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INTRODUCTION
1. INTRODUCTION
Finance is the most important factor which is required by any organization. Without the
availability of finance no organization can succeed. A business organization objective will be
to maximize profit. No economic activity can be carried without finance. All resources
needed for production can be arranged with the help of finance. Where there is use of finance,
there is a need for financial management. Financial management requires correct estimation
of the financial needs of business, decides the best sources of funds and proper administration
of capital. The utilization of finance is scattered to many departments via the production
department, marketing department, purchasing department, sales department, etc. Finance is
the lifeblood and nerve centres of a business. Finance is essential for smooth running of the
business. Financial analysis is the analysis of financial statement of a company to assess its
financial and soundness of its management. Financial statement analysis seeks to evaluate the
performance, financial strength, ability to generate enough cash and the growth outlook of the
company. A financial statement provides a summarized view of the financial position and
operation of a firm. Therefore, much can be learnt about a firm from care full examination of
its financial statement, thus, an important aid to financial analysis.
Financial Analysis is the process of identifying the strengths and weakness of the company
with the help of accounting information provided by the Profit and Loss Account and Balance
sheet. Financial analysis will give the management considerable insight into the levels and
areas of strength or weakness. The analysis of financial statement is a process of evaluating
the relationship between component parts of financial statement to obtain a better
understanding of the firm position and performance. The first task of the financial analysis is
to select the information relevant to the decision under consideration from the total
information contained in the financial statement. The financial analysis is the process of
selection relation and evaluation based on this resourcing.
This study is based on the financial performance of KSE LTD for the last five years. KSE
LTD earlier known as Kerala Solvent Extractions Ltd. KSE limited is one of the medium size
industrial undertakings and one of the largest producers of cattle feed in the private sector,
situated in Irinjalakuda, which is a small town in the Trissur district the cultural capital of
Kerala.
PRIMARY OBJECTIVE
The main objective of the present project is to analyse the financial performance of KSE LTD
for a period of five years from 2010-2011 to 2014-2015.
B.
SECONDARY OBJECTIVE
This study aims at pointing out the strength and weakness of the existing financial
performance of KSE limited irinjalakuda
Helps to get a clear understanding of the financial position of the firm.
It helps to improve analytical ability.
PRIMARY DATA
Primary data are those which are collected fresh and for the first time
information and thus happen to be original character. The primary data is collected
through the observation, communication with respondent, personal interview.
II.
SECONDARY DATA
Secondary data are those which have already been collected by someone else
and already have been passed through various statistical process.
Ratio analysis
Comparative balance sheet
Comparative income statement
Common size balance sheet
Common size income statement
Trend analysis
Chapter 2
INDUSTRY PROFILE
countries. Feed grains are thought to complete directly, or in the use of land, with grains for
human consumption and livestock are often blamed for inefficient use of feed and energy.
Indeed, in some systems, e.g. beef feedlots, energy and nitrogen conversion is poor. However,
if efficiency is seen over the entire production chain, and expressed as input of edible human
food/output in human edible food, the view of animal production is more positive. If it is
assumed that all 1000 million tons of cereals, roots and tubers used for livestock are edible
for humans then livestock use 80-100 million tonnes edible protein. On the positive side, the
233 million tonnes meat, 568 million tonnes milk and 55 million tonnes eggs produced
globally contain 65 million tons of protein. So while input is higher than output, if improved
protein quality on the outside is considered, a reasonable balance emerges
Industrial livestock production depends on external inputs. Technology, capital and
infrastructure requirements are based on large economies of scale and labour efficiency,
which may or may not been seen as positive in developing countries. One person can operate
a unit of 10-12,000 laying hens and 35-40,000 broilers, 6.5 times per year. Hence
industrialization requires less labour than traditional systems. However, given rapid increase
in demand, there is additional employment above the current level and further jobs are
created in the supply and processing industries. And as a way of providing eggs, poultry meat
and pork at competitive prices, it has been successful in meeting the escalating demands for
low cost animal products in rapidly growing urban centres of the developing world.
The industrial system is also associated with environmental problems. Industrialization
implies large numbers, large volume of wastes, animal and human health risks, and poor
animal welfare. Waste products are often dumped without accounting for the environmental
cost. Manure storage is disposal is one of the main problems of large industrial operations.
Pigs and poultry excrete some 65 and 70 percent, respectively, of their nitrogen and
phosphate intake. Nitrogen, under aerobic conditions, can evaporate in the form of ammonia
with toxic, eutrophic and acidifying effects on eco systems. Nitro oxide, a greenhouse gas, is
formed as a part of the DE nitrification process with particularly harmful effects on the
environment. Nitrates are leached into ground water posing human health hazards, and run
off and leaching of nitrogen directly lead to eutrophication and biodiversity loss of surface
waters and connected eco system. Phosphorus, on the other hand, is rather stable in the soil.
But when P saturation is reached after long term high level of application of manure, leaching
occurs and this also causes eutrophication or rivers and lakes.
To control the undesirable effects of industrial livestock production, the livestock and
environment authors proposed:
They also point out that there may be environmental benefits of industrial production
systems. Firstly, the rapid growth of pig and poultry systems reduces the total feed
requirements of the global livestock sector to meet a given demand. The shift from red to
white meat implies a great improvement in feed conversion efficiency. It may therefore
alleviate pressure for deforestation and degradation of rangelands, such as is happening in
part of Latin America and Asia, thus saving land and preserving biodiversity. Secondly, the
feed saving technologies developed for this system can be effective at any scale and therefore
can be successfully transferred to smaller farming systems. Thirdly, waste management and
treatment technologies have been developed which may convert it into valuable organic
fertilizer and energy in the form of biogas or electricity.
More begin development of pig and poultry production systems require attention to national
and local government policy to promote and encourage effective solutions
10
These technologies have been companied into integrated farming systems for the small
producer that are biologically sustainable and achieve high levels of production, with
minimal environmental problems as the manure is recycled or used for biogas production.
Much of these work described in publications by T.R. Preston, of which one is cited here.
Undoubtedly, the technologies have contributed to the improvement of income lifestyle of
small farmers and represent an effective approach to sustainable development and poverty
alleviation. But the approach has been divorced from the parallel growth of intensive systems
and industrial livestock throughout the world, which can be seen as providing the bulk of
supply to meet the demand.
The challenge is to enable small producers to have access to a wider market termed
Ruralizing the Livestock Revolution. There is also a need and demand for low cost and
simple technologies for livestock and product processing. All too often, the middle-men and
the traders take the greatest share of the profit because they have the means, the knowledge
and the access to the consumer market. Emphasis needs to be given to the development of
small-scale and village-level processing, including equipment, training, distribution and
marketing. India already has an advantage in this area. Medium sized and small cooperative
livestock systems
But this may not be the most effective method to advance production and supplies to meet
the demand. It may be better to develop medium sized cooperative commercial units which
are more susceptible to technological improvement and sustained supply. Such systems
would not be very small, backyard operations but medium sized and village cooperatives of
say 10000 to 50000 birds. The advantages of such development would include:
integrated, particularly in the states of Karnataka, Kerala, Andra Pradesh, Tamil Nadu and
Maharashtra, with soya bean production and small-scale processing. Such vertical
integration, albeit on relatively small scale, is desirable and appears feasible with these
numbers. Cooperative marketing is required to ensure the scale needed to supply the cities.
Unfortunately, experience in Indian poultry industry has been mixed with wide shifts in
prices and failures of companies as a result.
There is suspicion of the present 'integrators' and a need for a more organized and sustainable
system to develop the sector effectively. India's very positive experience with the NDDB and
milk production could have important lessons for the development of other parts of the
livestock sector. If the cooperative system and organized marketing is applied more to the
poultry sector, there is enormous potential for expanded production in rural areas. Supplying
the cities, the authors of the FAO report suggest that backyard production could be
coordinated through local units. Given that the scavenging hen produces cheapest eggs. But
this may not be the most effective method to advance production and supplies to meet the
demand. It may be better to develop medium sized cooperative commercial units which are
more susceptible to technological improvement and sustained supply. Such systems would
not be very small, backyard operations but medium sized and village cooperatives of say
10000 to 50000 birds
12
Chapter 3
COMPANY PROFILE
13
3. COMPANY PROFILE
3.1 HISTORY OF THE COMPANY
Kerala Solvent Extraction was incorporated in 1963 under the Indian companies Act 1956.It
was registered as a public company was held on 20 October 1963. It was formally known as
solvent extraction limited (KSEL) was prompted by K.L Francis, MC Paul, T.O Paul and A.P
George. Now it is come to know as KSE Ltd .KSEL is engaged in the production of cattle
feed, Solvent extracted coconut oil, rice brain oil, de oiled coconut cakes are other oil cakes
The company is mainly engaged in animal feed division, oil cake processing division
comprising milk and milk products including ice cream. The company commands the
resources, expertise and infrastructure to manufacture a range of livestock feed in high
volumes coconut oil from coconut oil cake and refined edible oil .the company has
endeavoured to supply its products to customers through an extensive network of dealers and
retailers which from a dedicated force behind the success of the company. It is a matter of
pride that the company The capacity of the plant was raised to 60 tons per day .By 1982 the
cattle feed capacity was increased to 100 tons per day .In 1987 the cattle feed capacity was
increased to 180 tons per day .The company s second production unit with capacity of 150
tons per day solvent extraction commenced operation at swaminathapuram, dindingul district
in Tamil nadu in 1988 The company provides direct employment to 1000 people and indirect
employment to 5000 people
KSE had computerized its operations way back in the year 1999; KSE went to upgrade its
EDP setup further. Customers made ERP software private limited, Cochin and online
computerization was fully implemented at allots plants, being custom made for KSE this ERP
software, with SQL RDBMS, front end or visual basic and windows NT OS had integrated all
functions of the organization via FA, inventory, billing, payroll, MIS, Share Accounting etc.
The head office at Irinjalakuda has 2 server and 40 nodes running the application. Other units
are above 8 server and 50 nodes. The latest plant at vedagiri, kottayam has a computerized
control room for monitoring homogenization, size reduction, batching, palletisation, pellet
cooling and aspiring system.
3.1.1 QUALITY POLICY
We at KSE Ltd, Irinjalakuda division shall endeavour to produce animal feed to satisfy the
needs of the customer and within the regulatory requirement and look for continual
improvement in all spheres of our activities through whole hearted efforts of our committed
and trained employees.
3.1.2 VISION
We shall endeavour to maintain leadership through quality products, explore new avenues in
product development and marketing, create a strong bond between the management, work
force, dealers and customer, contribute to social development and rural up liftment ,
constantly strive for excellence in all spheres of our activities.
14
3.1.3 MISSION
1.
2.
3.
4.
5.
3.1.5 GOALS
3.1.6 UNITS
IRINJALAKUDA UNIT
VEDAGIRI UNIT
PALAKKAD UNIT
KORATTY UNIT
SWAMINATHAPURAM UNIT
KONIKKARA UNIT-DAIRY DIVISION.
THALAYUTHU UNIT - DAIRY DIVISION
VEDAGIRI UNIT - ICE CREAM DIVISION
KOCHUVELL UNIT
15
Managing Director
M.C. Paul
Executive Director
A.P. George
Directors
K.P John
P.D Anto
Dr. K.C. Vijayaraghavan
John Francis K.
T.R. Ragulal
Joseph Xavier
Sathi A. Menon (From 25.09.2014)
Paul John ( From 12.02.2015)
"Best productivity performance for cattle feed in India "Award from National
productivity Council continuously for Eleven Years 1996-97 to 2005-06.
"The Solvent Extractions Association of India "-SEA Award for highest processor of
coconut cake in India, since institution of the award.
Kerala state productivity Council award.
"Top Cattle feed award" for afflation free feed from "The Indian Association of
veterinary Pathologists" (IAVP) and Kerala Agriculture University.
Tamil Nadu Productivity Council Safety Award.
