDCO provides assistance to Small
Scale Units in canvassing orders from Government and other Public Sector
Undertakings by way of Contract Marketing for marketing their products. This
division undertakes the works of all Government agencies. There are opportunities
for export of the products of Keralas SSI sector, village industries sector, etc. The
Marketing Division is now having 7 Sales Emporia, 7 Marketing Centres at various
districts of Kerala and 2 Marketing Cells. The SSI units registered with SIDCO
exhibit their products in the emporia for which SIDCO is not charging any fee.
SIDCO participates in Exhibitions and Trade fairs on behalf of SSI sector for the
promotion of their products. Steps are in progress to market SSI products like
Food, Plastic, leather, Rubber, Electrical items in addition to wood/steel/hospital
furniture and laboratory equipments.
Construction Division
The main function of this Division is to undertake construction and
maintenance work of various Govt. departments and agencies, including
construction of sheds in Industrial Estates, Industrial Development Plots, and
providing infrastructure facilities for industrial growth centres, setting up of
Industrial parks, etc. The construction Division under Kerala SIDCO has been
undertaking civil/electrical works of other Departments/PSU on centage basis in
addition to the own works of their organization. SIDCO offers a package of
integrated services for Structural Design, Preparing Detailed Estimate, Soil
Investigation, Surveying, Execution and Management of various types of Civil and
Electrical works. SIDCO is the nodal agency for implementing Infrastructure
facilities for development of plot , development of areas and construction of Multistoried buildings, other factory buildings, other public works for Industrial
Department and other sister concerns.
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Industrial Estate & Industrial Park Division

Kerala SIDCO owns 17 Conventional Industrial Estates and 36 Mini
Industrial Estates, which are functioning in different Districts of Kerala. There are
920 factory sheds in which more than 750 SSI units are functioning. Allotments of
land and sheds are made on Lease basis, Hire Purchase basis / Out Right Purchase
basis. In addition to these factory sheds, Industrial Plots are being allotted to the
entrepreneurs in Industrial Estates, Mini Industrial Estates and Industrial Parks for
constructing factory sheds of their own design to run industrial units.
Information technology & Telecommunication Division
SIDCO IT & TC Division is providing software and hardware solutions to
central and State Government Departments, Public Sector Undertakings, Local Self
Government Bodies, Autonomous Institutions and SSI Units. Kerala SIDCO IT &
TC Division supplies Hardware (Servers, Laptops, Desktop & Computer
peripherals), Software solutions, IT Consultancy Services, Telecom Products,
Office Automation Products, Annual Maintenance contract, Third Party
maintenance contract and repair and Maintenance Contract.
Export, Import & Special Projects Division
Export, Import and Special Projects Division is aimed at finding out
possibilities and suitable directions to the small scale industrialist on marketing
their products in the national and international sectors. This division is created to
undertake special projects.
The Division helps to import raw materials for the productive sector of the
industries and entrepreneurs; and ensures the presence and availability of the
quality products in the foreign markets. This division handles the range of products
starting from the Information technology Products, which the markets and
consumers demand, to the materials used for the construction sectors.
1. Office Automation products
2. Bitumen
3. Fair Price Building Material Depot
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4. Petrol Pump
5. Street Light
6. Electronic Public Toilet
7. Sanitary Napkin Vending Machine
8. Total solution for waste Management
(Bio gas / STP / Incinerator / Solid Waste Treatment Plant / Water shed /
Slaughter House)
9. Top Security Number Plates.
Consultancy Division
The Consultancy division is mainly constituted for assisting entrepreneurs
and Government/semi Government institutions right from project development to
its execution. Consultancy extends its service for project development, preparation
of project report, assistance for obtaining term loans and finally its implementation.
So far the division has bagged a handful of prestigious project for the consultancy
services.
Consultancy & Project formulation division is primarily focused on meeting
the prevalent need of the state to involve realistic and implementable projects for
various developmental sectors. They operate through multi-disciplinary panel of
consultants and associates who have extensive experience in the field of Natural
Resource Planning, Environmental planning, Tourism planning, social
development, Infrastructural Designs, Engineering and Architecture.
Kerala SIDCO Ltd will be carrying out consultancy operation of various
development projects in Kerala towards which the empanelment is invited. SIDCO
will have the right to accept or reject any proposal after evaluating the eligibility
criteria involving financial soundness, technical capability backed by competent
technical personnel and previous experience in executing consultancy projects and
as per the decision of the management without assigning any reason there off.
Trading Division
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Trading division is one of the major divisions in Kerala SIDCO. It deals with
promoting manufactures by helping them in marketing their products. SIDCO
offers its valuable brand name to quality products produced by good manufacturers
throughout the Country and help them to enter into the markets of Kerala.
Objective of the division is promotion of SSI units and other entrepreneurs
and to create job opportunities and make available quality products to the
customers at reasonable rates.
The Products which are now successfully traded by the division are SIDCO
Sabarmathi Food Products, SIDCO Drinking Water, SIDCO Washing Soap,
SIDCO Shanthi Cattle Feeds, KUBS Safe& Locks and Kripa Bone Bio Fertilizers.
The upcoming products are Sand, Note Book, Ready Mix Mortar and Agro
Organic Inputs. More products could be awaited.
Training Division
India as a nation is faced with massive problem of unemployment. On the
other hand the industrialists are complaining that they are not getting competitive
work force. The growing problem of unemployment among the youth as well as
the demand of the industrialists requires a recasting of the existing training
programmes.
We are striving hard to convert our huge human resources into productive
man power. We have thousands of Micro Small Medium Enterprises. Flow of
Multi-national Companies are increasing in India day by day to fix their units.
Traditional production or service methodologies are replacing with the emerging
trends. We have hundreds of Engineering Colleges, Polytechnics and other
Technical Vocational Skill Development Centres. We have set up a National Skill
Development Mission and also set up many Skill Development Centres throughout
the nation. Government of Kerala has also constituted a Vocational Skill
Acquisition Programme to train the students of the Arts and Science Colleges. Yet
we are lagging far behind in the development of skilled man power compare with
the demand in the emerging industries. This is a serious threat in our
developmental activities and to the march towards India a Developed Nation.
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India needs multi-million trained work force to cope up with the emerging
market demands. Career and Technical Education prepares learners for careers
directly related to a specific trade or occupation in which the learner participates.
The career courses should be demand and need-based, keeping in mind the
constantly changing requirements of technologies/industries.
Modern labour market becomes more specialized and economies are
demanding more skills, businesses are increasingly depending in new generation
career training institutes. The syllabi of career subjects should be updated on a
regular basis to keep pace with changes in technology.
Keeping in mind, the necessity of imparting modern training methodologies
in various sectors of the industry and commerce KERALA SIDCO proposes to
strengthen its Training Division in extending need based training programmes to
the community by constituting its own Training Centres as well as through Non
Governmental and other Organizations.
These Career Institutes are expected to extend training from entry-level
positions to professional levels. They are expected to handle active teaching
strategies, learner-cantered instruction, constructivist theories, and project-based
approaches to teaching more holistic instruction and a curriculum that is more
meaningful in applicability.
KERALA SIDCO Career Institutes train students for a variety of skilled
jobs, including Tool & Die, automotive technician, IT, home science, interior
designer, electronics technician, hospitality, office management, Beautician, Live
Stock Instructor, Agriculturist, etc. They shall also help students to identify
prospective employers and apply for jobs.
Super Check Cell and Quality Inspection
The super check cell is formed with the Vigilance officer, Kerala SIDCO as
the convener to conduct super check cell of the articles supplied by marketing
division and the production division with a view to ensure quality of the product /
services and to provide better after sales service to the customers. A special officer
(Quality Inspection) has been appointed exclusively for quality inspection which
will be done after the sale of products.
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Business Proposals
Business Proposals to Investors are as follows:
Technology up gradation and modernization of SSI units/production units.
Investment in Infrastructure development on SIDCOs Industrial Plots
Setting up of High Tech Industrial Parks of International Standard in
SIDCOs sites.
Setting up of advanced study centres exclusively for industrial
entrepreneurs.
3.2 Strategic Intent
Vision:
Serving Small Scale Industry on a large Scale
Mission:
To provide full client satisfaction by adding value with respect to service
quality and service experience that goes beyond managing time, cost and
quality
Objectives
SIDCO aims at the development of Small Scale Industries in the state by
providing:
Infrastructure facilities
Raw material supplies
Marketing products of SSI units
Promotional activities for SSI products
3.3 Product Profile
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Kerala SIDCO is a public undertaking. Govt. have examined the proposal

given by the company in detail and are pleased to appoint Kerala SIDCO as the
agency for procurement supply for the following items to Government Department
and Public Sector Undertaking in addition to the items enumerated to the
Government order.
The company supplies Water facilities, public water taps, plastic molded
furniture, pipes and pipes fittings, plastic water tanks and survey equipments.
Kerala SIDCO is functioning 8 production units out there.
These units include wood working units and 4 engineering units. Kerala
SIDCO is a sole canalizing agent for procurement supply of selected items
manufactured by small scale industrial units. SSI Products are Steel furniture,
hospital furniture, wooden furniture and lab equipments and chemicals. The raw
material includes iron and steel, paraffin wax, titanium dioxide, plastic granules,
galvanized iron sheets and pipes, aluminum sheets, petroleum products like
lubricants, rubber process oil and bitumen.
To support Kerala SIDCO as agency for the procurement and supply for the
following items:
1. Tarpaulin
2. Electrical chock, Condensers, Starters
3. Control panels
4. Lab Chemicals
5. Aluminum and steel products
6. Man Hole Covers
7. Wax Candles
8. Rollin shutters
9. Voltage Stabilizers
10.Agricultural tools and implements
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11.Paints and Varnishes

12.Safety matches
At present 8 production units are functioning. All units are depends on job
works. The Government departments can purchase various furniture and
equipments produced in these units without any tender formalities.
The Indian Economy is passing through the process of globalization,
liberalization and also more as the privatization. This disrupts the control on the
supply of materials among SSI Units. Almost all the items dealt in the division
have been decontrolled and have to trade these like private dealers and to face
strict competitors in the market so companys market share go on diminishing year
by year.
In order to give more help and assistance to SSI units to market their products,
Government has appointed Kerala SIDCO as a sole canalizing agency for certain
selected items. They have submitted a proposal to Government for implementing
the common branding and marketing of SSI products by their company.
Considering the importance of small scale industries in the industrialization of
the state as part of Government policy, the task of setting up an industrial park each
in the 140 Legislative Constituencies in states is being implemented by Kerala
SIDCO. Accordingly proposals from 36 constituencies were received last year
offering land for development as industrial parks. Though lands in 12 sites have
been handed over in SIDCO, the land of Mararikulam has been resumed by Govt.
and development works in industrial parks at Shornur and Thiruvarpa were
completed. Plots are being allocated to enterprises on 90 years long term lease with
suitable lease right and at a yearly rent of Rs 1 per cent.
3.3.1 Competitor
There is only one main competitor for Kerala SIDCO is KINFRA (Kerala
Infrastructural Development Corporation). Other competitors include local
companies and Foreign Multinational Companies.
3.3.2 Customer Profile
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The main customers of Kerala SIDCO are Government Departments and