Animal Nutrition Society of India Award for Company's contributions for propagation
of balanced compound livestock feed in India.
Industry Excellence Award from the Indian Society for the study of animal
Reproduction for the year 2001.
Entrepreneur Award from the College of Veterinary and Animal Sciences.
3.1.10 MILESTONES
17
2000 : Company started production and marketing of Pasteurized Milk and Milk
products from Konikkara Dairy, Trichur District,Kerala and Thalayuthu Dairy, Palani
Taluk, Tamil Nadu.
2002 : Cattle feed production at Irinjalakuda unit increased to 195 MTs per day.
'VESTA' Ice Cream launched.
2003 : Started production of Cattle feed in a leased plant at Edayar, Kalamassery.
Cattle feed production at the Swaminathapuram unit increased to 195 MTs per day.
2004 : Acquired Land from KINFRA for starting the new project of 200 TPD Solvent
Plant and 100 TPD Oil Physical Refining Plant at Kinfra Park, Koratty. ISO
9001:2008 Accreditation for Irinjalakuda.
2005 : Cattle feed Production capacity at the Irinjalakuda unit increased to 210 MTs
per day. Company acquired property at Mysore .ISO 9001:2008 accreditation for
Vedagiri and Swaminathapuram units.
2006 : The 200 TPD SolventExtraction Plant at Koratty commissioned. 100 TPD
Physical Refining Plant at Koratty commissioned. Solvent Plant at Irinjalakuda
dismantled.
2008 : Ice cream production unit commissioned at Thalayuthu.
2009 : Cattle Feed production capacity at Swaminathapuram increased to 200 MTs
per day. Commissioned Fractionation Plant at Koratty. Commenced 500 TPD Fully
State-of-the-Art German Technology Animal Feed Plant at Irinjalakuda.
2010 : Ice cream production unit at Vedagiri commissioned.
2012 : Started production of cattle feed in leased plant Kochuvell
2013 : Gorsam- Feed supplement introduced
2014 : Cattle feed production capacity of the old plant at the irijalakuda unit increased
to 225 MTs per day. Cattle feed production capacity at Palakkad unit increased to 120
MTs per day
On 29th March, 1998, on the occasion of commemorating the Silver Jubilee of the first
production of the factory, the Management of KSE Limited promised the public that a Park
and Library will be set up to benefit the children of surroundings. On 2nd April, 2000, the KS
Park and childrens information Centre was opened to the public to fulfil the Companys
social responsibility. Adjacent to the Registered Office of the Company at Irinjalakuda the KS
Park is spread over more than half an acre of land. The locale is blessed with unique scenic
beauty and pristine charm. With a beautiful building of nearly 3000 sq. ft., which
accommodates a library and Information Centre and childrens playing equipments, this
Centre provides the following facilities:
Park with latest playing equipments for children - a new rider imported from China
was recently installed.
18
Beautiful, lush greenery and resting place for the parents accompanying the children.
A good library with an extensive selection of books, magazines and periodicals to
facilitate acquisition of knowledge.
Computers with multimedia facility.
Newspapers and other informative magazines for the grownups.
An open air stage in the compound for cultural programs and competitions.
For the personality development of the children an association was formed and it was named,
KARTAVYA (Keyess Association for Regular Training And Voluntary Youth Activities). On
behalf of KARTAVYA various competitions and personality development programs are
conducted. As a part of Childrens Day celebrations, in the month of November, a painting
competition is held every year for school going children on all Kerala level. The painting
competitions are usually conducted for 3 or 4 days. Competitions are also held for KG
students and the winners are crowned with Vesta Baby Prince and Vesta Baby Princesses.
Various cultural competitions are also held during these days. Nearly 2500 students used to
participate in the competitions. During the school vacations - Onam, Christmas and summer
vacations - various programs like public speak practice, Handwriting improvement classes,
Quiz competitions and other personality development classes are conducted.
3.1.12 SOCIAL RESPONSIBILITY
KSE Ltd is in the forefront for meeting its responsibility towards the society. KSE has
contributed liberally towards the social events.
1. Construction and maintenance of a modem childrens information centre KS
PARK in irinjalakkuda at the cost of Rs 80 lakhs.
2. Construction of footpath cum handrail for public at cost of Rs 10 lakhs.
3. Contribution of Kargil Fund Rs 5 lakhs.
4. Contribution to Gujarat earthquake relief fund Rs 10 lakhs.
5. Contribution to Bharatia Vidya Bhavan in Irinjalakkuda Rs 1 lakhs.
6. Contribution to St. James Hospital Rs 3 lakhs.
7. To Amala cancer centre hospital and Research Centre Trissur Rs 3 lakhs.
8. The Chief Minister relief fund Rs3 lakhs.
9. Mahatma Gandhi
10. For construction of class rooms of Unnai Warier Smarakalanilaya Rs20000
11. To St Joseph Collage for women Rs 80000
12. For construction of blood bank attached to the Government Taluk Hospital Rs
25000
19
Today Kerala and Tamil Nadu comparison the largest market of KSE cattle feed. The
majority of their deposal over 600 KSE dealers ensure that the KS Range of cattle feed is
available to them at a lower price suggested and enforced but the company KSE has made
arrangements for the supply of cattle fed in villagers directly from dealers and through
retailers. Besides beginning range of trusted products to the villages KSE also imparts
valuable advice and instruction regarding animal has boundary and cattle to the villagers.
3.1.14 PROGRESSIVE MANAGEMENT AND UNIQUE WORK CULTURE
The management KSE rests on a eminent team of personalized from the cultural and financial
and social system of society who from the BOD. The Chairman and MD executive director
and whole time Director head the operations of the company and overseas its smooth
functioning. The day to day management of various units is carried out by experienced
professionals under a chief general manager. Who lead and motivate a dedicated world force.
The total number of employees in various units of KSE now exceeds 1000. Besides KSE
gives endured employment to over 2000 people, through its distribution network across
Kerala and Tamil Nadu.
The work culture of KSE is an exception to the rule in the strife ridden industrial climate of
Kerala. During the quarter century of it is operation, the days lost to industrial unrest is only
23 days. This fact illustrates the cordial work environment and speaks of the extra ordinary
relationship between the management and employees. Periodic appraisal and renewal of
agreements between the management and workers credit a responsible attitude and
productive atmosphere. The united efforts mutual test and progressive vision of management
and force is the cornerstone on which the success of KSE is based.
3.1.15 FUTURE PLANS AND PROGRAMS
KSE, having an annual turnover of Rs.250 crores, which s the largest manufacturer of cattle
feed. It provides employment to around 1000 members directly and another 5000 indirectly.
Its share is being listed in three stock exchanges in Cochin, Chennai and Mumbai. The
company commenced its production in the year 1972. It is marketing annually about 1.80
lakhs per tons of superior quality cattle feed. KSE has successfully launched its Vesta Brand
Ice Cream which has been well accepted in the market for its matching international quality
standards. KSE plans to add more ice cream production units across Kerala in the coming
years to serve all pockets.
KSE is in the oil extraction industry in the past 31 years. It is having two solvent plant with
processing capacity of 100 tons per day. The company has also a chemical oil refining plant
of 20 tons per day. The company has secured the National Productivity Award for the year
2001-2002 for being first in terms of production efficiency in the animal feed sector. This is
the sixth time in a row that the company is being selected for this most coveted award. It is
pertinent it note that in the Kerala industrial scenario, where many companies are choosing
down, either due to labour unrest or due to other economic reasons, KSE continue to
commence new venture each year and runs them successfully. The company is having six
units at different locations. The relation with the labour unions is very warm and cordial.
20
21
3.2PRODUCT PROFILE
The main products marketed are
1. K S CATTLE FEED
It includes six types they are
Product Name
Form
Weight
a)
K S ORDINARY
MASH
57 Kg
Rs 1030
b)
KS SUPER
MASH
60 Kg
Rs 1110
c)
KS DELUX
PELLETS
70 Kg
Rs 1302
d)
KS DELUX
PLUS
PELLETS
50 Kg
Rs 892
e)
KS SUPREME
PELLETS
50 Kg
Rs 1008
f)
KS PREMIUM
PELLETS
50 Kg
Rs 902
22
Price
EXECUTIVE
FINANCE
MANAGE
ASSISTA
NT
ACCOU
NT
MANAGING
PERSONN
EL
PURCHAS
E
EXECUTI
VE
SHARE
DEPUTY
OFFICE
OFFICER
MARKETIN
G
SECURITY
OFFICER
SECURITY
SUPERVIS
EXECUTIVE
ASSISTAN
T
FINANCE
MANAGER
WHOLETIME
CLERK
SECURI
TY
OFFICE
ASSISTANT
SALES
SALES
EXECUTI
OFFICE
ASSISTANT
CLERK
EXECUTIVE
SALES
SUPERVIS
OFFIC
SALES
REPRESENTATI
VE
CHIEF
ASSISTAN
T
CHEMI
ST
LAB
ATTENDER
ENGINEER
CLERK
ASSISTANT PLANT
ENGINEER
ELECTRICAL
FOREMAN
MAINTENAN
CE
BOILER
OPERATO
REFINIG
PLANT
SOLVENT
OPERAT
MAINTENAN
CE
ASSISTAN
T
ASSISTA
NT
WORK
CATTLE
FEED
ASSISTA
NT
GODOWN
ELECTRIC
AL
ELECTRIC
GODOWN
SUPERVISOR
STORES
GODOWN
ELECTRI
CAL
WORKER
WORKE
R
PLANT
ATTENDER
ASSISTA
NT
WORKE
WORKE
STORES
STORES
SUPERVIS
SHIFT
WORK
CUSTOM
ER
PRODUCTI
ON
CLERK
OFFICE
ASSISTA
NT
OPERAT
QUALITY
MANAGER
23
Man power planning including job analysis ,job specification and job description
Recruitment to all the departments of the company
Training of newly recruited employees
Performance appraisal , job evaluation
Running welfare scheme for employees
Grievance redressal
Fixing wages and salaries of the employee in consultation with the trade union
24
PERSONNEL MANGER
ASSISTANT MANAGER
SECURITY OFFICER
SECURITY SUPERVISOR
SENIOR EXCECUTIVE
EXCECUTIVE
SECURITY GUARD
OFFICERS
WATCH MAN
SENIOR ASSISTANT
OFFICE ASSISTANT
CLERK
25
Unskilled labours
Technical Assistants
Officers
Security
A. UNSKILLED LABOURS
As a part of the company policy , un skilled labours are selected from within 5 km
radius of the company. The age education should be less than SSLC
Workers can be classified as: Daily rated workers
Monthly rated workers
B. TECHNICAL ASSISTANTS
Minimum qualification of Technical Assist is ITI.
C. OFFICERS
Graduation is the minimum qualification for the post officers.
D. SECURITY
For this category, minimum age need is 50. The application should be ex- serviceman.
3.4.1.5 MANPOWER PLANNING
KSE Limited proud of its well-coordinated labour force. The personnel department was seen
as a place where the lesser productive employees could be placed with minimal damage to
the organisation on going operation.
3.4.1.6 EMPLOYEE SELECTION PROCEDURE
Employees are selected based on their educational qualification, work experience technical
knowhow and age, company ads on newspapers through employment
exchange and
promoting its own employees based on performance, In KSE Limited total number of
employees more than 900 including the employee in its 4 units. In this 500 employees
attached to irinjalakuda unit.
3.4.1.7 TRAINING
a) On the job: KSE Ltd gives the job training to the employees .They are kept in
probation for six months. If the company found it unsatisfactory, then probation
period may be extended. Induction training is given at this period. Workers are
selected as substitute workers. If a substitute worker works for a period for minimum
of 240 days with in a year they would be made permanent worker. Fresh blood would
26
be preferred for lower divisional works. Based on this policy company promotion for
senior posts are made
b) Off the job: The company staff is got off the job training from out of the campus.
Occasionally this type of training is provided on the surrounding conference hall
3.4.1.8 TRANSFER
According to the discretion of the management employers and workers are may be transfer
from one department /selection to another department /selection; they can also change from
one job to another
3.4.1.9 PERFORMANCE APPRAISAL
It is known as assessing The quality of personnel ,his behavior the relation amongThem .his
efficiency to complete the target on time
3.4.1.10 REMUNERATION
There are three types of wages schemes:
27
Finance is the life blood of the business. All the financial activities are handled by the
financial department of the company All department have a link between the financial
department . The main functions of financial department are to prepare the budget, financial
management, management the investment of the company, management
of taxes
,management of financial risk ,and merge and acquisition decision
FINANCE MANAGER
DEPUTY
ACCOUNTANT
DEPUTY FINANCE
MANAGER
DEPUTY SHARE
MANAGER
EXECUTIVE
OFFICER
EXECUTIVE OFFICER
EXECUTIVE
OFFICER
SENIOR OFFICER
OFFICE
ASSISTANT
CLERK
SENIOR OFFICER
OFFICE ASSISTANT
SENIOR OFFICER
OFFICE ASSISTANT
CLERK
CLERK
CLERK
29
The share capital of KSE ltd comes to 320 Lakh. from around 6500 shareholders. These
shares are listed in stock exchange of Mumbai, Chennai & Cochin. This 320 lakhs
where divided as 32 lakhs share of Rs 10 each. The company is having the over-all
profit after tax is ` 4,363.41 lakhs in year 2014-15 compared to ` 1537.36 lakhs in the
previous year. The turnover of the Company improved by 12 % from ` 806 crores to `
900 crores during the year ended 31st March, 2015.
3.4.2.3 SOURCE OF FINANCE
The company makes use of two types of source to finance activities, they are
1.
2.
3.
4.
Shareholders fund
Share capital
Reserves and surplus
Loan funds
1.
2.
3.
4.
5.
6.
7.
8.
30
3.4.2.7 AUDITING
The company has constituted on adult company .three independent non-executive directors
assists members. The main auditor of the company is varma and varma
A. INTERNAL AUDIT
It is independent appraisal function within an organisation, for review of activities as
a service to all levels of management. Its objective is to measure ,evaluate ,and report
upon the effectiveness of internal control financial and other as a contribution to the
efficient use of resource with an organisation. The KSE Limiteds internal audit is
taken care of by assistant manager, some of the units are audited by himself and the
rest, mainly situated in other districts and states are performed by independent
charted accountant firms
B. INTERNAL CHECK
The company has devised internal check measures. Internal check refers to a system
of book keeping and arrangement of staff duties in the organisation in such manner
that no one person can completely carry through a transaction and record every
aspect there
3.4.2.8 BUDGETING
Budget is prepared by each other year. The budget is prepared in the month of February.
Profit and loss account is prepared monthly by finance department .Two committee meeting
are conducted by management
3.4.2.9 FINANCIAL HIGHLIGHTS
PARTICULARS
20102011
(in Lakhs)
20112012
20122013
20132014
20142015
(in Lakhs)
(in Lakhs)
(in Lakhs)
(in Lakhs)
54336.
28
1446.98 2387.
83
667.31 1587.
04
449.81 1044.
93
3335.3 3971.
4
18
69825. 80720.
89
11
1401.8 2956.3
4
0
666.09 2343.8
7
465.30 1537.3
6
4069.5 4858.0
0
9
90133.
16
6173.9
0
6388.9
3
4363.4
1
7181.0
7
Capital employed
4498.23
4898.
67
7194.27 7308.
62
4958.2
1
8078.2
9
5702.4
1
8110.6
4
7764.1
3
7975.5
1
Rs
Rs
45436.
07
Rs
Rs
31
Rs
Shareholders equity
per share
Earnings per share of
Rs10 each
Dividend rate
YEAR
127.17
151.82
224.41
104.23
14.06
124.10
32.65
14.54
48.04
136.36
100%
110%
100%
200%
500%
449.81
45436.07
1044.93
54336.28
465.30
69825.89
1537.36
80720.11
4363.41
90133.16
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
(Showing the sales comparison of last 5 year)
Month
High ( Rs)
Low ( Rs)
April, 2014
239.95
221.05
May, 2014
255.75
209.25
June, 2014
375.60
268.50
July, 2014
399.00
340.50
August, 2014
412.00
360.10
September, 2014
440.00
361.00
October, 2014
402.00
351.50
November, 2014
611.85
375.00
December, 2014
620.00
541.00
January, 2015
722.30
544.95
February, 2015
730.00
544.65
March, 2015
730.00
651.00
Fixed assets
a. Asset put to use have been stated at costless depreciation
b. Asset not put to use have been state at cost
Depreciation
Depreciation on fixed asset has been provided on written down value method at The
rate prescribed in the company Act 1956
Investment
Long term investments are stated at cost less provision, if any permanent elimination
in the value of such investment
.Inventories
Inventories at the closing of the year are valued at lower cost or net realizable value.
Goods in transits at cost
Retirement benefit
Contribution to provident fund and employee welfare fund is charged to profit and
loss account
Gratuity
The accruing liability towards gratuity of employees is covered by the group gratuity
Assurance scheme of LIC (Life Insurance Corporation) of India and contribution due in
Accordance with the scheme is charged to profit and loss account. Gratuity represent of
Whole time directors is provided on basis and charged to profit and loss account
Sales
Sate includes exercise duty but exclude tax.
33
The company must design a marketing function that can carry out marketing strategies
and plans .If the company is very small , one person might do all the research , selling , and
advertising , customer service and other marketing activities .As the company expands a
marketing department emergence to plan and carry out marketing activities
Managing the marketing function would be hard enough if the marketer had to deal only
with the controllable marketing mix variables. But the company operates in a complex
marketing environment consisting of uncontrollable forces to which the company must adopt
3.4.3.1 MARKETING IN MODERN WORLD
In the olden days, Marketing has identified as physical movements of goods from producer to
customers. But modern concept of marketing aims at satisfying the needs and wants of
customer at reasonable amount of profit
The management process responsible for identifying anticipating and satisfying customer
requirements profitably, marketing requires coordination, planning, implementation of
campaigns and a competent manager with the appropriate skills to ensure success. Marketing
objectives, goals and targets have to be monitored and met competitors strategies analyzed
anticipating and exceeded through effective use of marketing research an organization should
be able to identify the needs and wants of the customer and try to delivers benefits that will
enhance or add to the customer lifestyle , While at the same time ensuring that the
satisfaction of these needs results in healthy turnover for the organization
PHILIPS KOTLER defines Marketing as satisfying needs and wants through an exchange
process
Within this exchange transaction customer will only exchange what they value (money) if
they feel that their needs are being fully satisfied. Clearly that greater the benefit provides the
higher transactional value an organization can charge. Marketing is not about providing
products or services it is essentially about providing changing benefits to the changing needs
and demands the customer. According to modern concept, profit can be earned only through
customer satisfaction
3.4.3.2 MARKETING STRATEGY OF KSE LIMITTED
34
Necessary publicity will be provided for assistance .The Company reduced its
advertising and expenditure and concentrate more on radio wall painting and
hoardings.
Seminar will be conducted on relevant topic
Cost of operation kept to be minimum
Sales representatives will be provided for assistance
Supply quality products at reasonable price using advanced production technique
Other marketing strategies
3.4.3.3 THIS SHOWS THE MARKETING DEPARTMENT AS FOLLOWS
CUSTOMER SERVICE
SALES SUPERVISOR
ASSISTANT MANAGER
SALES REPRESENTATIVE
EXECUTIVE OFFICER
SENIOR OFFICERS
JUNIOR OFFICER
CLERK
The field staff under assistant customer service and complaint manager will evaluate the
dealer on the basis of certain things .They are
If the dealer doesnt buy at last one load of cattle feed of 3 month, automatically the company
will terminate his dealership.
Farmers meet and dealer meet .These are conducted by company once in every two
year at different headquarters (TVM, ERM, TCR, CALICUT) .These meet are
conducted in five star hotels. It is a one day program with two sessions. In that dealers
can express their problem current market for the product. Farmers attitude towards
the product etc.
36
Giving incentives dealers promotion KSE give a target to dealers. If any dealer
achieves the target KSE gives incentives
Coupons are put inside the package. These offers are made in onam season. Coupons
are certificates offering a started amount of reduction in purchase of specific product.
This method includes customers to buy a particular brand
Seminar will be conducted for farmers about cattle feed .In this seminar; an award is
given for the best farmer. This award is given for best farmer; this award is in the
form of cattle feed.
Irinjalakuda
Edayar near cochin
Palakkad
Vedhagiri near kottayam
37
PRODUCTION LAN
PRODUCTION PROCESS
PRODUCTION CONTROL
EMPLOYEE SUPERVISION
MAINTANCE OF MACHINE
QUALITY ASSURANCE
MAINTAINING HYGIENIC WORK PLACE
MANAGEMENT OF DIFFERENT SHIFT EMPLOYEES
MAXIMIZING THE PRODUCTION WITH MINIMUM RESOURCE
In this plant, the company uses different types of cakes according to their availability apart from
other material the co-users coconut cake, sunflower cake, mustard cake, soya bean, wheat,
vitamins cottonseeds, phosphate, tapioca, maize, jower and other vitamins.
Except from coconut cake all other are purchased from other state. Here 24 hour production
take place and it produces 650 tons per day
The plant is designed with having a capacity of 200 tons per day. It work 8 hours with three
shifts: 8-4, 4-12, 12-8 respectively. Only dumping of raw materials and stocking of finished feed
is done manually. The other process are fully automated and controlled from the plant control
room. The specialty of the plant is the high level of automation that has been incorporated and
this automation has been helpful in attaining the consistency in quality through the repeatability
of the formulation during the batching process. This technology has been marketed by us in the
form of MMCP. Such as
Milling
Mixing
Cooking
Pelleting
MMCP TECHNOLOGY
Milling
This is being used for ensuring that all the granules are grinded, screened to 3mm sieve. Then
it is made powder using grinder, two -harmer mills are used for this process.
Mixing
The raw material is used thoroughly by using horizontal mixer. Capacity of this mixer is 6
mm.
Cooking
Steam for cooking is produced using 3MT Boiler. The mixer / homogenizer carryout mixing
while the mash is being moved forward and add with dry saturated steam. High efficient
steam traps are used in the stream line for obtaining day-saturated steam. Cooking is carried
out a temperature of 80 c using pressure dry statured steam. Cooking is carried out a
temperature of 80 c using high pressure dry saturated steam.
Pelleting
The pellet mill die, by rotating, drags the mixture of mash steam toward the roller, which
presses it and consequently compels it to pass through the role of die. The compression cause
an increase in density of the mixture ,Which together With the heat generated by the dry
saturated steam facilities the extraction of pallet.
39
c) REFINING PLANT
In this plant oil refined according to the seasonal demand , here two types of oil are
refined
1. Solvent extracted oil
2. Sun flower oil
Here 20 tons per day is produced. The oil produced will be colourless and odourless so it is
not used for house hold consumption .The user of this oil are oil millers, industries and is
used as an ingredient for their product
In the company store department divided in to two
General store
Go down
3.4.4.3 RAW MATERIALS
The various materials used for the production of cattle feed are as follows.
1) Tower
2) Maize
3) Sun flower extraction
4) DORB (de-oiled rice brain)
5) Rice polish
6) De oiled coconut cake
7) Soya bean meal
8) Ground nut extraction
9) Tamarind seed powder
10) Wheat bran/flakes
11) Rape seed extraction
12) Cotton seed extraction
13) Ragi powder
14) Molasses
15) Calcite powder
16) Urea
17) Salt
18) Minerals
40
PURCHASE MANAGER
EXECUTIVE OFFICER
OFFICER
OFFICE ASSISTANCE
CLERK
41
A meeting of purchase committee held after receiving the quotation the committee
includes general manager , marketing manager and finance manager
The purchase committee selects suppliers after proper evaluation
The purchase manager then discuss with suppliers about the rate , quality
requirements, quantity, delivery, time and packing
If both parties agree, they will enter into purchase contract according to supply and
payment
Purchase order
The purchase department sends the purchase order to the selected supplier. It includes date of
order, description of material to be supplied and mode of supply etc. .It is prepared three
copies. One is send to the supplier and other two are maintain in the accounts and purchase
departments.