Public Undertakings. The main customers of raw materials produced by Kerala
SIDCO are Iron and Steel Authority of India, Tata Iron and Steel Company Ltd.,
Vishakhapattanam Steel Plant and Madras Refineries Ltd. for Paraffin Wax.
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CHAPTER 4
REVIEW OF LITERATURE
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4.1 REVIEW OF LITERATURE

A literature review is text written by someone to consider the
critical points of current knowledge including substantive findings as well as
theoretical and methodological contributions to a particular topic. Literature
reviews are secondary sources, and as such, do not report any new or original
experimental work. Also, a literature review can be interpreted as a review of an
abstract accomplishment.
Most often with academic oriented literature, such as a thesis, a
literature review usually precedes a research proposal and results sections. Its main
goal is to situate the current study within the body of literature and to provide
context for the particular reader.
In our present day economy, finance is defined as the provision of
money at the time when it is required. Every enterprise whether big, medium or
small it requires finance to carry on various business operations and to achieve
their predetermined goals. A basic definition of finance is a branch of economics
that deals with resource management. In simple laymans terms, finance is any
area of study that helps us to get manage and invest money.
Financial statements are the records that outline the financial activities of a
business, an individual or any other entity. Financial statements are meant to
present the financial information of the entity in question as clearly and concisely
as possible for both the entity and for the readers. Financial statements for the
business usually include: income statements, balance sheet, statements of retained
earnings and cash flows as well as other possible statements.
Financial statements can be explained as, it is standard practice for business to
present financial statements that adhere to generally accepted accounting principles
(GAAP), to maintain continuity of information and presentation across
international borders. As well, statements are often audited by government
agencies, accountants, firms etc. to ensure the accuracy and tax, financing or
investing purposes. Financial statements are integral to ensuring accurate and
honest accounting for businesses and individuals alike.
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Financial statement analysis research into data relating to the stability and
profitability of businesses, especially to guide ones investing practices. At its most
basic, financial analysis involves looking at financial statements to determine if a
company is healthy. Balance sheets are important to financial analysis as they
provide a readymade of investigating performance.
Financial statement analysis is an evaluative method of determining the past,
current and projected performance of a company. Several techniques are
commonly used as part of financial statement analysis including horizontal
analysis, which compares two or more years of financial data in both dollar and
percentage form; vertical analysis, where each category of accounts on the balance
sheet is shown as a percentage of the total account; and ratio analysis, which
calculates statistical relationships between data.
Financial statement analysis can be defined as, the process of reviewing and
evaluating a companys financial statements (such as the balance sheet or profit
and loss account), thereby gaining an understanding of the financial health of the
company and enabling more effective decision making. Financial statements record
financial data; however, this information must be evaluated through financial
statement analysis to become more useful to investors, shareholders, managers and
other interested parties
Woelfel C.J quoted that, analysis of financial statement is the systematic numerical
evaluation of the relationship between one fact with the other to measure the
profitability, operational efficiency and the growth potential of the business.
R.M Shrivasthava has defined as methods employed to examine the vertical as
well as horizontal relationship between different financial variables with a view to
study profitability and financial position of business is called tools of financial
analysis.
Agarwal B.D (2005) profitability is the measure of the amount by which a
companys revenue exceed its relevant expenses. Profitability ratios are used to
evaluate management ability to create earnings from revenues generating bases
within the organization.
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As per the dictionary.com profitability is the ability of a firm to generate net

income on consistent basis. It is often measured by price to earnings ratio. Review
of literature and theories on determinanats of profitability explains that the
profitability determinants were basically divided into two main categories, namely
the internal determinants and the external determinants. The internal determinants
include management controllable factors such as liquidity, investment in securities,
investment in subsidiaries, loans and overhead expenditure.
Bourke Etal indicated that financial statement variables are those variables relate
to the balance sheet and profit and loss account. Asset liability portfolio decisions
would certainly have an impact on profitability.
Robert S Kalpan and David P Norton (1992) argue that a comprehensive
evaluation of companys performance calls for looking at financial measures as
well as operational measures, which indeed drive financial measures.
Metcaff and Titard quoted that analyzing financial statement is a process of
evaluating the relationship between the component parts of financial statement to
obtain a better understanding of a firms position and performance.
Nelson A Tom and Milller Paul quoted that financial analysis is an individual
matter and value for a ratio which is perfectly acceptable for one company or one
industry may not be at all acceptable in case of another
In the words of J. Batty, ratios can also assist management in its basic functions
of forecasting, planning, coordination, control and communication.
A financial ratio or accounting ratio is a relative magnitude of two selected
numerical values taken from an enterprises financial statements. Often used in
accounting, there are many standard ratios used to try to evaluate the overall
financial condition of a corporation or other organization. Financial ratios may be
used by managers within a firm, by current and potential shareholders (owners) of
a firm, and by a firms creditors. Financial analysts use financial ratios to compare
the strengths and weaknesses in various companies. If shares in a company are
traded in a financial market, the market price of the shares is used in certain
financial ratios.
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J.O Horrigan says, From a negative viewpoint, the most striking aspect of ratio
analysis is the absence of an explicit theoretical structure.
Hunt, William and Donaldson the ratio analysis is an aid to management in
taking correct decisions, but as a mechanical substitute for thinking and judgments,
it is worse than useless.
Gordon and Swillinglaw quoted it was reasoned that if the firm was to go out of
business, it might not be possible to sell off the current assets at their book value,
but a current ratio of 2:1 is not considered feasible for each case.
Avkiran says generally the financial performance of banks and other financial
institutions has been measured using a combination of financial ratios analysis,
bench marking, measuring performance against budget or a mix of these
methodologies.
Chien Ho and Song Zhu (2004) showed in their study that most previous studies
concerning company performance evaluation focus merely on operational
efficiency, customer services and financing performances among Australian
Financial Institutions (Elizabeth Duncan, and Elliot, 2004)showed that all
financial performance measures as interest margin, return on asset and capital
adequacy are positively correlated with customer service quality scores.
Kalpan and Urwitzz found that, in general, a lower debt ratio, a higher interest
coverage ratio, a higher return on asset ratio, a larger size, a lower market risk and
lower unique risk had a favorable influence on bond rating.
Hester and zoellner were the pioneers of bank profitability studies. In their work,
they measured the relationship between items in the balance sheet and profit and
loss account of 300 banks in Kanas City and Connecticut in the USA, for the
period from 2000 to 2003. They used the net current operating income, net profit
before income taxes, net profit after taxes as the dependent variable. They found
that the changes in asset and liability portfolios (items in the balance sheet)
produced both positive and negative results on the banks earnings. While all asset
items add a significant positive relationship, all liability items, which include
demand, time and saving deposits, were negatively related to profits.
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Profitability ratios like profit margin, return on assets and return on equity. It is
important to note that a little bit background knowledge is necessary in order to
make relevant comparisons when analyzing these ratios.
Financial statement analysis typically starts with reformulating the reported
financial information. In relation to the income statement, one common
reformulation is to divide reported items into recurring or normal items and nonrecurring or special items. In this way, earnings could be separated in to normal or
core earnings and transitory earnings. The idea is that the normal earnings are more
permanent and hence more relevant for prediction and valuation. Normal earnings
are also separated into net operational profit after taxes and net financial debt and
equity.
According to Myer, the financial statement provide a summary of the accounts of
a Business enterprise, the Balance Sheet reflecting the assets and liabilities and the
Income statement showing the result of operations during a certain period.
CREDIT MANAGEMENT
Credit means delaying payment for the goods or services you have already
received until a later date.
Agarwal says, credit management is concerned with making sure that
organization, who buy goods or service on credit, or individual who borrow money
can afford to do so and that they pay their debt on time.
Myer says credit management is implementing and maintaining a set of policies
and procedures to minimize the amount of capital tied up in debtors and to
minimize the exposure of the business to bad debts.
Credit jobs exist within any industry sector eg; manufacturing, distribution, retail,
telecoms, utilities, local authority, financial services and within any size company
from SMEs to large corporate
Key responsibilities within credit roles include risk assessment, billing, query
resolution, account reconciliation, debt collection and taking legal action when
payments are overdue.
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Robert S Kalpan says A sound credit risk management program ensures that a
corporations risk identification and reporting controls in credit processes are
adequate and functional. Top management typically gauges the companys
economic standing and loss prevention strategy by reviewing risk controls, such as
internal audit tests and departmental procedures that lower level managers put into
place.
A company needs to have an effective credit management system to be useful. This
helps determine how efficient a company will be achieving its goals and
objectives. The other side of credit is collections. A collection department that
operates effectively will help a company limit the losses it incurs, which can also
increase profit and help the shareholders earn a return on their initial investment.
Managing credit is one of the most important things that a firm can do. A well
managed credit portfolio will help the concern to obtain better loan rates, lower
interest rates, and reduce the fees associated with some types of credit cards. Credit
that is poorly managed, or not managed at all, can lead to foreclosures,
repossessions and bankruptcy.
Sherin Moraes says credit management is the process for controlling and
collecting payments from the customers. A good credit management system will
help the firm to reduce the amount of capital tied up with debtors and minimize
firms exposure to bad debts.
There is no clear definition of what credit management is. It is usually regarded as
assuring that buyers pay on time, credit costs are kept low, and poor debts are
managed in such a manner that payment is received without damaging the
relationship with that buyer. A trade credit insurance company does all that. Either
directly or in conjunction with a companys credit department. An approved credit
management policy can offer assurances to a financing bank, which may facilitate
financing.
The process of identification, analysis and either acceptances or mitigation of
uncertainty in investment decision making. Essentially, risk management occurs
anytime, an investor or fund manager analyzes and attempts to quantify the
potential for losses in an investment and then takes the appropriate action given
their investment objectives and risk tolerance. Inadequate credit risk management
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can result in severe consequences for companies as well as individuals. It is a two

step process determining what risks exist in an investment and then handling those
risks in a way best suited to your investment objectives.
Metcalf and Titard says credit risk is the risk of loss that may arise from the
failure of a business partner (also known as counter party)to reimburse a loan when
it is due. For example, if a bank expects a counterparty to reimburse a $10 million
loan on a specific date, and the counterparty fails to provide funds, the banks
incurs a credit loss. Counterparty usually fails to pay because of bankruptcy or
temporary monetary difficulties.
Haslem says credit management enables the practice of permitting a buyer to
receive goods oor services before payment. It is only as a means of increasing sales
and thereby future benefits.
Credit management can be explained as a function performed within a company to
improve and control credit policies that will lead to increased revenues and lower
risk including increasing collections, reducing credit costs, extending more credit
to credit worthy customers, and developing competitive credit terms. It is also
called credit control.
One of the best methods to avoid any of the aforementioned credit challenges
begins with a budget. A budget is merely a guideline of how you spend and how
you should allocate your resources. It is intended to track your fixed and variable
expenses as well as your savings allocations. A budget is an essential tool for any
debt management plan in that it gives you a better understanding of your financial
situation. Knowing how and where you spend your money is an essential building
block to fiscal responsibility and offers the best defence against unforeseen or
unwanted credit disasters, such as foreclosure or bankruptcy.
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REFERENCES
Woelfel C.J, An Introduction to Financial Accounting p.578
R.M Shrivastava, Financial Decicion Makingp.47
Agarwal B.D ; (2005) Advanced Financial Accounting, New Delhi; Pitambar
Publishing Company
Bourke, etal (2002) Advanced Accounting, New Delhi. Publishing
Compnay:Chand.
Robert S Kalpan and David P Norton, The balanced score card-Measures
that Drive Performance , Harward Business Review, January- February
1992.
Metcaff and Titard, Principles of Accounting,p.157
Nelson A Tom and Miller Paul. Modern Management Accounting(1977)
Batty J, Management Accounting (may 1965)p.413
J.O Horrigan, A Short Strory of Financial Ratio Analysis, The Accounting
Review, Vol.43, (April 1968), 284-94
Hunt, Williams and Donaldson, Basic Business Finance, (1971), p.116
Gordon and Swillinglaw, (2004) Performance Measurement of Taiwan
Commercial Banks, International Journal of Productivity and Performance
Management, Vol.53, No.5, pp.425-434
Avkiran N K (1995), Developing an Instrument to Measure Customer
Service Quality in Branch Banking, International Journal of Banks
Marketing, Vol.12 No.6 pp.10-18
Chien Ho and Song Zhu (2004) efficiency customer services and financial
performance among Australian financial institutions, International journal
Bank Marketing, Vol.22,No.5, pp.319-342
R.S Kalpan and G.Urwitzz Statistical Models of Bond Rating :A
Methodological Inquiry, Journal of Business, Vol.52(April 1979)232-262
Hester and Zoellner
(1994) Financial Management Vol.1
publications:chand
Myer (2002), Advanced Accounting, New Delhi: Prentice-Hall of India
Private Limited.
Agarwal (2005) Corporate Finance and Credit Management, New Delhi:
Vikas Publishing House Private Limited.
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Sherin Moraes (2006), Research Methodology- Methods and Techniques,

New Delhi: New Age International publishers
Metcalf and Titard Financial Management(Ninth Edition) New Delhi,
Vikas Publishing House Pvt Ltd
Haslem accounting for managers (2002)New Delhi New Age International
Publishers
4.2 THEORETICAL PERSPECTIVE
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The financial statements reveal the true and fair of

the financial position of the concern. Financial statement analysis (or financial
analysis)the process of understanding the risk and profitability of a firm (business,
sub-businesses or project) through analysis of reported financial information, by
using different accounting tools and techniques.
According to Metcalf and Titard, analysis of
financial statement is a process of evaluating the relationship between component
part of a financial statement to obtain a better understanding of a firms position
and performance.
The ideal financial statements should have the following characterics:
Depict true financial position

Effective presentation
Attractive
Comparability
Analytical representation
Easiness
Brief
Promptness
4.2.1 Objectives
4.2.2
To analyze the financial position of SIDCO.

To find out the liquidity position of the concern.
To analyze the relevance of credit management in SIDCO.
To give suggestions and recommendations in order to improve the
performance of Kerala SIDCO.
Tools and Techniques used for study
Ration analysis
Comparative balance sheet and profit and loss account
Trend analysis
Correlation analysis
Calculation for debt collection period
4.3 RATIO ANALYSIS
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Ratio analysis is one of the techniques of financial

analysis where ratios are used as a yardstick for evaluating the financial condition
and performance of a firm. It aims at making use of quantitative information for
decision making. A ratio is an expression of relationship between two variables.
Ratios can be computed from the basic financial statements- balance sheet and
profit and loss account.
Ratio analysis is an important and widely used tools
of analysis of financial statements. It is essentially an attempt to develop
meaningful relationship between individual items or groups of items in the balance
sheet or profit and loss account. The object and utility of ratio analysis as a
technique of financial analysis is confined not only to the internal parties but to the
trade creditors, banks and lending institutions also. It functions as a sort of health
test. In the nut shell, ratio analysis gives the answer to the problems such as:
Whether the enterprises financial position is basically sound

Whether the capital structure of the business is in proper order
Whether profitability of the enterprise is satisfactory
Whether the credit policy in relation to sales and purchase is sound
Whether the company is credit worthy
Thus, ratio analysis highlights the liquidity, solvency, profitability.
Advantages of Ratio Analysis

Following are some of the advantages of ratio analysis:
Simplifies financial statements:- Ratio analysis simplifies the
comprehension of financial statements. Ratios tell the whole story of
changes in the financial condition of the business.
Facilitates inter-firm comparisons:- Ratio analysis provides data for interfirm comparison. Ratio high light the factors associated with successful and
unsuccessful firms. They also reveal strong firms and weak firms,
overvalued and undervalued firms.
Makes intra firm comparison:- Ratio analysis also makes possible
comparison of the performance of the different divisions of the firm. The
ratios are helpful in deciding about their efficiency or otherwise in the past
and likely performance in the future.
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The following are the important categories of ratios used for analysis of
financial performance of Kerala SIDCO.
A. Liquidity Ratios
1. Current ratio
2. Acid test ratio or Quick ratio
3. Absolute liquidity ratio
B. Solvency Ratios
1. Debt-equity ratio
2. Proprietary ratio
3. Fixed assets to shareholders fund ratio
4. Current asset to shareholders fund ratio
C. Efficiency Ratios
1. Inventory Turnover Ratios
2. Working Capital Ratios
3. Current Asset Turnover Ratios
4. Fixed Asset Turnover Ratios
5. Debtors Turnover Ratios
6. Debt Collection Period (in days)
7. Creditors Turnover Ratios
8. Debt Payment Period(in days)
D. Profitability Ratios
1. Gross Profit Ratio
2. Net Profit Ratio
3. Return on Capital Employed
4. Return on Shareholders Fund
5. Return on Total Asset
A. LIQUIDITY RATIOS
1. Current Ratios
Current ratio expresses the relationship between current assets and current
liabilities. It is computed by dividing current assets by current liabilities. The
higher current ratio is a clue that the company will be able to pay its debts
maturing within a year. On the other hand, a lower current ratio points to the
possibility that a firm may not be able to pay its short term debt.
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Current Ratio = Current assets Current liabilities

Current assets are those, the amount which can be realized within a period of one
year. It includes cash in hand, cash at bank, bills receivable, sundry debtors, stock,
prepaid expenses, short term investments, etc..
Current liabilities are those amounts which are payable within a period of one year.
Current liabilities are creditors, bills payable, bank overdraft, outstanding
expenses, income tax payable, proposed dividend, etc.
2. Quick Ratio
This ratio is sometimes known as acid test ratio or liquidity ratio. It
shows the relationship between quick assets and current liabilities. These liquid
assets are those which are easily converted into cash immediately without any
diminishing value.
Quick Ratio= Quick Assets Current Liabilities
The term quick asset refers to current assets which can be converted into cash
immediately. It comprises all current asset except stock and prepaid expenses.
3. Absolute Liquidity Ratio
The ratio is calculated by dividing the absolute liquid assets (cash in hand, cash at
bank and marketable securities) by current liabilities. It is also known as cash
position ratio. Bank overdraft often not included for the purpose quick ratio as well
as absolute liquidity ratio as it is considered as a permanent arrangement with
banks.
Absolute Liquidity Ratio=(cash +Marketable securities ) Current Liabilities
B. SOLVENCY RATIOS
Many of the financial analysts are interested in the relative use of debt
and equity in the firm. These ratios measure the long term solvency position of the
firm. The important leverage ratios are:
1. Debt- equity ratio
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Debt-equity ratio expresses the relationship between debt and equity. Debt
equity ratio is directly computed by dividing total debt by net worth.
Debt Equity Ratio= Total debt Net worth
2. Proprietary Ratio
The proprietary ratio relates to the shareholders fund to total sales. This
ratio shows the long term solvency of the business. It is calculated by dividing
shareholders fund by the total assets. Total assets include goodwill (excluding
fictitious assets).
Proprietary Ratio= Shareholders fund Total Assets
C. EFFICIENCY RATIOS
1. Inventory Turnover Ratio
This ratio indicates the effectiveness of the inventory management. The
ratio how speedily the inventory is turned into accounts receivables through sales.
Higher the ratio, the more efficiently the inventory is said to be managed vice
versa.
Inventory Turnover Ratio = Net Sales Average Stock
or
Inventory Turnover Ratio = Cost of Goods Sold Average Stock
Cost of goods sold = Sales Gross Profit
Average Stock = (Opening Stock + Closing Stock)/2
2. Working Capital Turnover Ratio
This ratio indicates the number of times the working capital is turned over
in the course of a year. The ratio measures the efficiency with which the working
capital is being used by the firm. A higher ratio is being used by a firm. A higher
ratio indicates efficient utilization of working capital.
WCT ratio = Net Sales Net Working Capital
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3. Current Assets Turnover Ratio

Current assets ratio indicates the efficiency with which current assets turn
into sales. A high ratio implies that the current assets are being utilized efficiently
by the firm and also indicates reduced lock up of funds in current assets. An
analysis of this firm over a period of time reflects working capital management of
the firm.
Current Assets Turnover Ratio=Net Sales Current Assets
4. Fixed Assets Turnover Ratio
It shows the relationship between fixed assets and sales. Yet it includes
the extent to which the investments in fixed assets contribute towards sales. The
ratio is calculated by
Fixed Assets Turnover Ratio= Net Sales Net Fixed Assets
5. Debtors Turnover Ratio
Debtors turnover ratio shows the extent of trade credit granted and the
efficiency in the collection of debts. Thus, it is an indication of efficiency of trade
credit management and prompt payment by the customers or debtors.
Debtors Turnover Ratio= Net Credit Sales Average Accounts Receivable
6. Debt Collection Period
Debt collection period measures how long it takes to collect cash from the debtors
by the firm. The actual collection period can be compared with the stated credit
terms of the company. If the period is longer than those terms, then it indicates
insufficiency in the procedure of collecting debts.
Debt Collection Period=
Sundry Debtors
365
Net Sales
7. Creditors Turnover Ratio
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The creditors turnover ratio indicates the prompt payment made by the
firm to its creditors. This ratio is similar to the debtors turnover ratio. It compares
creditors with the total credit purchases. It signifies the credit period enjoyed by
the firm in paying creditors. Accounts payable include both sundry creditors and
bills payable.
Creditors turnover ratio= Net credit purchases Average accounts payable
8. Debt Payment Period
Measurement of debt payment period shows that the average time
taken to pay for goods and services purchased by the company. In general, longer
period available is considered as good, but if a too long period is taken to pay
creditors the credit rating of the company may suffer, thereby making it more
difficult to obtain suppliers in the future.
Debt payment period=
Sundry Creditors
365
Net Purchases
D. PROFITABILITY RATIOS
This ratio expresses the relationship between gross profit and net sales.
Gross profit means net sales minus cost of goods sold. Net sales means sales minus
sales returns. Cost of goods sold means opening stock, purchases and purchase
expenses minus closing stock. Gross profit ratio is liability significant as it is a
useful test of profitability and management efficiency.
Gross Profit =
Gross Profit
100
Net Sales
2. Net Profit Ratio
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It expresses the relationship between net profit and net sales. The profit
margin indicates the management liability to operate the business successfully.
Their ratio measures the overall profitability of the firm which is useful to the
owners.
Net Profit
Net Profit Ratio= Net Sales 100