STORE
DEPARTMENT
STORE OFFICER
GODOWN
EXECUTIVE
STORE
GODOWN
SUPERVISOR
GODOWN
ASSISTANT
STORES CLERK
WORKER
WORKER
KSE follows centralized storing system. Under this system requirement of various
departments are stored and issue from one store.
KSE follows centralized storing system. Under this system requirement of various
departments are stored and issued from one store. The total available store space is divided
into various tracks. When material in the store is exhausted, the store department prepares
purchase requisition and forward to purchase department. The main functions are,
1. Identify the material that has reached the recorder level
2. Storage and proper keeping of the material
3. Issuing material to the customer department
4. Stores all data regarding the storage and supply of materials in the computer,
computerization of this department helped the company to save lot of time and eliminate
various records like storage ledger
It is prepared by the store keeper and sends the account department for recording it in the
profit and loss account. The consumption of this material by each department is shown in this
statement
GENERAL STORE
The officer is in charge of general store keeper. The store keeper is responsible for identifying
the material that has reached the recorder level and is responsible for its storing. The main
item purchased and stored here are spare part of machinery, packing material, belt, chain and
miscellaneous articles.
GODOWN
The company store raw material for one month or one and half month .the company has got
more than seven go downs. In the case of sampling of good, all the visible impurities are
identified. The impurities like fatty acid can be found only after lab analysis, In go down they
follow FIFO .as the department is computerized annual stock can be calculated easily.
STRENGTH
1) Experience in the field over 35 years
2) Leadership in the market
3) Reputation and brand image of the company for the quality of its products
4) Good network of leadership
5) Capable of marketing personnel
6) Good financial back ground
7) Acceptability of the feed and its quality standards in the market
8) Fully computerized plant
9) Good - employee employer relationship
10) Talented marketing personnel
WEAKNESS
1)
2)
3)
4)
5)
OPPORTUNITY
1) Expanding its distribution areas
2) Growing demand of the product
3) Adequate infrastructure can be made available for the production of other animal
feeds
4) Financial strength of the company will help the company to withstand the un healthy
market competitions
5) As the diary product field is in a developing stage the company can made quality
product
THREAT
1)
2)
3)
4)
45
46
Chapter 4
REVIEW OF LITERATURE
47
4. REVIEW OF LITERATURE
Review of literature focus on the earlier studies on financial performance analysis. These
studies are helpful in assessing the limitation, finding and suggestion involved in such
studies.
Finance always being disregarded in financial decision making since it involves investment
and financing in short-term period Further, also act as a restrain in financial performance,
since it does not contribute to return on equity (Rafuse, 1996 Current Research Journal of
Social Sciences 3(3): 269-275,2011 ISSN: 2041-3246).
Financial performance analysis is vital for the triumph of an enterprise. Financial
performance analysis is an appraisal of the feasibility, solidity and fertility of a business, subbusiness or mission. Altman and Eberhart (1994) reported the use of neural network in
identification of distressed business by the Italian central bank. Using over 1,000 sampled
firms with 10 financial ratios as independent variables, they found that the classification of
neural networks was very close to that achieved by discriminate analysis. They concluded
that the neural network is not a clearly dominant mathematical technique compared to
traditional statistical techniques. Gepp and Kumar (2008) incorporated the time "bias" factor
into the classic business failure prediction model. Using Altman (1968) and Ohlson's (1980)
models to a matched sample of failed and non-failed firms from 1980's, they found that the
predictive accuracy of Altman's model declined when applied against die 1980's data. The
findings explained the importance of incorporating the time factor in the traditional failure
prediction models. Campbell (2008) constructed a multivariate prediction model that
estimates the probability of bankruptcy reorganization for closely held firms. Six variables
were used developing the hypotheses and five were significant in distinguishing closely held
firms that reorganize from those that liquidate. The five factor were firm size, asset
profitability, the number of secured creditors, the presence free assets, and the number of
under-secured secured creditors, prediction model correctly classified 78.5% of the sampled
firms. This model is used as a decision aid when forming an expert opinion regarding a
debtor's likelihood of rehabilitation.
Maria Zain (2008), (performance evaluation and ratio analysis of pharmaceutical company
Bangladesh) he discuss about the return on assets is an important percentage that shows the
company's ability to use its assets to generate income. He said that a high percentage
indicates that company's is doing a good utilizing the company's assets to generate income.
He notices that the following formula is one method of calculating the return on assets
percentage. Return on Assets = Net Profit/Total Assets. The net profit figure that should be
used is the amount of income after all expenses, including taxes. He enounce that the low
percentage could mean that the company may have difficulties meeting its debt obligations.
He also short explains about the profit margin ratio - Operating Performance .He pronounces
that the profit margin ratio is expressed as a percentage that shows the relationship between
sales and profits. It is sometimes called the operating performance ratio because it's a good
48
indication of operating efficiencies. The following is the formula for calculating the profit
margin. Profit Margin = Net Profit/Net Sales.
James Clausen (2009), the article performance evaluation and ratio analysis of
pharmaceutical company Bangladesh article he barfly express about the liquidity ratio. He
Pronounce that it is analysis of the financial statements is used to measure company
performance. It also analyses of the income statement and balance sheet. Investors and
lending institutions will often use ratio analyses of the financial statements to determine a
Company's profitability and liquidity. If the ratios indicate poor performance, investors may
be reluctant to invest. The current ratio measures the company's ability to pay back its shortterm debt obligations with its current assets. He thinks a higher ratio indicates the company is
better equipped to pay off short-term debt with current assets. Wherefore, the acid test ratio or
quick ratio, measures quick assets against current liabilities. Quick assets are considered
assets that can be quickly converted into cash.
Gopinathan Thachappllly (2009), in this articles he discuss about the Financial Ratio
Analysis for Performance evaluation. It analysis is typically done to make sense of the
massive amount of numbers presented in company financial statements. It helps evaluate the
performance of a company, so that investors can decide whether to invest in that company.
Here we are looking at the different ratio categories in separate articles on different aspects of
performance such as profitability ratios, liquidity ratios, debt ratios, performance ratios,
divestment evaluation ratios.
Jo Neigadde (2010), in the article he briefly explain about the asset management ratio. It
divided into different types of categories. He state that about the used to analyze accounts
receivable and other working capital figures to identify significant changes in the Company's
operations and financial accounts. He said that there are two categories about this ratio such
as account receivable turnover and average age of account receive. He measurement the ratio
as. Accounts receivable turnover = Sales / Average Accounts receivable. Average age of
accounts receivable/ collection period - 365 days / Accounts receivable Turnover.
Munya Mtetwa (2010), in this article he short propose that about the fixed asset He define
that fixed assets are assets that are used in production or supply of goods or services and they
are to be used within the business for more than one financial year. Consequently, fixed assets
represent the company's long term income generating assets and they can either be tangible or
non tangible. It includes land and buildings, plant and equipment, golf courses, casinos,
football players, machinery and hotels depending on the nature of the business under
consideration. Fixed asset turnover = Sales / Net fixed asset.
49
Gallet C.A (1996), "Merger and Market Power in the US Steel industry" He examine the
relationship between mergers in the U.S. steel industry and the market power. The study
employed New Empirical Industrial Organization (NEIO) approach which estimates the
degree of market power from a system of demand and supply equations. The study analysed
yearly observations over the period between 1950 and 1988 and results have revealed that in
the period of 1968 to 1971 merges did not have a significant effect on market power in the
steel industry; whereas mergers in 1978 and 1983 did slightly boost market power in the steel
industry.
(Source: Gallet C.A (1996), "Merger and Market Power in the US Steel industry")
Anup Agraval Jeffrey F. Jaffe (1999), "The Post-merger Performance Puzzle" they
examines the literature on long-run abnormal returns following mergers. The paper also
examines explanations for any findings of underperformance following mergers. We
conclude that the evidence does not support the conjecture that underperformance is
specifically due to a slow adjustment to merger news. We convincingly reject the EPS
myopia hypothesis, i.e. the hypothesis that the market initially overvalues acquires if the
acquisition increases EPS, ultimately leading to long-run underperformance.
(Source: Anup Agraval Jeffrey F. Jaffe (1999), "The Post-merger Performance Puzzle "
Saple V. (2000), "Diversification, Mergers and their Effect on Firm Performance: A Study of
the Indian Corporate Sector" he finds that the target firms were better than industry averages
while the acquiring firm shad lower than industry average profitability. Overall, acquirers
were high growth firms which had improved the performance over the year prior to the
merger and had a higher liquidity.
(Source: Saple V. (2000), "Diversification, Mergers and their Effect on Firm Performance)
50
Beena P.L (2001), 'An analysis of merger in the private corporate sector in India's attempt to
analyze the significance of merger and their characteristics. The paper establishes that
acceleration of the merger movement in the early 1990s was accompanied by the dominance
of merger between firms belonging to the same business group of houses with similar product
line.
(Source: Beena P.L (2000), 'An analysis of merger in the private corporate sector in India)
Paul (2003) "The merger of Bank of Madura with ICICI Bank". The researcher evaluated the
valuation of the swap ratio, the announcement of the swap ratio, share price fluctuations of
the banks before the merger decision announcement and the impact of the merger decision on
the share prices. He also attempted the suitability of the merger between the 57 years old
Bank of Madura with its traditional focus on mass banking strategies based on social
objectives, and ICICI Bank, a six year old 'new age' organisation, which had been
emphasizing parameters like profitability in the interests of shareholders. It was concluded
that synergies generated by the merger would include increased financial capability, branch
network, customer base, rural research and better technology, However, managing human
resources and rural branches may be a challenge given the differing work cultures in the two
organizations.
(Source: Paul (2003) "The merger of Bank of Madura with ICICI Bank")
Joydeep Biswas (2004) "Recent trend of merger in the Indian private corporate sector". They
research about Corporate restructuring in the form M&A has become a natural and perhaps a
desirable phenomenon in the current economic environment. In the tune with the worldwide
trend, M&A have become an important conduit for FDI inflows in India in recent years. In
this paper it is argued that the Greenfield FDI and cross-border M&As are not alternatives in
developing countries like India.
(Source: Joydeep Biswas (2004) "Recent trend of merger in the Indian private corporate
sector")
Vanitha. S (2007) "Mergers and Acquisition in Manufacturing Industry" she analysed the
financial performance of the merged companies, share price reaction to the announcement of
merger and acquisition and the impact of financial variable on the share price of merged
companies. The author found that the merged company reacted positively to the merger
announcement and also, few financial variables only influenced the share price of the merged
companies.
(Source: Vanitha. S (2007) "Mergers and Acquisition in Manufacturing Industry")
51
Kumar Priya, Raj an and singh (2009) "conducted a study and observed that financial
statement analysis is largely a study of relationship among various financial factors in a
business as disclosed by a single set of statements and a study of the trends of these factors as
shown in a series of statement.
Source: Kumar Priya, Rajan and singh (2009) an Indian Perspective")
52
4.1 JOURNALS
1.
Ramaswamy (1992) in his article states that the central problem that has both
constrained and distorted the performance of public sector enterprises in the country is an
unhealthy close, distinction relationship between them. This attributed prevents public sector
enterprises from functioning in business innovativeness that imply.
(Iyer R. Ramaswamy (1992), Public Enterprise and Purpose, "Economic And Political
Weekly", Vol.XXXIX, No.34. PP 60-264)
2.