3. Return on Total Sales
It is calculated by dividing net profit by total sales. The ideal ratio of return
on assets to be kept is 1%.
Net Profit
Return on Total Sales= Total Salles 100

4. Return on Shareholders Fund
This ratio shows the rate of profit on shareholders fund. It relates the profit
available for the shareholders to their investments. A company may maintain the
profit as compared to the total investment made.
Return on Shareholders Fund=
Net Profit
100
'
Shareholde r s Fund
2. COMPARATIVE FINANCIAL STATEMENTS

The preparation of comparative financial statements is an important device of
horizontal financial analysis. Financial data becomes more meaningful when it is
compared with similar data for a previous period or a number of prior periods.
Statements prepared in a form that reflects financial data for two or more periods
are known as comparative statements. Annual data can be compared with similar
data for years. Such statements are very helpful in measuring the effects of the
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conduct of a business during the period under consideration. Comparative

statements can be of two types;
1. Comparative Balance Sheet
2. Comparative Income Statements
1. Comparative Balance Sheet
In this statement two or more different years data can be used for comparing assets
and liabilities, and to find out any increase or decrease in these items. This
facilitates the comparison of figures of two or more periods and provides necessary
information, which may be useful in forming an opinion regarding the financial
condition as well as the progressive outlook of the concern.
2. Comparative Income Statements
This statement discloses the net profit or net loss resulting from the operations of
business. Such statements show the operating results for a number of accounting
periods so that changes in absolute data from one period to another period may be
stated in terms of absolute change or in terms of percentages. This statement helps
in deriving conclusions, as it is very easy to ascertain the change in sales volume,
administrative expenses, selling and distribution expenses, cost of sales etc.
3. TREND RATIOS
Under this technique of financial analysis, the ratios of different items for various
periods are calculated and then a comparison is made. An analysis of ratios over
the past few years may well suggest the trend or direction in which the concern is
going upward or downward. The method of trend percentages is a useful analytical
device for the management since by substituting percentages for the larger
amounts; the brevity and readability are achieved.
TREND ANALYSIS
In financial analysis the direction of change over a period of years is of crucial
importance. Trend analysis of ratio indicates the direction of change. This kind of
analysis is particularly applicable to the items of profit and loss account. For trend
analysis the use of index numbers is generally advocated. Assign the number 100
to items of the base year and to calculate the percentage change in each item of
other years are as relation to the base year.
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Characteristics
Trend analysis refers to long period changes
It shows the definite and the basic tendency of the statistical data with the
passage of time
It is smooth, regular and long term movement of statistical data. The
movement can be upward, downward or constant
Sudden and erratic movements either in upward or in downward direction
have nothing to do the trend.
Procedure for calculating Trends
Assign the number 100 to items of the base year
Calculate the percentage changes in each items of other years in relation to
the base year.
4. CORRELATION ANALYSIS
Correlation is the relationship between any two or more variables. Simpson and
Kafka defines, Correlation analysis deals with the association between two or
more variables. Two variables are said to be correlated if the change in one
variable results in a corresponding change in the other variable. That is, when two
or more together, we say they are correlated. Correlation analysis refers to the
technique used in measuring the closeness of the relationship between the variables
Karl Pearsons coefficient of correlation.
Types of Correlation
Simple, Partial and Multiple correlation

Positive and negative correlation
Perfect and imperfect correlation
Linear non linear correlation
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CHAPTER 5
DATA ANALYSIS AND INTERPRETATION
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RATIO ANALYSIS
LIQUIDITY RATIOS
Liquidity is the ability of the firm to meet its current liabilities as they fall due.
Since liquidity is basic to continuous operations of the firm it is necessary to
determine the degree of liquidity of the firm.
1. Current Ratio
Current ratio =
Current Assets
Current Liabilities
Table no: 5.1 Current Ratio (Rs. In lakhs )

Year
2010
2011
2012
2013
2014
Current Assets
5630.19
7469.48
9499.59
12085.42
16739.64
Current Liabilities
6316.71
7804.33
8742.45
11435.02
16647.7
Current ratio
.891
.957
1.086
1.057
1.005
Source : Secondary Data
Chart no: 5.1 Diagram showing Current Ratio from 2010 to 2014
Current Ratio
1.2
1
0.89
1.09
1.06
2012
2013
0.96
0.8
Current Ratio
0.6
0.4
0.2
0
2010
2011
Year
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2014
Kerala SIDCO
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Interpretation:
The current ratio of firm measures the short term solvency, i.e., its ability to meet
short term obligations. In a sound business, a current ratio of 2:1 is considered to
be an ideal one. It provides margin of safety to the creditors.. The company cannot
achieve sound solvency position. The firm has opportunity for maintaining
adequate working capital, because the firm achieved its highest current ratio in
2012 at an increasing rate. Later on there is a slight decrease in the current ratios of
2013 and 2014. Lowest current ratio shows in the year 2010. There after the
current ratio of the firm improved.
2. Quick Ratio
Quick Assets
Quick Ratio= Current Liabilities

Table no: 5.2 Quick Ratio (Rs in lakhs)
Year
2010
2011
2012
2013
2014
Quick Assets
5488.07
7286.40
9267.51
11551.29
16340.70
Current Liabilities
6316.71
7804.33
8742.44
11435
16647.69
Source: Secondary Data
Chart no:5.2 Diagram showing Quick Ratio
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Quick Ratio
.869
.934
1.06
1.010
.981
Kerala SIDCO
Quick Ratio
1.2
1
0.87
1.06
1.01
0.98
2012
2013
2014
0.93
0.8
Quick Ratio
0.6
0.4
0.2
0
2010
2011
Year
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Interpretation
A quick ratio of 1:1 is considered as satisfactory, as a firm can easily meet all its
current liabilities. If the ratio is less than 1:1, then the financial position of the
concern shall be deemed to be unsound. On the other hand, if the ratio is more than
1:1 then the financial position of the concern is sound and good. Quick ratio is the
true test of business solvency. In 2010 the company had not achieved a sound
financial position to meet its all current liabilities and in the year 2012 and 2013 it
exceeded 1:1.
3. Absolute Liquidity Ratio
Absolute liquidity ratio=
Cash+ Marketable Securities

Current Liabilities
Table no: 5.3 Absolute Liquidity Ratio (Rs in lakhs)

Year
2010
2011
2012
2013
2014
Absolute Liquid Assets

869.96
1617.96
1223.48
1792.21
1881.15
Current Liabilities
6316.71
7804.33
8742.44
11435
16647.69
Source: Secondary Data
Chart no: 5.3 Diagram Showing Absolute Liquidity Ratio
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Absolute Ratio
.14
.20
.14
.16
.11
Kerala SIDCO
Absolute Liduidity Ratio

0.2
0.2
0.15
Liquidity Ratio
0.14
0.14
0.16
0.11
0.1
0.05
0
2010
2011
2012
2013
2014
Year
Interpretation
A ratio of 0.75: 1 is recommended to ensure liquidity. From the analysis it is clear
that the absolute liquid position of SIDCO has not attained a favourable position
even from 2010 to 2014. The firm has average cash position.
SOLVENCY RATIOS/ LIVERAGE RATIOS
Solvency means the ability of the business to repay its outside liabilities. Here, the
term solvency ratios have been used to mean long term financial position of the
business.
1. Debt-Equity Ratio
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Debt equity ratio= Debt Equity

Table no.5.4 Debt Equity Ratio
Year
Debt
Equity
2010
2011
2012
2013
2014
1227.18
1704.25
7013.97
7107.3
7396.13
2528.33
3148.33
-980.19
-781.65
-1467.00
Debt Equity
Ratio
.48
.54
-7.15
-9.09
-5.04
Source: Secondary data
Chart no:5.4 Diagram showing Debt equity ratio
Debt Equity Ratio

2
0.48
0.54
-7.15
-9.09
-5.04
2010
2011
2012
2013
2014
0
-2
Debt Equity Ratio
-4
-6
-8
-10
Year
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Interpretation:
Ratio of 2:1 is considered as sound debt equity ratio. The analysis made here
shows that from the year 2010 to 2014 the amount of debt increases and so the
ratio is high. It shows that the claims of creditors are greater than that of the
owners. The company cannot achieve good debt equity ratio. The ratio is below
2:1. The ratio becomes negative from the year 2012 to 2014 due to the cumulative
losses. This is rare as it is tough for businesses to survive on negative equity. A
lower debt equity ratio implies a greater claim on owners than creditors.
2. Proprietary Ratio
Proprietary Ratio=
Shareholders Fund
Total assets
Table no:5.5 Proprietary Ratio (Rs in lakhs)

Year
2010
2011
2012
2013
2014
Shareholders Fund
2528.33
3148.33
-980.19
-781.65
-1467.00
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Total Assets
4828.82
6089.71
15033.71
17760.66
22576.82
Proprietary Ratio
.52
.52
-.065
-.044
-.065
Kerala SIDCO
Proprietary Ratio
0.6
0.52
0.52
0.5
0.4
0.3
proprietary Ratio
0.2
0.1
-0.04
0
-0.1
2010
-0.07
2012
2011
2013
-0.07
2014
Year
Cha
rt no:5.5 Diagram showing Proprietary Ratio
Interpretation:
The proprietary ratio shows the contribution of stockholders in total capital of the
company. A high proprietary ratio, therefore, indicates a strong financial position
of the company and a greater security for creditors. A low ratio indicates that the
company is already heavily depending on debts for its operations. A large portion
of debts in the total capital may reduce creditors interest, increase interest expense
and also the risk of bankruptcy. The acceptable ratio is 1:3. Here the proprietary
ratio goes negative from the year 2012 to 2014 because of the cumulative loss.
3. Fixed assets to Shareholders Fund Ratio:
Fixed assets to Shareholders Fund Ratio=
assets
Shareholders Fund
Table no:5.6 Fixed assets to Shareholders Fund Ratio (Rs in lakhs)

Year
2010
2011
2012
2013
2014
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Fixed Assets
257.43
1094
5380.96
5215.63
5174.13
Shareholders Fund
2528.33
3148.33
-980.19
-781.65
-1467.00
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Proprietary Ratio
.10
.35
-5.48
-6.67
-3.53
Kerala SIDCO
Fixed assets to Shareholders Fund Ratio
Fixed assets to Shareholders Fund Ratio
1
0
-1
-2
-3
-4
-5
-6
-7
0.1
0.35
-5.48
-3.53
2010
2011
2012
-6.67
2013
2014
Year
Chart no:5.6 Diagram showing Fixed assets to Shareholders Fund Ratio

Interpretation:
The ratio shows the proportion of shareholders fund invested in fixed asset. If the
ratio is greater than 1 it means the creditors fund has been used to acquire a part of
fixed assts. Here the ratios are below 1, so creditors fund has not been used in fixed
assets. From 2010 to 2014 the fixed assets shows an increasing trend.
ACTIVITY RATIO:
Activity ratio measures how efficiently assets are employed by the firm. These
ratios indicate the speed with which assets are converted into sales. These ratios are
also called efficiency ratios.
1. Inventory turnover ratio
Sales
Inventory Turnover Ratio= Inventory

Table no:5.7 Inventory Turnover Ratio (Rs in lakhs)
Year
2010
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Sales
9180.72
Inventory
141.44
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Inventory Turnover Ratio

64.91
Kerala SIDCO
2011
2012
2013
2014
12368.04
19908.01
23640.65
31414.33
182.55
231.67
534.10
395.73
67.75
85.93
44.26
79.38

85.93
100
80
64.91
67.75
2010
2011
60
40
20
0
2012
2013
44.26
2014
79.38
Year
Ch
art no:5.7 Diagram showing Inventory Turnover Fund Ratio
Interpretation:
The inventory turnover ratio signifies the liquidity of the inventory. There is no
standard ratio for the inventory turnover. A high inventory turnover ratio indicates
brisk sales. The ratio is a measure to discover the possible trouble in the form of
over stocking. A low inventory turnover ratio results in blocking of funds in
inventory. Here the ratio is high which represents satisfactory inventory level.
There is a positive and increase in the ratio which implies the overall inventory
efficiency of SIDCO is sound.
2. Stock velocity
Stock velocity= 365 Inventory Turnover Ratio
Chart no:5.8 Stock Velocity (Rs in lakhs)
Year
2010
2011
2012
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Inventory turnover
64.91
67.75
85.93
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Stock velocity
5.6
5.4
4.2
Kerala SIDCO
2013
2014
44.26
79.38
8.2
4.6
Source : Secondary Source
stock velocity
stock velocity
9
8
7
6
5
4
3
2
1
0
5.6
5.4
4.2
2010
2011
2012
2013
8.2
2014
4.6
Year
Cha
rt no:5.8 Diagram showing stock velocity
Interpretation:
Stock velocity shows decreasing trend from 2010 to 2012. In the year 2013 it is at
its maximum. Again it decreased in to minimum. Stock velocity represents amount
of inventory remains in the firm or it helps in analyzing whether the inventory is
over stock or under stock. So low ratio represents sound performance of SIDCO in
inventory maintenance.
3. Fixed Assets Turnover Ratio
Fixed Assets Turnover Ratio= Net Sales Fixed Assets
Table no:5.9 Fixed Assets Turnover Ratio (Rs in lakhs)
Year
2010
2011
2012
2013
2014
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Sales
9180.72
12368.04
19908.01
23640.65
31414.33
Fixed Assets
257.43
1093.94
5380.96
5215.63
5174.13
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Fixed Assets Turnover Ratio

35.66
11.30
3.70
4.53
6.07
Kerala SIDCO

40
35
35.66
30
25
20
15
11.3
10
5
0
3.7
2010
2011
2012
2013
4.53
2014
6.07
Year
Chart no:5.9 Diagram showing Fixed Assets Turnover Fund Ratio
Interpretation:
The ratio indicates the extent to which the investments in fixed assets contribute
towards sales. If compared with the previous year, it indicates whether the
investment in fixed assets has been judicious or not. Here the fixed assets of
SIDCO are increasing from 2010 to 2014 and the ratio decreases from 2011 to
2014. Soo contributiom of assets towards sales is low.
4. Working Capital Turnover Ratio
Working capital turnover ratio = Sales Working capital
Table no:5.10 Working capital Turnover Ratio (Rs in lakhs)
Year
2010
2011
2012
2013
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Sales
9180.72
12368.04
19908.01
23640.65
Working capital
(686.52)
(334.85)
757.15
650.40
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Working capital Turnover Ratio

-13.37
-36.94
26.29
36.35
Kerala SIDCO
2014
31414.33
91.94
341.68

400
350
341.68
300
250
200
150
100
26.29
50
0
-13.37
-50
-100
2010
36.35
-36.94
2011
2012
2013
2014
Year
Chart no:5.10 Diagram showing Working capital Turnover Ratio

Interpretation:
This ratio indicates the turnover of the firms networking capital in the course of
the year. It is a good measure of over trading and under trading. Here current
liabilities of SIDCO are higher than current assets from 2010 to 2011 and sp net
working capital was negative and operating cost will be high. After 2011 net
working capital changes to positive value. Net sales show an increasing trend from
2010 to 2014.
5. Debtors Turnover Ratio
Debtors Turnover Ratio= Net Sales Accounts Receivable
Table no: 5.11 Debtors Turnover Ratio (Rs in lakhs)
Year
2010
2011
Sales
9180.72
12368.04
ICMPOOJAPURA
Average Accounts Receivable

3271.60
3880.58
Page 72
Debtors Turnover Ratio

2.8
3.18
Kerala SIDCO
2012
2013
2014
19908.01
23640.65
31414.33
5861.17
8027.29
9924.21
3.40
2.94
3.16
DebtorsTurnover Ratio
4
3.5
3.4
3.18
3
2.5
Debtors Turnover Ratio
2
1.5
1
0.5
0
2.8
2010
2011
2012
2.94
2013
3.16
2014
Year
Chart no:5.11 Diagram showing Debtors Turnover Ratio

Interpretation:
Debtors velocity indicates the number of times the debtors are turned over during
a year. Generally, higher the value of debtors turnover the more efficient is the
management of debtors/ sales or more liquid are the debtors. Similarly, low
debtors turnover implies inefficient management of debtors/sales and less liquid
debtors. Here the ratio shows efficient management of debtors/sales or more liquid
are the debtors.
6. Average Debt Collection Period
Debt Collection Period=
Sundry Debtors
365
Net Sales
Table no: 5.12 Debt Collection Period (Rs in lakhs)

Year
Sales
ICMPOOJAPURA
Sundry debtors
Page 73
Debt Collection Period
Kerala SIDCO
2010
2011
2012
2013
2014
9180.72
12368.04
19908.01
23640.65
31414.33
3654.74
4106.43
7179.78
8874.79
10973.62
145.30
121.19
131.64
137.02
127.50

150
145
140
135
131.64
130
125
121.19
120
115
110
105
145.3
2010
2011
2012
137.02
2013
127.5
2014
Year
Chart no:5.12 Diagram showing Debt Collection Period

Interpretation
It measures the quality of debtors. Generally, the shorter the average collection
period the better is the quality of debtors as a short collection period implies quick
payment by debtors. Similarly, a higher collection period implies as inefficient
collection performance which in turn adversely affects the liquidity or short term
paying capacity of a firm out of its current liabilities. Moreover, longer the average
collection period, larger is the chances of bad debts. Here debt collection period of
SIDCO is high.
7. Creditors Turnover Ratio
Creditors turnover ratio= Net credit purchases Average accounts payable
ICMPOOJAPURA
Page 74
Kerala SIDCO
Table no: 5.13 Creditors turnover ratio (Rs in lakhs)

Year
2010
2011
2012
2013
2014
Net Purchases
8346.95
11327.98
17004.61
21301.54
29310.83
Accounts Payable
4609.38
5828.29
6536.71
9153.07
12434.11
Creditors Turnover Ratio

1.8
1.9
2.6
2.3
2.3
Creditors turnover ratio
Creditors turnover ratio
3
2.5
2
1.5
1
0.5
0
2.6
1.9
1.8
2010
2011
2012
2.3
2013
2.3
2014
Year
Chart no:5.13 Diagram showing Creditors turnover ratio
Interpretation
The ratio indicates the number of times the accounts payable rotate in the year. It
signifies the credit period enjoyed by the firm in paying its creditors. It shows the
promptness in making payment of credit purchases. Here the SIDCO is having
average credit worthiness.
8. Debt payment period
Debt payment period=
Sundry Creditors
365
Net Purchases
Table no: 5.14 Debt payment period (Rs in lakhs)
ICMPOOJAPURA
Page 75
Kerala SIDCO
Year
2010
2011
2012
2013
2014
Net Purchases
8346.95
11327.98
17004.61
21301.54
29310.83
Accounts Payable
5122.28
5521.49
7551.49
10754.66
14113.57
Debt payment period

223.99
177.91
162.09
184.28
175.75
Debt payment period

250
200
177.91
162.09
150
Debt payment period
100
50
0
223.99
2010
2011
2012
184.28
2013
175.75
2014
Year
Chart no:5.14 Diagram showing Debt payment period

Interpretation
The average payment period represents the average number of days taken by the
firm to pay its creditors. Generally, lower the ratio better is the liquidity position of
the firm and higher the ratio less liquidity is the firms position. Higher ratio may
also imply less discount facilities availed or higher price paid for the goods
purchased in credit.
PROFITABILITY RATIO
Profitability is an indication of the efficiency with which the operations of the
business are carried on. Poor operational performance may indicate poor sales and
hence poor profits.
ICMPOOJAPURA
Page 76
Kerala SIDCO
Gross Profit =
Gross Profit
100
Net Sales
Table no: 5.15 Gross Profit Ratio (Rs in lakhs)

Year
2010
2011
2012
2013
2014
Gross Profit
775.24
993.5
2607.54
1112.52
1916.84
Sales
9180.72
12368.04
19908.01
23640.65
31414.33
Gross Profit Ratio

8.44
8.03
13.09
4.71
6.10
Gross Profit Ratio

13.09
15
8.03
10
Gross Profit Ratio
5
0
8.44
2010
2011
2012
4.71
2013
6.1
2014
Year
Chart no:5.15 Diagram showing Gross Profit Ratio

Interpretation
The gross profit ratio indicates the extent to which selling price of goods per unit
may decline without resulting in losses on operations of the firm. It reflects the
efficiency with which a firm produces its products. As the gross profit is found by
deducting cost of goods sold from sales, higher the gross profit better is the result.
There is no standard norm for gross profit ratio, but gross profit must be adequate
to cover operating expense. A low gross profit ratio generally indicates high cost of
goods sold due to unfavourable purchasing policies, lesser sales, lower selling
prices etc.
2. Net Profit Ratio
ICMPOOJAPURA
Page 77
Kerala SIDCO
Net Profit
Net Profit Ratio= Net Sales 100
Table no: 5.16 Net Profit Ratio (Rs in lakhs)

Year
2010
2011
2012
2013
2014
Net Profit
182.60
91.11
195.44
72.05
(421.19)
Sales
9180.72
12368.04
19908.01
23640.65
31414.33
Net Profit Ratio

1.98
.74
.98
.30
(1.3)
Net Profit Ratio
Net Profit Ratio
2.5
2
1.5
1
0.5
0
-0.5
-1
-1.5
0.74
0.98
1.98
2010
0.3
2011
2012
2013
-1.3
2014
Year
Chart no:5.16 Diagram showing Net Profit Ratio

Interpretation
This ratio is used to measure the overall profitability and hence it is very useful to
proprietors. It is an index of efficiency and profitability of the business. Higher the
ratio better is the operational efficiency of the concern. Higher ratio is 2010 and
lower ratio is 2014.
3. Return On Total Assets
ICMPOOJAPURA
Page 78
Kerala SIDCO
Return On Total Assets=
net profit
100
total assets
Table no: 5.17 Return On Total Assets (Rs in lakhs)