Reddy (1997) has discussed the relevance and the scope of public enterprise in a
changed economic condition. In the context of redefining the rate of public sector with regard
to profitability, most of the public enterprises benefited from the administrated price, since
both input cost and output price are regulated by the government or through other public
enterprises in the network.
(Reddy Y. V (1997), Public Enterprises and Economic Reforms, "Banking And Finance", Vol.
10 No., PP 8-10)
3.
Mirtyunjay Atherya (1998) in his article describes the entrepreneurial capabilities in
enterprise. The solution to the problem of public sectorenterprises requires an infusion of
entrepreneurial dynamism.
(Atherya Mirtyunjay (1998), New Entrepreneurial, Management of Public Enterprises,
"Southern Economists", Vol.37 No.l, PP 18-21)
4.
Sathyam Sundaram (1998) revealed that autonomy and accountability are vital
factors in public sector enterprises. Autonomy means units could be completely autonomous
and independent from government supervision. Accountability should be continued to key
areas of management which needs to be transparent.
(Sathyam Sundaram (1998), Autonomous and Accountability of Public Enterprises,
"Southern Economists", Vol.37 No.l, PP 22)
5.
Leelavathi (1998) in her article strongly asserts, the need for bringing effective
reforms for public sector enterprise; even the privatization and investment more will remain
in complete without proper public sector enterprise reforms.
(Leelavathi D. S (1998). Public Reforms in India, "Southern Economist",VoL37 No.l, ,PP 5360)
53
Above reviewed literature studies the profitability of enterprises based on the published
financial statements awareness on the factors affecting profitability. Hence such a study is
worthwhile and is of contemporary value.
4.2 Articles related with financial performance
2. Dr. Perway Alam (2014) "Co-operative banks are an essential part of the Indian financial
system. They consist of urban co-operative banks and rural co-operative credit
institutions. Urban Co-operative Banks (UCBs) play a vital role in meeting the growing
credit needs of urban and semi urban areas of the country. This paper focused on the
growth and financial performance of Urban Co-operative Banks in India. This Paper
analysed the growth of UCBs in India during 1996-67 to 2012-13.
54
This paper also analysed the financial performance of UCBs in India during 2000-01 to
2012-13. Secondary data has been used for the present study. Technique of ratio analysis
has been used for the data analysis. This paper concluded that Urban Co-operative Banks
developed only in five states of India.
The growth rate of UCBs owned funds, deposits and advances in the post reform period
(after 1991) was more than pre reform period. Due to number of scams have taken place
in Urban Cooperative banking sector in 2001-02, a number of UCBs became weak.
These banks lost the confidence of the depositors. In 2005, RBI had drafted vision
document and constituted TAFCUBs (Task force for Co-operative Banks) for
strengthening the urban banking sector.
The study concluded that the constitution of TAFCUBs has positive impact on Urban Cooperative banking sector in India. In spite of number of UCBs decreased due to merger
and failure of UCBs, there has been increased in profit, deposits and advances of UCBs
during the last eight years. This paper also concluded that there has been an
improvement in the financial performance of the UCBs in India during the study period.
At the same time, the study brought out that the high levels of Non-Performing Assets of
UCBs continue to pose a challenge to the financial soundness of UCBs.
A large number of the UCBs became weak due to lack of proper corporate governance.
Thus, UCBs should adopt Corporate, Governance proactively. For the implementation of
Corporate Governance Board of Director plays very crucial role. Therefore, the Board of
Directors of UCBs should implement professional management approach and Reserve
Bank of India and government should co-operate to UCBs for their development."
(Dr. Perway Alam "Growth and Performance of Urban Co-operative Banks in India",.
Vol 3, No 2 (2014)
3.Tejani Rachana (2011) "In an index of Financial Inclusion, India has been ranked 50 out
of 100 countries, Only 34% of the India's population has access to basic banking
services. The objectives of the paper is to study financial inclusion in rural areas, reasons
for low inclusion, satisfaction level of the rural people toward banking services and to
assess the performance of the banks which are working in the rural areas which mainly
55
include
designed on the basis of literature review was used to collect data from 200 people
residing in Ambasan, Jotana and Khadalpur villages of Gujarat. The paper first describes
in detail the financial inclusion status in India and Gujarat followed with a review of
scenario at the global level. The third section analyses the data with the help of Chisquare test and Tabulation followed with the discussion of analysis, recommendations
and conclusion indicating that there is lot of opportunity for the commercial banks to
explore the rural unbanked areas.0Though Regional Rural Banks (RRBs) and Primary
Agriculture Credit Societies (PACS) have good coverage but most of them are running
into losses. Commercial banks should seize this opportunity rather than looking at it as a
social obligation."
(Tejani Rachana "Financial Inclusion and Performance of Rural Co-operative Banks in
Gujarat", Vol 2, No 6 (2011))
4. Dr. Padmaja. B., Dr. BhanuKiran. C. and Dr. Rama Prasada Rao, C. H (2006) "The
concept of "Financial Inclusion" is inbuilt in the structure of Urban Co-operative Bank.
As Urban Co-operative Banks are mostly working in the rural and semi-urban areas.
They are the back bone of banking system and contribute for growth of the nation. The
researcher aims to analyse the financial performance of Anantapur Urban Cooperative
bank. The study used exploratory research design which relies on secondary data. The
analysed data reveals that there was significant growth in the deposits mobilization,
loans and advances, working capital, reserves and owned funds. There is no significant
growth in membership but there was significant growth in share capital per member with
CGR of 9.43. There was significant increase in the total cash with the bank which is
growing at CGR of 12.44. There was no significant growth in CDR. There was
significant difference in the growth and composition of income. The total expenses were
increasing significantly with CGR of 16.61. Even though there was increasing trend in
the Net Profits earned during the study period except in the year 2006-07 but it was
statistically in significant. The EPS of AUCB was enhanced which is statistically
significant during the study. Therefore the performance of AUCB was satisfactory."
56
(Dr. Padmaja. B., Dr. BhanuKiran. C. and Dr. Rama Prasada Rao, C.H. "An empirical study
on financial performance of anantapur urban cooperative bank", Social Sciences and
Humanities, 2006)
5. Sanjay Kanti Das (2012) "State Cooperative Banks provide the necessary financial
resources to District Cooperative Banks and Primary Agricultural Cooperative Societies,
and are responsible for their recovery. They have role in the development rural economy
of India. The paper explores and evaluates the growth and progress of State Cooperative
Banks in the North-eastern region of India. Further, efforts are also given to make a
comparative analysis of State Cooperative Banks in the North-eastern region and India
through some selected financial indicators. It is found that all the financial variables
(capital, reserves, deposits, advances, demand, collection and over dues) increased with
higher growth rate during 2002-2009 on the basis of Compound Annual Growth Rate.
The paper highlights the reasons for slow progress of State Cooperative Banking in the
North-eastern region of India which is considered as the most backward region of the
country. Further, this paper focuses on several pitfalls and shortcomings faced by State
Cooperative Banks in region. Finally, it is observed that the State Cooperative Banks in
the North-eastern region are not at par with the all India level which is evidenced from
the study of some selected financial indicators."
(Sanjay Kanti Das "State Cooperative Banking in Northeast India: Financial and
Operational Viability Analysis" Keywords: State Cooperative Banks, North-eastern
region of India, Compound Annual Growth Rate, Selected Financial Ratios, Journal of
North East India Studies, Vol.2, No.l, Jul- Dec.2012,pp. 13-32.)
6. Droj Laurentiu (2013) "This paper will be later used within the Doctoral thesis: The
Mechanism of Financing Investment Projects by Usage of European Structural Funds,
which is currently under development at the University Babes Bolyai Cluj Napoca,
Faculty of Economics and Business Management, under the coordination of the prof.
57
Univ. dr. loan Trenca. This paper comes also as a result of the European funded project
PER1NPRO Cross-Border Research Programme-Performance Indicators of the
Economic Entities from Bihor-Hajdu Bihar Euro region and which will be used to
analyze the financial health of the economic entities in the Euro region of Hajdu-BiharBihor. The first chapter of the paper will introduce the research and also will present the
literature review and the methodological framework; by establishing a common set of
indicators for the financial analysis of the companies located in the Bihor-Hajdu Bihar
Euroregion. Seven of these indicators considered to be highly important will also briefly
describe and defined. Some of these indicators are used for the first time in a transnational analysis over companies located in the Romanian-Hungarian cross border area
Several characteristics which differentiate the financial reporting documents from
Romania and Hungry will be identified and measures for correction of the values of the
indicators will be proposed. This comparative study can be considered an innovation, as
well, in the cross-border area since in the past no other studies of this types were
performed between Romania and hungry
(Droj Laurentiu riaurentiu.droj@gmail.com) universitatea din Oradea, Facultatea de
Stiinte Economice), "Financial Performance Analysis Based on the Financial Statements
for the Companies Located in the Bihor-Hajdu Bihar Euro region")
58
Chapter 5
THEORETICAL FRAMEWORK
59
5. THEORETICAL FRAMEWORK
5.1 FINANCIAL PERFORMANCE ANALYSIS
Management should be particularly interested in knowing financial strengths of the firm to
make their best use and to be able to spot out financial weaknesses of the firm to take suitable
corrective actions. The future plans of the firm should be laid down in view of the firms
financial strengths and weaknesses. Thus, financial analysis is the starting point for making
plans, before using any sophisticated forecasting and planning procedures. Understanding
the past is a prerequisite for anticipating the future.
Financial Performance analysis is defined as the process of identifying financial strengths
and weaknesses of the firm by properly establishing relationship between the items of the
balance sheet and the profit and loss account.
There are various methods or techniques that are used in analyzing financial statements, such
as comparative statements, schedule of changes in working capital, common size percentages,
funds analysis, trend analysis, and ratios analysis.
Financial statements are prepared to meet external reporting obligations and also for decision
making purposes. They play a dominant role in setting the framework of managerial
decisions. But the information provided in the financial statements is not an end in itself as no
meaningful conclusions can be drawn from these statements alone. However, the information
provided in the financial statements is of immense use in making decisions through analysis
and interpretation of financial statements.
5.1.1 TOOLS AND TECHNIQUES OF FINANCIAL PERFORMANCE ANALYSIS
The following are some tools to analyses the financial Performance of the company:
1.
2.
3.
4.
Ratio Analysis
Comparative Statement Analysis
Common Size Statement Analysis
Trend Analysis
without much loss. If the actual ratio is equal to more than 1:1, the conclusion can be that the
concern is liquid and so, it can pay off its short term liabilities out of its quickly realizable
assets without any difficulty.
5.2.4.1.3 Absolute Liquid Ratio or Cash Ratio
Although receivable, debtors and bills receivable are generally more liquid than inventories,
yet there may be doubts regarding their realization into cash immediately or in time.
Absolute liquid ratio = Absolute liquid ratio
Current liabilities
The cash ratio goes a step further and examines the ability of the firm to settle short-term
liabilities using only cash and cash equivalents such as marketable securities. In other words,
the cash ratio indicates the extent to which current liabilities can be paid through very liquid
assets
Absolute liquid assets include cash in hand and cash at bank and marketable securities or
temporary investments. This ratio is most rigorous and conservative test of a firms liquidity
position. It gives a more meaningful measure of liquidity along with current and acid test
ratio. Absolute liquidity ratio relates the sum of cash and marketable securities to the current
liabilities. The ideal absolute liquid ratio is 2:1. It is fixed at 1:2 because for the payment of
quick liabilities, besides the 100% cash available from the absolute liquid assets, a good
amount of cash may also result from other current assets like receivables and sundry debtors.
If the absolute ratio is equal to or more than the standard ratio 1:2, the firm is considered to
be liquid.
63
64
Inventory
Where average inventory refers to arithmetic average of opening and closing inventory, and
the cost of revenue from operations means revenue from operations less gross profit.