Year
2010
2011
2012
2013
2014
Net Profit
182.60
91.11
195.44
72.05
(421.19)
Total Assets
3755.52
8580.35
15033.71
17760.66
22576.82
Return on total assets

4.73
1.06
1.3
.4
(1.8)
Return On Total Assets
Return On Total Assets
6
5
4
3
2
1
0
-1
-2
-3
1.06
1.3
4.73
0.4
-1.8
2010
2011
2012
2013
2014
Year
Chart no:5.17 Diagram showing Return On Total Assets
Interpretation
Profitability can be measured in terms of relationship between net profit and total
assets. It measures profitability of investment. Higher the ratio higher is the
efficiency. SIDCO has only an average return on total assets. In 2014 it seems too
poor.
4. Return On Capital Employed
ICMPOOJAPURA
Page 79
Kerala SIDCO
Return On Capital Employed=
net profit
100
net capital employed
Table no: 5.18 Return On Capital Employed (Rs in lakhs)

Year
2010
2011
2012
2013
2014
Net Profit
182.60
91.11
195.44
72.05
(421.19)
Capital Employed
2528.33
3148.33
-980.19
-781.65
-1467.00
Return on Capital Employed

7.2
2.89
-19.93
-9.2
28.71
Return On Capital Employed
Return On Capital Employed
40
30
20
10
0
-10
-20
-30
2.89
-19.93
7.2
28.71
-9.2
2010
2011
2012
2013
2014
Year
Chart no:5.18 Diagram showing Return On Capital Employed

Interpretation
This ratio is also known as return on investment (ROI). It indicates the return on
capital employed in the business and it can be used to show the efficiency of the
business as a whole. Higher ratio shows the more efficient use of capital employed.
Here SIDCO has really poor return on investment.
4.1 COMPARATIVE BALANCESHEET
KERALA SIDCO LTD, THIRUVANANTHAPURAM
Table no: 5.19
COMPARATIVE BALANCESHEET AS ON 31ST MARCH 2014 AND 2013
ICMPOOJAPURA
Page 80
Kerala SIDCO
Particulars
2014
(RS in lakhs)
2013
(Rs in
lakhs)
Absolute
change
Percentage
Equity share capital
2986.91
2708.43
278.48
10.28
Reserves and surplus
(4453.91)
(3490.02)
963.89
27.62
Noncurrent liabilities
7396.13
7107.2
288.93
4.06
Current liabilities
16647.7
11435.02
5212.68
45.58
Total
22576.82
17760.66
4816.16
27.11
Noncurrent assets
5837.19
5675.24
197.95
3.48
Current assets
16739.64
12085.42
4654.22
38.53
Total
22576.82
17760.66
4816.16
27.11
Equity and liabilities
Assets
ICMPOOJAPURA
Page 81
Kerala SIDCO
Interpretation
The above comparative balance sheet in the year 2013 &2014 shows that the
share capital increased of 10.28%. In the year 2014 the share capital is Rs.
2986.91 lakhs.
Reserves and surplus shows negative balance due to
accumulated losses of previous years. It shows an increase
of 27.62%.
Noncurrent liabilities increased by 288.93 lakhs i.e. 4.06%. In
the year 2013
Noncurrent liabilities were 7107.2 lakhs.
Current liabilities and provisions increased by 5212.68 lakhs
i.e. 45.58%. in the year 2013 current liabilities and provisions
was 11435.02 lakhs and in the year 2014 it become 16647.7
lakhs.
Noncurrent assets increased by 197.95 lakhs i.e. 3.48%. In the 2013
noncurrent assets were 5675.24 lakhs and in the year 2014
it become 5837.19 lakhs.
Current assets increased by 4654.22 lakhs i.e. 38.53%.
Total liabilities and assets are increased by 4816.16 lalkhs i.e.
27.11%.
ICMPOOJAPURA
Page 82
Kerala SIDCO

Table no: 5.20
Particulars
2013
(RS in lakhs)
2012
(Rs in
lakhs)
Absolute
change
Percentage
2708.43
2708.43
(3490.02)
(3430.14)
59.88
1.74
7107.2
7012.97
94.23
1.34
Current liabilities
11435.02
8742.44
2692.58
30.79
Total
17760.66
15033.71
2726.95
18.13
Noncurrent assets
5675.24
5534.12
141.12
2.55
Current assets
12085.42
9499.59
2585.83
27.22
Total
17760.66
15033.71
2726.95
18.13
Assets
ICMPOOJAPURA
Page 83
Kerala SIDCO
Interpretation
share capital has no change.
of 1.74%.
Noncurrent liabilities increased by 94.23lakhs i.e. 1.34%. In
the year 2012
Noncurrent liabilities were 7012.97 lakhs.
Current liabilities and provisions increased by lakhs2692.58
i.e. 30.79 %. in the year 2012 current liabilities and
provisions was 8742.44 lakhs and in the year 2013 it
become11435.02 lakhs.
Noncurrent assets increased by 141.12 lakhs i.e. 2.55 %. In the
2012 noncurrent assets were 5534.12 lakhs and in the year
2013 it become 5675.24 lakhs.
Current assets increased by 2585.83 lakhs i.e. 27.22%.
Total liabilities and assets are increased by 2726.95 lakhs i.e. 18.13%.
ICMPOOJAPURA
Page 84
Kerala SIDCO

Table no: 5.21
Particulars
2012
(RS in lakhs)
2011
(Rs in lakhs)
Absolute
change
Percentage
2708.43
2708.43
(3430.14)
(3653.29)
223.15
6.10
7012.97
2660.68
4352.29
162.56
Current liabilities
8742.44
6864.53
1877.91
27.53
Total
15033.71
8580.35
6453.36
75.21
Noncurrent assets
5534.12
1238.50
4295.62
346.8
Current assets
94499.59
7341.85
87157.74
1187
Total
15033.71
8580.35
6453.36
75.21
Assets
ICMPOOJAPURA
Page 85
Kerala SIDCO
Interpretation
share capital has no change.
of 6.10%.
Noncurrent liabilities increased by 4352.29lakhs i.e. 162.56
%. In the year 2011 Noncurrent liabilities were 2660.68
lakhs.
provisions was 6864.53lakhs and in the year 2012 it become
8742.44 lakhs.
Current assets increased by 87157.74 lakhs i.e. 1187%.
Total liabilities and assets are increased by 6453.36 lakhs i.e. 75.21%.
ICMPOOJAPURA
Page 86
Kerala SIDCO

Table no: 5.22
Particulars
2011
(RS in lakhs)
2010
(Rs in lakhs)
Absolute
change
Percentage
2946.91
2326.91
620
26.64
(3891.77)
(3982.88)
91.11
2.28
1704.25
1227.18
477.07
38.87
Current liabilities
7804.32
6316.71
1487.61
23.55
8563.71
5887.92
2675.79
45.44
Noncurrent assets
1093.94
257.43
836.51
324.94
Current assets
7469.47
5630.19
1839.28
32.66
.3
.3
5887.92
2675.79
45.44
Total
Assets
Investments
Total
ICMPOOJAPURA
8563.71
Page 87
Kerala SIDCO
Interpretation
share capital has increased by Rs.620 lakhs i.e 26.64%.
accumulated losses of previous years. It shows a decrease of
2.28%.
Noncurrent liabilities increased by 477.07lakhs i.e. 38.87 %.
In the year 2010 Noncurrent liabilities were 1227.18 lakhs.
provisions was 6316.71 lakhs and in the year 2011 it become
7804.32 lakhs.
Current assets increased by 1839.28 lakhs i.e. 32.66 %.
Total liabilities and assets are increased by 2675.79 lakhs i.e. 45.44
%.
ICMPOOJAPURA
Page 88
Kerala SIDCO
5.3COMPARATIVE INCOME STATEMENTS

COMPARATIVE P&L ACCOUNT AS ON 31ST MARCH 2014 AND 2013
Table no: 5.23
Particulars
2014
2013
(RS in lakhs) (Rs in lakhs)
Absolute
change
Percentage
INCOME
Revenue from operations
31414.32
23640.64
7773.68
24.74
Other income
1235.48
1750.80
(515.32)
29.43
Total revenue
32649.81
25391.45
7258.36
28.58
29310.83
21301.54
8009.29
37.60
Manufacturing and
construction expenses
Changes in inventories
186.65
1226.58
(1039.93)
84.78
146.85
77.90
68.95
88.5
Selling and distribution
75.61
74.10
1.51
2.03
2141.91
2058.67
83.24
4.04
Finance costs
125.82
128.74
(2.92)
2.26
Depreciation
163.37
189.89
(26.52)
13.96
Other expenses
897.09
541.16
355.93
65.77
Prior period items
22.83
20.68
2.15
10.39
EXPENSES
Purchases
Employees benefit expense
ICMPOOJAPURA
Page 89
Kerala SIDCO
Total expenses
33071.00
25463.50
7607.5
29.87
PROFIT/LOSS
(421.19)
(72.05)
(349.14)
484.58
INTERPRETATION
The above comparative profit and loss account shows that in the year 2013
and 2014 revenue from operations increased to 7773.68 lakhs i.e.
24.74%.in the year 2013 revenue from operations were
23640.64 lakhs and in the year 2014 it has become
31414.32 lakhs.
Other income decreased by 515.32 lakhs i.e. 29.43%. Total
revenue increased by 7258.36 lakhs i.e. 28.58%.
Purchases increased by 8009.29 lakhs i.e. 37.60%. In the year
2013 it was RS. 21301.54. And in the year 2014 it become
Rs. 29310.83.
Manufacturing expenses decreased by 1039.93 lakhs i.e. 84.78%
Selling and distribution expenses increased by 1.51lakhs i.e.
2.03%.
Employees benefit expense increased by 83.24 lakhs i.e.
4.04%.
Finance cost and depreciation decreased by Rs. 2.92 and Rs.
26.52 respectively.
Total expenses increased by Rs. 7607.5 lakhs ie. 29.87 %.
Net loss increased by 349.14 lakhs i.e. 484.58%.
ICMPOOJAPURA
Page 90
Kerala SIDCO

Table no: 5.24
Particulars
2013
2012
Absolute
change
Percentage
INCOME
23640.64
19908.01
3732.63
18.75
Other income
1750.80
886.18
864.62
97.56
Total revenue
25391.45
20794.19
4597.26
22.210
Purchases
21301.54
17004.61
4296.93
25.27
Manufacturing and
1226.58
916.48
310.1
33.83
77.90
25.11
52.79
210.23
74.10
74.10
2058.67
1548.71
509.96
32.92
Finance costs
128.74
128.27
Depreciation
189.89
54.43
135.46
248.87
Other expenses
541.16
675.491
(134.75)
19.94
EXPENSES
ICMPOOJAPURA
Page 91
Kerala SIDCO
Prior period items
20.68
20.68
Total expenses
25463.50
20598.75
4864.75
23.62
PROFIT/LOSS
(72.05)
195.44
(123.39)
63.13
INTERPRETATION
18.75 %.in the year 2012 revenue from operations were
23640.64 lakhs.
Other income increased by 864.62 lakhs i.e. 97.56%. Total
revenue increased by 4597.26 lakhs i.e. 22.210%.
2012 it was RS. 17004.61 . And in the year 2013 it become
Rs. 21301.54 .
Manufacturing expenses increased by 310.1 lakhs i.e. 33.83 %
Employees benefit expense increased by 509.96lakhs i.e.
32.92 %.
Finance cost remains constant depreciation increased by
135.46 lakhs i.e 248.87%.
Total expenses increased by Rs. 4864.75 lakhs ie. 63.13 %
ICMPOOJAPURA
Page 92
Kerala SIDCO