The objectives of calculating stock turnover ratio are to know how efficiently the stock or
inventory is utilized. Generally a ratio of 8 times is considered satisfactory. A high ratio
indicates effective management of inventory. If the ratio is less than 8 times, it means that the
concern has accumulated unsalable goods. It also decides to analyze the inventory conversion
period which represents the number of days taken to convert inventory into cash. High
conversion period indicates the efficiency of the management.
5.2.4.2.2 Debtors Turnover Ratio
It explains the relationship between net credit sales and average debtors including bills
receivable. This ratio shows how quickly debtors are realized or converted into cash. It
indicates how efficiently the firm collects cash from debtors. It is also known as receivable
turnover ratio.
Debtors turnover ratio =
The objectives of computing this ratio is to know how efficiently the trade debtors are
managed. In other words, their objective is to determine the liquidity of debtors. For Debtors
turnover ratio, standard is not fixed. This is because it depends on a number of factors such as
the seasonal nature of the business, nature of industry, credit policy of the firm etc. Generally,
a turnover ratio of 7 (collection period of 45 days) may be taken as satisfactory. A high ratio
is an indication of shorter time lag between credit sales and cash collection. Whereas low
ratio shows that debtors are not being collected rapidly.
Debt collection period =
The objective of this ratio is to determine the period for which credit purchases remain
outstanding. Generally, lower than ratio better is the liquidity position of the firm and higher
the ratio, less liquid is the position of the firm. But higher ratio also implies greater period
enjoyed by the firm and consequently larger period from credit suppliers.
Average payment period =
Net sales
66
A lower fixed asset turnover relative to the industry may indicate that the firm carries
excessive fixed assets. A higher turnover may indicate inadequate, low, outdated or
depreciated fixed assets.
5.2.4.2.5 Current Assets Turnover Ratio
The ratio which expresses the relationship between the current assets to sales is known as
Current Assets Turnover Ratio.
Current assets turnover ratio =
Net sales
67
5.2.4.3.2Operating Ratio
It is computed to analyze cost of operation in relation to revenue from operations. It is
calculated as follows:
Operating Ratio = (Cost of Revenue from Operations + Operating Expenses)
X 100
Net Revenue from Operations
Operating expenses include office expenses, administrative expenses, selling expenses,
distribution expenses, depreciation and employee benefit expenses etc.
Cost of operation is determined by excluding non-operating incomes and expenses such as
loss on sale of assets, interest paid, dividend received, loss by fire, speculation gain and so
on.
5.2.4.3.3 Operating Profit Ratio
It is calculated to reveal operating margin. It may be computed directly or as a residual of
operating ratio.
Operating Profit Ratio = 100 Operating Ratio
Alternatively, it is calculated as under:
Operating Profit Ratio =
Operating Profit
X 100
Net sales
68
= Net profit
X 100
Net sales
Generally, net profit refers to profit after tax (PAT).
Debt
Equity ( Net Worth)
69
This is a variant of the debt-to-equity ratio. It is also known as equity ratio or net worth to
total assets ratio. This ratio relates the shareholder's funds to total assets. Proprietary / Equity
ratio indicates the long-term or future solvency position of the business.
Proprietary ratio=
Total Debt
Capital Employed
EBIT
Interest
70
The benefits of a comparative statement are varied for a corporation. Because of the uniform
format of the statement, it is a simple process to compare the gross sales of a given product or
all products of the company with the gross sales generated in a previous month, quarter, or
year.
Comparing generated revenue from one period to a different period can add another
dimension to analyzing the effectiveness of the sales effort, as the process makes it possible
to identify trends such as a drop in revenue in spite of an increase in units sold.
Along with being an excellent way to broaden the understanding of the success of the sales
effort, a comparative statement can also help address changes in production costs
5.3.2 Features of Comparative Statements:
1) A comparative statement adds meaning to the financial data.
2) It is used to effectively measure the conduct of the business activities.
3) Comparative statement analysis is used for intra firm analysis and inters firm analysis.
4) A comparative statement analysis indicates change in amount as well as change in
percentage.
5) A positive change in amount and percentage indicates an increase and a negative change in
amount and percentage indicates a decrease.
Common
Item of Interest
Reference Item
71
Sales
Net profit
Current assets
Current liabilities
72
73
Chapter 6
DATA ANALYSIS AND INTERPRETATION
74
YEAR
2010 2011
3843.9
3212.23
2011 2012
4979.92
3738.82
2012 2013
5481.94
4574.09
2013 2014
5794.31
3847.88
2014 - 2015
10917.54
6038.41
Source : Published Annual Report of KSE Ltd for five years
1.19
1.33
1.19
1.50
1.80
CURRENT RATIO
2
1.5
1
0.5
20
13
20
14
-2
01
5
20
14
20
13
20
12
20
12
20
11
20
10
20
11
CURRENT RATIO
INTERPRETATION
The information on the current assets, current liabilities and current ratio of the company for
various year is summarized in table . it is observed from table that, current ratio of the firm is
shows an increasing trend. By rule of thumb the ideal ratio is 2:1, There is a increasing trend
in the year 2010 2011 to 2011 2012 , then there is decreasing in 2012-2013,then last two
years increasing trend. last year current ratio is 1.8 thus the company has faced some liquidity
problems.
75
QUICK RATIO
0.18
0.22
0.16
0.21
0.71
QUICK RATIO
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
QUICK RATIO
INTERPRETATION
The highest ratio shown by the above table is 0.71 for the year 2014 2015. The lowest ratio
is shown for the year 2012 2013 i.e. 0.16. Ratio 1:1 is considered as ideal. The graph shows
fluctuating ratios for the years.
76
CURRENT
LIABILITIES RS in
lakhs
348.07
2010 2011
3212.23
583.33
2011 2012
3738.82
375.78
2012 2013
4574.09
314.41
2013 2014
3847.88
3777.75
2014 - 2015
6038.41
Source : Published Annual Report of KSE Ltd for five years
YEAR
ABSOLUTE
LIQUID RATIO
0.10
0.15
0.08
0.08
0.62
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
ABSOLUTE LIQUID RATIO
INTERPRETATION
The highest ratio shown by the above table is .62 for the year 2014 2015. The lowest ratio
is shown for the year 2012 2013 and 2013 -2014. 0.08 and 0.08. When comparing previous
years 2010-2011 to 2014-2015 highest ratio is came in last year. It is a huge increasing trend .
08 to .62
77
YEAR
NET ASSETS
RS in lakhs
NET WORKING
CAPITAL RATIO
631.67
2010 2011
7710.46
2011 2012
1241.1
8637.49
2012 2013
907.85
9532.30
2013 2014
1946.43
9550.29
2014 - 2015
4879.13
13802.54
Source : Published Annual Report of KSE Ltd for five years
.08
.14
.09
.20
.35
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
NET WORKING CAPITAL RATIO
INTERPRETATION
The net working capital ratio of the company was started with 0.08 in the year 2010 -2011.
Then It was increased to 0.14 by 2011-2012 and slightly decreased to 0.09 by 2012- 2013.
Then last two year increasing trend .20 and .35 by the year 2013-2014, 2014-2015, The
average NWC Ratio of the company is 0.172 for the above study period.
78
NET
SALES RS
in lakhs
INVENTORIES
RS in lakhs
INVENTORY
TURNOVER
RATIO
2010 2011
45368.03
3261.2
2011 2012
54222
4148.33
2012 2013
69717.71
4737.15
2013 2014
80630.33
4969.9
2014 - 2015
89970.05
6600.66
Source : Published Annual Report of KSE Ltd for five years
13.91
13.07
14.71
16.22
13.63
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
INVENTORY TURNOVER RATIO
INTERPRETATION
In the above diagram the highest turnover ratio is in the year 2012 2013, and lowest in
the year 2011 2012 .stock turnover ratio for all the years were above the standard. A
higher turnover ratio indicates efficient management of inventory because more
frequently the stocks are sold, the lesser the amount of money is required to finance
inventory is sold very fast.
79
DAYS
IN A
YEAR
INVENTORY
TURNOVER
RATIO
INVENTORY
TURNOVER
PERIOD
2010 2011
365
13.91
2011 2012
365
13.07
2012 2013
365
14.71
2013 2014
365
16.22
2014 - 2015
365
13.63
Source : Published Annual Report of KSE Ltd for five years
26.24
27.92
24.81
22.50
26.77
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
INVENTORY TURNOVER PERIOD
INTERPRETATIONS
Inventory holding period means the time taken to clear the stock of the firm. From the above
it is clear that inventory conversion period is showing a increasing trend in the year 2011
2012 it is 27.3 and decreasing trend in the year 2013 2014 it is 22.50. Then last year 20142015 again increasing 26.77
6.1.2.3 DEBTORS TURNOVER RATIO
80
Net Sales
Debtors
NET SALES
RS in lakhs
DEBTORS
RS in
lakhs
DEBTORS
TURNOVER
RATIO
2010 2011
45368.03
22.76
1993.32
2011 2012
54222
16.79
3229.42
2012 2013
69717.71
29.26
2382.69
2013 2014
80630.33
16.99
4745.75
2014 2015
89970.05
28.71
3133.75
Source : Published Annual Report of KSE Ltd for five years
Chart No: 6.1.2.3 Chart showing Debtors turnover ratio
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
DEBTORS TURNOVER RATIO
INTERPRETATION
81
Debtors turnover ratio shows the relationship between sales and debtors. From the above
tables showing decreasing trend in the year 2014 2015 it was 3133.756.1.2.4 AVERAGE
PAYMENT PERIOD
Average payment period =
DAYS IN A
YEAR
DEBTORS
TURNOVER
RATIO
AVERAGE
PAYMENT
PERIOD
2010 2011
365
1993.32
2011 2012
365
3229.42
2012 2013
365
2382.69
2013 2014
365
4745.75
2014 - 2015
365
3133.75
Source : Published Annual Report of KSE Ltd for five years
0.18
0.11
0.15
0.07
0.11
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
AVERAGE PAYMENT PERIOD
INTERPRETATION:
From the above it is clear that average payment period is showing a increasing trend in the
year 2014-2015 it was 0.11.
82
YEAR
CREDITORS
TURNOVER
RATIO
2010 2011
44251.26
1014.42
2011 2012
52382.5
1768.83
2012 2013
68421.85
2859.46
2013 2014
69418.72
1594.54
2014 - 2015
75659 .98
2464.76
Source : Published Annual Report of KSE Ltd for five years
43.62
29.61
23.92
43.53
30.69
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
CREDITORS TURNOVER RATIO
INTERPRETATION:
It is clear from table figure 6.1.2.5 that the creditors turnover ratio shows the relationship
between purchases and creditors including bills payable. It reveals that creditors turnover
ratio is fluctuating year after year, the ratio is higher in 2010 -2011. It indicates that the
creditors are being paid promptly, thus enhancing the credit worthiness of the company. In the
year 2012 2013 creditors ratio is very low (23.92). This means liberal credit term followed
by the suppliers.
83
YEAR
2010 2011
2011 2012
2012 2013
2013 2014
2014 - 2015
365
365
365
365
365
CREDITORS
TURNOVER
RATIO
AVERAGE
PAYMENT
PERIOD
43.62
29.61
23.92
43.53
30.69
8.36
12.32
15.25
8.38
11.89
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
AVERAGE PAYMENT PERIOD
INTERPRETATION
From the above it is clear that average payment period is showing a increasing trend in the
year 2014-2015 it was 11.89
84
20
13
20
14
-2
01
5
20
14
20
13
20
12
20
12
20
11
20
10
20
11
INTERPRETATION
The information on the relation between net sales and net fixed asset is summarized in the
figure 6.1.2.7. Higher the fixed assets turnover ratio, it is good for the company. Fixed assets
turnover ratio high in 2014 2015. Here it clear that fixed assets turnover ratio is high in the
company. It means better utilization of resources of fixed assets for better working of the
firm. The high turnover ratio tells the efficiency of the management and utilization of assets.
85
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
CURRENT ASSETS TURNOVER RATIO
INTERPRETATION
The information on the relationship between net sales and current assets is summarized in the
figure 6.1.2.8. This ratio indicates effective utilization of current assets. It is clear that the
current assets turnover ratio shows an decreasing trend year y year, in the year 2013 2014
current assets turnover ratio shows a highly increase trend.
86
YEAR
NET
SALES RS
in lakhs
NET
WORKING
CAPITAL
RS in lakhs
WORKING
CAPITAL
TURNOVER
RATIO
631.67
2010 2011
45368.03
1241.1
2011 2012
54222
907.85
2012 2013
69717.17
1946.43
2013 2014
80630.33
4879.13
2014 - 2015
89970.05
Source : Published Annual Report of KSE Ltd for five years
71.82
43.68
76.79
41.42
18.43
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
WORKING CAPITAL TURNOVER RATIO
INTERPRETATION:
The information on the relationship between net sales and net working capital is summarized
in the figure 6.1.2.9. It is clear that the working capital ratio shows an decreasing trend year
by year, in the year 2012 2013 working capital turnover ratio shows a highly increase trend.
Here the ratio shows an increasing trend which means that the firm is improving its resource
utilization. Higher the working capital turnover ratio indicates the better management of
working capital and vice versa. The average working capital ratio is 50.42
NET
GROSS
SALES RS
PROFIT RATIO
in lakhs
2010 2011
45368.03
1359.8
2.99
2011 2012
54222
2291.78
4.22
2012 2013
69717.17
1401.84
2.01
2013 2014
80630.33
2956.3
3.66
2014 - 2015
89970.05
6173.9
6.86
Source : Published Annual Report of KSE Ltd for five years
YEAR
GROSS
PROFIT RS in
lakhs
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
GROSS PROFIT RATIO
INTERPRETATION:
It is clear from the table and figure that the gross profit of the organization is showing in
fluctuating trend during the period under the study and the net sales of the firm showing
increasing trend. Even if the sales are increasing there is no proportionate increase in the
gross profit. It is observed that the gross profit ratio of the organization is showing a
fluctuating trend year after year. There is high increase in last year. High gross profit ratio is a
efficient production or purchase management.
NET PROFIT
RS in lakhs
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
NET PROFIT RATIO
INTERPRETATION
The firms profit position was low in 2011, and then it has increased in 2012. In 2013 profit
reached the lowest position than last four year. Lower ratio shows the operational inefficiency
(related to indirect expenses and revenues) of the company. In 2014 and also in 2015 the net
profit is increased which indicates that the company has taken necessary steps to reduce its
operational inefficiencies. In 2015 the net profit increased very high, it shows the successful
of the company.
89
Operating Cost
Net Sales
X 100
OPERATING RATIO
100
99
98
97
96
95
94
93
92
91
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
OPERATING RATIO
INTERPRETATION
The information on relationship between operating cost and net sales is summarized in table
6.1.3.3. It is observed from the table that the operating ratio of the company shows the
fluctuating trend every year. This ratio shows the operating efficiency of the business was
unfavorable.
90
Operating
X 100
Net Sales
Table No: 6.1.3.4 Table showing operating profit ratio
OPERATING
NET
OPERATING
YEAR
PROFIT RS SALES RS
PROFIT
in lakhs
in lakhs
RATIO
2010 2011
667.31
45368.03
1.47
2011 2012
1587.04
54222
2.92
2012 2013
666.09
69717.17
0.95
2013 2014
2343.87
80630.33
2.90
2014 - 2015
6388.93
89970.05
7.10
Source : Published Annual Report of KSE Ltd for five years
Chart No: 6.1.3.4 Chart showing operating profit ratio
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
OPERATING PROFIT RATIO
INTERPRETATION
The information on the relationship between operating cost and net sales is summarized in the
figure. It is observed that there is a fluctuating trend in the operating profit ratio. The
operating profit in the year 2012-2013 is decreased, but in the year 2013-2014, 2014-2015 it
is increased. It indicates the overall efficiently in operating the business.
91
EBIDT
100
Total AssetsNet Assets
EBIDT RS
in lakhs
NET
RETURN ON
ASSETS
INVESTMENT
RS in lakhs
RATIO
211.46
7710.46
2010 2011
2.74
8637.49
2011 2012
1127.57
13.05
9532.3
2012 2013
243.99
2.55
9550.29
2013 2014
1968.1
20.60
13802.54
2014 - 2015
5752.74
41.67
Source : Published Annual Report of KSE Ltd for five years
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
RETURN ON INVESTMENT RATIO
INTERPRETATION
The information on the relationship between EBIDT and Net asset is summarizes in the
figure. It is observed that there is a increasing trend in the Return on investment ratio. Higher
92
return on Investment implies efficient use of assets, the companys return on investment is in
fluctuating stage.But in 20014-2015 it shows a high return 41.67%
Debt
Equity ( Net Worth)
DEBT
RS in
lakhs
EQUITY
RS in lakhs
4375.11
3335.35
4666.31
5462.8
4692.2
6621.47
3971.18
4069.5
4858.09
7181.07
DEBTEQUITY
RATIO
1.31
1.17
1.34
0.96
0.92
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
DEBT- EQUITY RATIO
INTERPRETATION
93
The information on the relationship between debt and equity is summarizes in the figure. It is
observed that there is a decreasing trend in the debt equity ratio. It means company reduce
the debt finance in 2010-2011 it is 1.31,now 2014-2015
EQUITY
RS in
lakhs
TOTAL
ASSETS
PROPRIETARY
RATIO
3335.35
2010 2011
7710.462
0.43
2011 2012
3971.18
8637.49
0.45
2012 2013
4069.5
9532.3
0.42
2013 2014
4858.09
9550.29
0.50
2014 - 2015
7181.07
13802.54
0.52
Source : Published Annual Report of KSE Ltd for five years
PROPRIETARY RATIO
0.6
0.5
0.4
0.3
0.2
0.1
0
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
PROPRIETARY RATIO
INTERPRETATION
94
Proprietary Ratio is increasing each year, Higher the ratio or the share of shareholders in the
total capital of the company better is the long-term solvency position of the company. A low
proprietary ratio will include greater risk to the creditors.In2010-2011 it was 0.43 , now 20142015 it 0.52
Total Debt
Capital Employed
Table No: 6.1.4.3 Table showing Total Debt Ratio
YEAR
DEBT
RS in
lakhs
CAPITAL
EMPLOYE
D RS in
lakhs
TOTAL DEBT
RATIO
4375.11
2010 2011
6065.52
2011 2012
4666.31
4898.67
2012 2013
5462.8
4958.21
2013 2014
4692.2
5702.41
2014 - 2015
6621.47
7764.13
Source : Published Annual Report of KSE Ltd for five years
0.72
0.95
1.10
0.82
0.85
2010 2011 2011 2012 2012 2013 2013 2014 2014 - 2015
TOTAL DEBT RATIO
95
INTERPRETATION
The debt ratio average for the study period is 0.88; it means that the lenders have financed
88% of total debt. It obviously implies the owners have provided remaining finance.
96
97
INTERPRETATION
Comparing the balance sheet of KSE limited during the year 2014-2015 the Amount of
capital collected by the company remains the same. From the comparing balance sheet we
can find an increase in reserves and Surplus. It shows that the reserve increase 51.18% during
the year.
The long term borrowings have a 18.60%, decreasing during the year. The deferred tax
liabilities decreasing to 100% during the year. The provision created for the long term has
increased by 37.30%.
Under current liabilities are also showing increasing. Short term, provision shows 31.60%
increase. Other current liabilities show a 72.82 % increase. Short term borrowing and trade
payables are increasing at 14.08% and 88.66%.
Investment is decreasing 66.6%. This is a major change happened compare to last years.
Fixed assets of the company decreasing to 24.86% and the long term loans and advances also
increasing to 18.53%.
Under the current asset inventories increased from 2.81%. The companies, trade receivables
are increasing68. 98%. It shows that most of the sales are run in credit sales. The loans and
advances are increasing at 2.55%. Other current assets increasing at 55.7% during the year.
98
99
INTERPRETATION
Comparing the balance sheet of KSE limited during the year 2013-2014the Amount of capital
collected by the company remains the same. From the comparing balance sheet we can find
an increase in reserves and Surplus. It shows that the reserve increase 21.03% during the year.
The long term borrowings have a 5.67%, decreasing during the year. The deferred tax liability
decreasing to 8.79% during the year. The provision created for the long term has increased by
31.97%.
Under current liabilities are also showing decreasing. Short term, provision shows 84.47%
increase. Other current liabilities show a 14.12 % increase. Short term borrowing and trade
payables are decreasing at 62.54% and 5.28%.
There is no change on the investment. Fixed assets of the company decreasing to 7.37% and
the long term loans and advances also decreasing to 3.67%.
Under the current asset inventories increased from opening date to 4.91%. The companies,
trade receivables are decreasing. It shows that most of the sales are run in cash sales. The
loans and advances are increasing at 46.37%. Other current assets decreasing at 0.55%
during the year.
INTERPRETATION
101
Comparing the balance sheet of KSE limited during the year 2012-2013 the amount of capital
collected by the company remain the same. From the comparing balance sheet we can find
increase in reserves and surplus. It shows that the reserve ingress 2.69% during the year.
The long term borrowings have a 4.05%, decreasing during the year. The deferred tax liability
decreasing to 6.71% during the year. The provision created for the long term has increased by
9.20%During the year 2011-2012 non-current liability company is decreasing.
Under current liabilities are showing an increase.Short term, provision shows 44.74%
decrease. Other current liabilities show 50.91 % increase. Short term borrowing increasing
and trade payables are decreasing at 10.32% and 157.17%.
Fixed assets of the company increasing to 10.07% and the long term loans and advances also
increasing to 47.60%.Non- current investments are remain same.
Under the current asset inventories increased from opening date to 14.19%..The company's,
trade receivables shows increse74.27%. The loans and advances are increasing at
49.99%.Cash and equivalents are show in decrease 35.58%.The total performance of the
company at a satisfactory level.
102
103
INTERPRETATION
Comparing the balance sheet of KSE limited during the year 2011-2012 the amount of capital
collected by the company remain the same. From the comparing balance sheet we can find
increase in reserves and surplus. It shows that the reserve ingress 21.08% during the year.
The long term borrowings have a 23.34%, decreasing during the year. The deferred tax
liability decreasing to 10.96% during the year. The provision created for the long term has
increased by 25.14%.
During the year 2011-2012 non-current liability company is decreasing. Under current
liabilities are showing an increase.
Short term, provision shows 22.71% increase. Other current liabilities show 11.73 %
increase. Short term borrowing increasing and trade payables are decreasing at 21.81% and
5.41%.
Fixed assets of the company decreasing to 5.29% and the long term loans and advances also
decreasing to 11.44%.Non- current investments are remain same.
Under the current asset inventories increased from opening date to 27.20%..
The company's, trade receivables shows a slight different. The loans and advances are
increasing at 5.98%.Cash and equivalents are show increase 67.58%
.It means that
companies' liquidity position is increasing. It is good for companies day to day performance.
Other current assets increasing at a percent of 184.53% during the year. The total
performance of the company at a satisfactory level.
104
105
INTERPRETATION
Comparing the balance sheet of KSE limited during the year 2010-2011 the amount of capital
collected by the company remain the same. From the comparing balance sheet we can find
increase in reserves and surplus. It shows that the reserve increase 2.65% during the year.
The long term borrowings have a 65.28% increase during the year. The deferred tax liability
decreasing to 14.20% during the year .The provision created for long term has decreasing at
97.33%.During the year 2010-2011 non-current liabilities of company is decreasing.
Under current liabilities also showing increase. Short term provision shows 56.93% increase.