Table no: 5.25
Particulars
2012
2011
Absolute
change
Percentage
INCOME
19908.01
13966.62
5941.39
42.53
Other income
886.18
314.97
571.21
181.35
Total revenue
20794.19
14281.58
6512.61
45.60
17004.61
11190.48
5814.13
51.95
Manufacturing and
916.48
1055.51
(139.03)
13.17
(25.11)
(35.11)
(10)
28.48
1548.71
1328.61
220.1
16.56
Finance costs
128.27
74.83
53.44
71.41
Depreciation
54.43
30.82
23.61
76.60
EXPENSES
Purchases
ICMPOOJAPURA
Page 93
Kerala SIDCO
Other expenses
675.491
386.38
289.11
74.82
Total expenses
20598.75
14191.53
6407.22
45.14
PROFIT/LOSS
195.44
90.05
105.39
117.03
INTERPRETATION
19908.01 lakhs.
Other income increased by 571.21lakhs i.e. 181.35 %. Total
revenue increased by 6512.61 lakhs i.e. 45.60 %.
2011 it was RS. 11190.48. And in the year 2012 it become
Rs. 17004.61 .
Manufacturing expenses decreased by 139.03 lakhs i.e. 13.17%
Changes in inventory decreased by 10 lakhs.
Employees benefit expense increased by 220.1lakhs i.e.
16.56%.
Finance cost increased by Rs. 53.44 i.e 71.41% and
depreciation by 23.61 i.e 76.60%.
ICMPOOJAPURA
Page 94
Kerala SIDCO
Total expenses increased by Rs. 6407.22 lakhs ie. 45.14.

Net profit increased by Rs. 105.39 lakhs.

Table no: 5.26
Particulars
2011
2010
Absolute
change
Percentage
INCOME
12368.03
9180.72
3187.31
34.71
861.67
810.55
51.12
6.3
2.07
1.60
.47
29.37
13229.7
9992.87
3236.83
32.39
Material consumed
11374.5
8405.48
2969.02
35.32
Operating expense
1660.43
1285.66
374.77
29.15
74.83
83.24
(8.41)
10.10
Other income
Prior period income
Total revenue
EXPENSES
Finance charges
ICMPOOJAPURA
Page 95
Kerala SIDCO
Depreciation
30.81
25.38
5.43
21.39
.03
10.48
(10.45)
.99
Total expenses
13140.6
9810.51
3330.09
33.9
PROFIT/LOSS
89.1
182.36
(93.26)
51.14
Prior period items
INTERPRETATION
9180.72 lakhs and in the year 2011 it has become 12368.03
lakhs.
Other income increased by 51.12 lakhs i.e. 6.3%. Total
revenue increased by 3236.83 lakhs i.e. 32.39 %.
Materials consumed increased by Rs. 2969.02 lakhs i.e 35.32%.
Operating expense increased by 374.77 lakhs i.e. 29.15% .
Finance charges decreased by 8.41 lakhs i.e. 2.03%.
Depreciation increased by 5.43 lakhs i.e 21.39%
Prior period expenses decreased by 10.45 lakhs.
Total expenses increased by Rs. 3330.09 lakhs ie. 33.9%.
ICMPOOJAPURA
Page 96
Kerala SIDCO
5.6TREND ANALYSIS
1. TREND ANALYSIS OF NET PROFIT
Table no:5.27
Year
2010
2011
2012
2013
2014
Net Profit(in lakhs)

182.60
91.11
195.44
72.05
(421.19)
Trend Percentage
100
49.89
107.03
39.46
(230.06)
Trend Analysis Of Net Profit

150
107.03
100
49.89
50
0
-50
100
39.46
-100
-150
-200
-250
2010
2011
2012
Year
Chart no:5.19 Diagram showing Trend Analysis Of Net Profit
ICMPOOJAPURA
Page 97
2013
-230.06
2014
Kerala SIDCO
Interpretation
Trend signifies tendency. Therefore, review and appraisal of tendency in
accounting variables as trend analysis. An analysis of ratios over the past few years
may well suggest the trend or direction in which the concern is going upward or
downward. Trend analysis reveals the net profit shows a decreasing tendency. This
is not a good sign. Only in the year 2012 it showed an increase from the base year
1. TREND ANALYSIS OF SALES
Table no:5.28
Year
2010
2011
2012
2013
2014
Net Sales(in lakhs)

9180.72
12368.04
19908.01
23640.65
31414.33
Trend Percentage
100
134.72
216.86
257.50
342.17

400
350
342.17
300
250
216.86
257.5
2012
2013
200
134.72
150
100
100
50
0
2010
2011
Year
Chart no:5.20 Diagram showing Trend Analysis of Net Profit

Interpretation
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2014
Kerala SIDCO
The analysis shows that there occurs a tremendous change in net sales of Kerala
SIDCO from 2010 to 2014. From year 2010 to 2014 it shows an increasing trend.
Thus the graph shows a fair sales trend of SIDCO.
5.7CORRELATION ANALYSIS
Correlation refers to the relationship between any two or more variables. Two
variables are said to be correlated if with a change in the value of one variable,
there arises a change in the value of the other variable also. The statistical tool with
the help of which the relationship between two or more than two variables is
studied is called measures of correlation.
Table no: 5.29 Correlation between Net profit and Net sales
Year
2010
Net profit(X) Net

sales(Y)
182.60
9180.72
X2
33342.76
2011
91.11
12368.04
8301.03
2012
195.44
19908.01
38196.79
2013
72.05
23640.65
5191.20
2014
(421.19)
31414.33
177401.01
Total
120.01
96511.75
259432.76
n =5
XY= -4834019.76
X= 120.01
Y= 96511.75
X2= 259432.76
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Y2
84285619.7
2
152968413.
4
396328862.
2
558880332.
4
986860129.
3
2179323357
XY
1676399.47
1126852.12
3890821.47
1703308.83
(13231401.65
)
(4834019.76)
Kerala SIDCO
Y2= 2179323357
2
5 217932335796511.75
35752473.92
r=
= 45049446.8
( 5 259432.76120.012 )
5 (4834019.76 )(120.01 96511.75 )
=.79
Chart no:5.21 Diagram showing Correlation between Net profit and Net sales
35000
30000
25000
20000
net profit
15000
net sales
10000
5000
0
2010
-5000
2011
2012
2013
2014
Interpretation
The coefficient of correlation between net profit and net sales is .79 which is
positive and it shows the positive relationship between profit and sales. The profit
increases that of the sales and thus profit and sales are positively correlated.
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CHAPTER 6
CONCLUSION
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Kerala SIDCO
6.1 FINDINGS
The project study made in Kerala SIDCO on the topic Analysis of Financial
Performance and Credit Management leads to find out major strength and
weakness of the firm. Kerala SIDCO starts its function from 1975, which is purely
under the control of government and focus on small scale industries. The growth of
SIDCO was slow and the firm faces huge loss from 1984 to 2004. Crores of rupees
remain as accumulated loss; it occurs due to inefficiency of debtors to pay back
and most of the receivables remain as bad debts. After 2004 SIDCO starts earning
profit and till now the net sales and profit are on increasing trend. But the yearly
profit of SIDCO is transferred to accumulated loss account to write off all its debts.
It is found that the current ratio from the year 2010 to 2014 the ratio were
below the standard norm of current ratio of 2:1. It shows a fluctuating trend
and the ratio was at its maximum in the year 2012. They range from .891 to
1.086 over the period. It shows the liquidity position of SIDCO is low.
Quick ratio also shows that the liquidity position of Kerala SIDCO is
unsound. In 2010 the company had not achieved a sound financial position
to meet its all current liabilities and in the year 2012 and 2013 it exceeded
1:1.
Absolute liquidity ratio also shows unsound liquidity position of the firm
from 2010 to 2014, Kerala SIDCO does not have marketable securities and
so cash and bank is there as liquid assets. From the analysis it is clear that
the absolute liquid position of SIDCO has not attained a favourable position
even from 2010 to 2014.
Debt equity ratio below 2:1. The ratio becomes negative from the year 2012
to 2014 due to the cumulative losses. This is rare as it is tough for businesses
to survive on negative equity. A lower debt equity ratio implies a greater
claim on owners than creditors.
Financial strength of SIDCO analysed through proprietary ratio shows
below average performance from 2012 to 2014. And also the ratio shows
decreasing trend. It indicates poor long term solvency of the firm and
unsecured position to creditors. The standard norm of proprietary ratio is
1:3.
The fixed assets to shareholders fund ratio shows the proportion of
shareholders fund invested in fixed asset. If the ratio is greater than 1 it
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Kerala SIDCO
means the creditors fund has been used to acquire a part of fixed assts. Here
the ratios are below 1, so creditors fund has not been used in fixed assets.
From 2010 to 2014 the fixed assets shows an increasing trend.
Investment of inventory by Kerala SIDCO is found to be satisfactory from
2010 to 2014 the ratio shows an increasing trend. There is a positive and
increase in the ratio which implies the overall inventory efficiency of
SIDCO is sound.
To study the investment in fixed assets contributes towards sales is made
through fixed assets turnover ratio. It shows increasing trend in first two
years and decreases quickly so that the contribution of fixed assets in sales is
poor.
Net working capital of SIDCO is found to be negative from 2010 to 2011.
Here current liabilities of SIDCO are higher than current assets from 2010 to
2011 and so net working capital was negative and operating cost will be
high. After 2011 net working capital changes to positive value. Net sales
show an increasing trend from 2010 to 2014.
Debtors turnover ratio range from 2.8 to 3.40. Here the ratio shows efficient
management of debtors/sales or more liquid are the debtors.
Debt collection period of SIDCO is also high; which range from 121 to 145.
A higher collection period implies an inefficient collection performance
which in turn adversely affects the liquidity or short term paying capacity of
a firm out of its current liabilities.
The above mentioned debt collection period shows the relevance of credit
management in SIDCO. As the history of SIDCO says that from 1984 to
2004 they faced huge accumulated loss due to various reasons. If the debtors
turnover ratio and collection period continues in this same trend, it will
adversely affect the liquidity position of firm and may cause huge bad debts
and it will leads to loss.
The major reason for this poor credit management is that Kerala SIDCO
does not have any methods of collecting debt from debtors and as the firm
being purely under the control of Government, it takes more time to
implement new plans.
Credit worthiness of Kerala SIDCO is on an average position. It signifies the
credit period enjoyed by the firm in paying its creditors. It shows the
promptness in paying its creditors.
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Kerala SIDCO
Debt payment period of Kerala SIDCO is higher which again shows poor
liquidity position of firm to pay its creditors. Which range from162 to 223.
Profitability of the firm measured through gross profit ratio, net profit ratio
etc. Gross profitability of Kerala SIDCO is only an average one. The ratio
from 2010 to 2014 shows a fluctuating trend. The data shows in the year
2012 the gross profit ratio is in highest position and in 2013 it shows the
lowest
Net profit ratio is better only in the year 2010. All other years have a low
ratio which shows the index of efficiency and profitability of the business is
unsound. From the year 2011 to 2014 it shows a decreasing trend and the
ratio becomes negative in the year 2014.
Return on total assets of Kerala SIDCO shows a decreasing trend. It has only
an average return on sales. The highest ratio is showed in the year 2010.
From 2011 the return on total assets goes on decreasing. In the year 2014 it
becomes negative.
Return on investment shows a decreasing trend. In the year 2010 it shows a
better result and from the year 2011 the return on investment decreases and
it becomes negative. In the year 2014 the return on investment shows a
better result it is only the effect of mathematical formula. In the year 2014
both net profit and capital employed are negative.
Comparative balance sheet shows that the equity share capital, fixed assets,
current assets etc. are showing an increasing trend from 2010 to 2014. The
reserves and surplus remains negative due to accumulated losses of previous
years.
Increase in the profits is absorbed by the accumulated losses of previous
years and it makes the shareholders fund negative.
The comparative income statement also shows increasing trend in case of
sales and other income of Kerala SIDCO. Even though material
consumption cost and operating expense are increasing, it can compensate
by increase in sales.
Trend analysis made for sales shows a huge increase in net sales from the
year 2010 to 2014. Trend analysis made on profit shows that only in the year
2012 it showed an increasing trend from the base year.
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Kerala SIDCO
The coefficient of correlation is .79 which is positive and it shows the

positive relationship between profit and sales. The profit increases with that
of the sales and thus profit and sales are positively correlated.
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Kerala SIDCO
6.2 CONCLUSION
Kerala SIDCO, a promotional agency for small scale industries, set up as
a Public Sector Undertaking of Government of Kerala. The project made for
analyzing the financial performance and credit management of Kerala SIDCO
Thiruvnanathapuram gives a clear idea about the financial position and the various
activities of SIDCO.
The main objective of the study was to evaluate and analyze the financial
performance and credit management, to find out relationship between profit and
sales of SIDCO. The tools used for interpretation are ratio analysis, debt duration
period, comparative balance sheet and income statement, trend analysis and
correlation. While analyzing the balance sheet and profit and loss account, it is
found that the company is starting to making losses again. The net profit shows a
decreasing trend for the last five years. The study shows that the company should
frame a long term financial policies to improve the profitability of the company.
Being the State Govt. ventures SIDCO has its own good will; if we exploit the
market potentialities the organizations can prosper and achieve best results.
Comparative financial statements and ratio analysis provide information about
companys profitability solvency and efficiency. Trend analysis provides trend of
profit and sales of past five years.
The study was completed in the allotted time itself. The study gave me a practical
exposure to the theories that I have learned in the classroom. All the managers and
non-managerial staff were very cooperative. The major drawbacks of the study
were that only limited period of study was allotted, problems of price level changes
and absence of well accepted standard level.
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Kerala SIDCO
5.3 SUGGESTIONS
The organizations must try to gain stability in liquidity position. The
liquidity of the concern is poor and so the firm must take effective measures
to increase the financial stability in future.
The debt of Kerala SIDCO is showing an increasing trend and it must be
controlled, otherwise more leverage capital occurs and will adversely affect
the firm.
The company needs to maintain an optimum level of net working capital on

a consistent basis. As working capital is required for day to day activities.
Net working capital should be maintained positive by decreasing current
liabilities, otherwise operating cost cannot be covered.
As the debt collection period of SIDCO is long and there occurs a chance of
bad debts, proper debt collection technique like factoring must be
implemented.
Credit management must be effective without making lead time in
implementation. Lagging in implementation of Government plans and
procedures are the major problem faced by Kerala SIDCO.
Proper debt payment must be made in order to reduce the debt payment
ratio. Prompt payment of debt can save interest and discount from creditors.
The sales are increasing every year but the net profit is decreasing. This is
because the cost is raising which in turn may be due to increase in the
administrative expenses. It is suggested that the company should take
suitable actions to minimize administrative expense.
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Kerala SIDCO
BIBLIOGRAPHY
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Kerala SIDCO
BOOKS
1. Agarwal B.D ; (2005) Advanced financial accounting, New Delhi; Pitambar
Publishing Company
2. Sasi K Gupta : Financial Management Theory and Practice, Kalyani
Publishing New Delhi 1986.
3. Maheswari S N, Principles of Management Accounting, S N Chand & Sons,
New Delhi.
4. Jain S P and Narang K L(2002), Advanced Accounting, New Delhi;
Prentice-Hall of India Private Limited
5. K G C Nair Higher Accounting, B.com: Chand Publications Trivandrum
1983.
6. L R Potti, Research Methodology, MBA : Yamuna Publications Trivandrum
2005
7. Kothari C R (2006), Research Methodology- Methods and Techniques, New
Delhi: New Age International Publishers
8. Pandey I M , Financial Management (Ninth Edition), New Delhi, Vikas
Publishing House Pvt Ltd
9. Khan M Y and Jain P K , Financial Management , New Delhi, Tata Mc Graw
Hill Publishing Company Ltd
10. Jaffe, Ross Westerfield; (2005) Corporate Finance, New Delhi: Tata Mc
Gram Hill Publishing Company Limited.
WEBSITES
www.google.co.in
www.investopedia.com
www.keralasidco.co.in
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Kerala SIDCO
ANNEXURE
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Kerala SIDCO
Table no:5.30 BALANCE SHEET AS ON 31ST MARCH

2012
2013
Particulars
2010
2011
2014
Equity share
capital
2326.91
2708.43
2708.43
2708.43
2986.91
Reserves and
surplus
-3982.88
-3653.29
-3430.14
-3490.02
-4453.91
Noncurrent
liabilities
1227.18
2660.68
7012.97
7107.2
7396.13
Current liabilities
6316.71
6864.53
8742.44
11435.02
16647.7
Total
5887.92
8580.35
15033.71
17760.66
22576.82
Noncurrent assets
257.43
1238.5
5534.12
5675.24
5837.19
Current assets
5630.39
7341.85
9499.59
12085.42
16739.64
Total
5887.92
8580.35
15033.
71
17760
.66
22576.
82
Assets
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Kerala SIDCO
2014
2013
2012
2011
2010
(RS in
lakhs)
(Rs in
lakhs)
(RS in
lakhs)
(Rs in
lakhs)
(Rs in
lakhs)
Revenue from
operations
Other income
31414.32
23640.64
19908.01
13966.62
9180.72
1235.48
1750.8
886.18
314.97
812.15
Total revenue
32649.8
25391.45
20794.19
14281.58
9992.87
29310.83
21301.54
17004.61
11190.48
8405.48
Manufacturing and
186.65
1226.58
916.48
1055.51
1285.66
146.85
77.9
-25.11
-35.11
75.61
74.1
Employees benefit
expense
Finance costs
2141.91
2058.67
1548.71
1328.61
83.24
125.82
128.74
128.27
74.83
25.38
Depreciation
163.37
189.89
54.43
30.82
Other expenses
897.09
541.16
675.491
386.38
Prior period items
22.83
20.68
Total expenses
33071
25463.5
Particulars
INCOME
EXPENSES
Purchases
PROFIT/LOSS
10.48
20598.75
14191.53
-421.19
-72.05
195.44
90.05
st
Table no:5.31 Profit &Loss a/c for the year ended 31 March
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9810.51
182.36

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A PROJECT REPORT ON

AN ANALYSIS OF FINANCIAL PERFORMANCE

Submitted in partial fulfillment of the requirement for the

INSTITUTE OF COOPERATIVE MANAGEMENT, POOJAPURA

I, JUGUNU S NAIR, hereby declare that the project report

It gives me a greater pleasure to place on record my sincere thanks and gratitude to

I am extremely thankful to my faculty guide Dr. R. Raveendran Nair

I express my sincere thanks to Mr. Sasi.K, Finance Head, Kerala

I thank my parents and friends for their motivation and support.

I offer my gratitude to GOD almighty with whose grace I could successfully

1.1 INTRODUCTION TO THE STUDY

1.2 BACKGROUND OF THE PROBLEM

1.3 OBJECTIVES OF THE STUDY

1.4 RESEARCH METHODOLOGY

1.5 METHOD OF DATA COLLECTION

1.6 TOOLS AND TECHNIQUES

1.7 SCOPE OF THE STUDY

1.8 PERIOD OF THE STUDY

1.9 LIMITATION OF THE STUDY

4.1 REVIEW OF LITERATURE

4.2 THEORETICAL PERSPECTIVE

DATA ANALYSIS & INTERPRETATION

5.1 RATIO ANALYSIS

5.2 COMPARATIVE BALANCE SHEET

5.3 COMPARATIVE INCOME STATEMENT

5.4 TREND ANALYSIS

5.5 CORRELATION ANALYSIS

ABSOLUTE LIQUIDITY RATIO

DEBT EQUITY RATIO

FIXED ASSETS TO SHAREHOLDERS FUND RATIO

INVENTORY TURNOVER RATIO

FIXED ASSETS TURNOVER RATIO

WORKING CAPITAL TURNOVER RATIO

DEBTORS TURNOVER RATIO

AVERAGE DEBT COLLECTION PERIOD

CREDITORS TURNOVER RATIO

DEBT PAYMENT PERIOD

GROSS PROFIT RATIO

NET PPROFIT RATIO

RETURN ON TOTAL ASSETS

RETURN ON CAPITAL EMPLOYED

COMPARATIVE BALANCESHEET FOR THE YEAR 2014&20013

COMPARATIVE BALANCESHEET FOR THE YEAR 2013&2012

COMPARATIVE BALANCESHEET FOR THE YEAR 2012&2011

COMPARATIVE BALANCESHEET FOR THE YEAR 2011&2010

COMPARATIVE P&L a/c FOR THE YEAR 2014&2013

COMPARATIVE P&L a/c FOR THE YEAR 2013&2012

COMPARATIVE P&L a/c FOR THE YEAR 2012&2011

COMPARATIVE P&L a/c FOR THE YEAR 2011&2010

TREND ANALYSIS OF NET PROFIT

TREND ANALYSIS OF SLAES

CORRELATION BETWEEN NET PROFIT AND SALES

COMPRESSED BALANCESHEET OF SIDCO

COMPRESSED INCOME STATEMENT OF SIDCO

ABSOLUTE LIQUIDITY RATIO

DEBT EQUITY RATIO

FIXED ASSETS TO SHAREHOLDERS FUND RATIO

INVENTORY TURNOVER RATIO

FIXED ASSETS TURNOVER RATIO

WORKING CAPITAL TURNOVER RATIO

DEBTORS TURNOVER RATIO

AVERAGE DEBT COLLECTION PERIOD

CREDITORS TURNOVER RATIO

DEBT PAYMENT PERIOD