Other current liabilities show 86.43% increase. Short term borrowing and trade payables are
decreasing at 5.43% and 16.87%.
Comes to asset side, the company got an amazing change in the investment. It shows that
98.16%, decreasing on the investment This is a major change happened compare to last year.
Fixed assets of the company decreasing to 5.27% and the long term loans and advances also
increase to 50.10.
Under the current asset inventories increased from opening date to 56.59%. The companies,
trade receivables only shows a slight different. The loans and advances are decreasing at
16.21%. Other current assets decreasing at percent of .76% during the year. Cash and
equivalents are shows decrease 59.54% .The total performance of the company at a
satisfactory level.
106
INTERPRETATION
107
INTERPRETATION
108
INTERPRETATION
INTERPRETATION
110
INTERPRETATION
111
112
113
INTERPRETATION
Common size financial statement is given above reveals of the total assets is taken
100% in the years 2014 and 2015
The common size balance sheet that shows the share capital in 2014, 3.35% and
2015,2.31%
The common size balance sheet that shows the Reserve and surplus in 2014 47.51%
and 2015 is 49.70% .Increase the reserve and surplus compared to previous year
Non- current liabilities in 2014, 8.8% and 2015,4.2% .Decrease the Non- current
liabilities compared to previous year.
Current liabilities in 2014,40.29% and 2015,43.74%. Increase the Current liabilities
compared to previous year
Fixed Assets in 2014,38.25% and 2015,19.88%. Decrease the Fixed Assets compared
to previous year.
Non- current investments in 2014 , 0.078% and 2015, 0.018% .Decreasing then
previous year
Long term loans and advances in 2014, 94.8% and 2015 ,112.37%. Increasing then
previous year
Inventories in 2014 , 52.03% and 2015, 47.82% .Decreasing then previous year
Trade receivables in 2014 , 0.17% and 2015, 0.20% .Increasing then previous year
Cash and equivalents in 2014 , 3.2% and 2015, 27.36% .Increasing then previous year
Total current assets in 2014, 60.67% and 2015,79.09% . Increasing then previous year
114
6.3.2 COMMON SIZE BALANCE SHEET FOR THE YEARS 2013 , 2012 &2011
115
116
INTERPRETATION
Common size financial statement is given above reveals of the total assets is taken
100% in the years 2013 ,2012 and 2011
The common size balance sheet that shows the share capital in 2013, 3.7% ,
2012,3.35% and 2011,4.15%
The common size balance sheet that shows the Reserve and surplus in 2013,
42.27%,2012 39.33% and 2011 is 39.10% . The reserve and surplus continuously
increased as compared to previous year
Non- current liabilities are decrease from 15.08% to 9.32% in 2011-2012, and then
increased 10.73% in2013
Current liabilities are increase from 41.66% to 47.98% in 2011-2012, and then
decreased 43.28% in2013
Fixed Assets are decrease from 49.87% to 41.37 in 2011-2012, and then increased
41.48% in2013
Non- current investments are decrease from .097% to .078% in 2011-2012, and then
increased .087%% in2013
Long term loans
are
117
6.3.3 COMMON SIZE INCOME STATEMENT FOR THE YEARS 2015 & 2014
INTERPRETATION
Common size income statement is given above reveals of the Revenue from sales is
taken 100% in the years 2014 and 2015.
The other income in 2015,1.2% and 2014 , .11%.Increase the other income then
previous year
Raw materials and finished good expense are decreased from 85.72% to 82.27% in
2014-2015.
Manufacturing, Administrative, Selling and Other expenses are increased from 7.17
to 7.28% in 2014-2015
Employees benefits expense were increased from 3.5% to3.7% in 2014-2015
Finance cost is decreased from .29% to.21% in2014-2015
The PBT has increased from 2.9% to7.1% in 2014-2015
The Net Profit After Tax has increased from 1.9% to4.8% in2014-2015
118
119
INTERPRETATION
Common size income statement is given above reveals of the Revenue from sales is
taken 100% in the years 2013,2012 and 2011.
The other income are increase from .14% to .21% in 2011-2012, and then decreased .
15% in2013
Raw materials and finished good expense are decreased from 83.89% to 83.04% in
2011-2012 then increase 86.74%.
Manufacturing, Administrative, Selling and Other expenses are in 2011,
9.1%,2012,8.7% and 2013,8.03%. Manufacturing, Administrative, Selling and Other
expenses are continuously increased as compared to previous year
Employees benefits expense in 2011, 4.08%,2012,4.2% and 2013,3.36%. Employees
benefits expense continuously increased as compared to previous year
Finance cost in 2011, .52%,2012,.45% and 2013,.44%. Finance cost continuously
increased as compared to previous year
The PBT has increased from 1.47% to2.92% in 2014-2015 then decrease .95% in
2015
The Net Profit After Tax has increased from .99% to1.92% in2014-2015 then decrease
in 2015
120
Sales
RS in lakhs
2011
2012
2013
2014
2015
Sales Trend
%
45368.03
54222
69717.71
80630.33
89970.05
100
119.5158794
153.671451
177.7249971
198.3115643
Sales Trend %
250
200
198.31
177.72
153.67
150
100 100
Sales Trend %
119.51
50
0
2011
2012
2013
2014
2015
INTERPRETATION
The trend line is moving upward direction. So the sales volume has increased year by year. In
2015, the sales percentage is 198.3 % it is increasing rate than the year 2014. Increase of sales
indicates that increased the demand of KSE products
121
Net profit
RS in lakhs
2011
2012
2013
2014
2015
Net profit
Trend %
449.81
1044.93
465.3
1537.36
4363.41
100
232.3047509
103.4436762
341.7798626
970.056246
970
800
600
400
200
341.7
232.3
100
0
2011
2012
103.44
2013
2014
2015
INTERPRETATION4
This trend line graph showing that, the net profit in 2011, 2012 and 2013 is fluctuating. In
2014 and 2015 the net profit increased. In 2015, the net profit increased to 970 %. It is higher
than the last four years of net profit. This indicates that efficiency of management of KSE
122
Current
assets
RS in lakhs
3892.85471
4979.92
5481.94
5794.31
10917.54
Current assets
Trend %
100
127.9246304
140.8205651
148.8447536
280.4507441
280.4
250
200
150
127.9
140.8
148.8
100 100
50
0
2011
2012
2013
2014
2015
INTERPRETATION
The current asset's trend is moving upward. So it indicates that an increase in current assets.
In 2015, the value of current asset is higher than 2011. The firm has sufficient fund to meet
operating expenses. This is one positive sign of growth of the firm.
123
Current
liability
RS in lakhs
3212.23
3738.82
4574.09
3847.88
6038.41
Current liability
Trend %
100
116.3932844
142.3960924
119.7884336
187.9818693
INTERPRETATION
The current liabilities have shown an increasing trend from 2011 to 2013. But in the year
2014 the trend was decreased. During the year 2015 the company's trend was is highest
position. It is highly satisfactory that the company reduces their liability to a lower one in the
year 2012
124
Chapter 7
FINDINGS, SUGGESTIONS AND
CONCLUSION
125
7.1 FINDINGS
The firms current ratio is lower than standard ratio (2:1) from 2010-11 to 2014-15.
But in 2014-15 it is close to standard ratio, 2010-11 it was 1.19, 2014-15 it is 1.80. It
indicates the company has faced some liquidity problems.
Current ratio is increasing trend in the year 2013 2014 to 2014- 2015 compare with
other years. it means company is moving back on good liquidity position
The companys quick ratio is also lower than standard ratio (1:1) from 2010-11 to
2014-15.But in 2014-2015 it is closed to standard ratio , 2010-11 it was 0.18,2014-15
it is 0.71 It indicates the company has faced some liquidity problems.
The companys absolute liquid ratio also increasing trend. When comparing previous
years huge increasing trend now 2010-11 it is .10 then now .62 In the study period
the working capital turnover ratio was continuously fluctuated. The average working
capital ratio is .17
In overall liquidity ratios is not meet the standard ratio. But when comparing previous
years we can see a huge improvement
In the study period the Inventory Turnover ratio was continuously fluctuated in 201314 inventory turnover ratio is very higher. The higher turnover ratio indicates
efficient management of inventory because more frequently the stocks are sold, the
lesser the amount of money is required to finance inventory is sold very fast. ,2013-14
ratio is 16.22 then 2014-15 it is decreased to 13.63. The inventory conversion period
is showing a increasing trend.
The debtor turnover ratio is decreasing trend in 2013-14 debtor turnover ratio is
-2011. It indicates that the creditors are being paid promptly, thus enhancing the credit
worthiness of the company. In the year 2012 2013 creditors ratio is very low
(23.92). This means liberal credit term followed by the suppliers. The average
net profit , gross profit operating profits are continuously increased trend, return on
41.67
The trend analysis of sales shows a good performance over the five years of the study,
the study, maximum during the year 2014 2015 with 280.4%.
The trend analysis of current liability shows a good performance over the five years of
the study, maximum during the year 2014 2015 with 188%.
127
7.2SUGGESTIONS
As it found the current ratio is not equal to the standard ratio 2:1; it was recommended
to utilize the idle current assets of the company in order to increase the other income.
And standardize the firms current ratio.
The company has to go for integrated marketing, so that it can increasing its sales,
with this the profit will be increased.
The Working Capital turnover ratio shows a Fluctuating balances. The company must
try to assess working capital needs perfectly.
Company always maintains liquid cash in their hand.
If company provides small awards to their valuable customer, then it will help the
company to create good image in the eyes of the customers.
In future, the company give more importance to cash transactions than the credit
facilities.
128
7.3 CONCLUSION
From this analysis it is concluded that KSE Limited has a satisfactory financial
performance in terms of profitability, profitability is the key to success in the
business. The company has a good opportunity in future head, as the company can
become one of the major companies in India, by maintaining the quality of services to
its customers. Form the overall analysis company's current liability shows increasing
in trend so take remedial measures for reducing the current liabilities. To overcome
this situation it is good for the future performance of the company.
During the period I have spent in the KSE Limited I have received full co-operation
from the director and other officers of this company. I can see the cordial and friendly
relationship between the staffs and subordinates. The project program introduced as a
part of MBA course has been highly useful because it gives practical knowledge about
the financial performance analysis of the company. Through this program I have
learned a lot personal relation office practice and manners.
129
BIBLIOGRAPHY
130
BIBLIOGRAPHY
Websites
www.kselimited.com
www.smbsmgu.org
www.Info.shine.com
www.indiainfoline.com
www.Investopedia.com
www.managementstudies.com
131
APPENDIX
132
APPENDIX
2013
Rs in
lakhs
2012
Rs in
lakhs
2011
Rs in
lakhs
320
6861.07
320
4538.09
320
3749.5
320
3015.35
7181.07
4858.09
4069.5
320
3651.18
3971.1
8
528.48
0
54.58
583.06
649.25
155.32
39.75
844.32
688.3
170.29
30.12
888.71
717.37
182.54
27.58
927.49
935.82
205.02
22.04
1162.88
831.6
1633.16
728.9
865.64
1413.48
355.35
1447.8
375.68
2550.05
1023.6
1475.54
777.8
1486.22
483.77
766.85
621.9
6038.41
3847.88
1945.5
9
913.87
1292.9
9
421.64
4574.0
9
3738.82
3212.23
13802.54
9550.29
9532.3
8637.49
7710.46
2745.3
1
2.5
24.82
112.37
3653.6
8
7.5
0
94.8
3944.4
5
7.5
0
98.41
3583.4
7.5
0
66.67
4969.9
16.99
4737.1
5
29.26
4148.3
3
16.79
314.41
483.94
9.07
5794.3
1
375.78
330.63
9.12
5481.9
4
583.33
220.43
11.04
4979.9
2
Non-current liabilities
long term borrowings
deferred tax liabilities
long term provisions
2015
Rs in
lakhs
3335.35
Current liabilities
TOTAL
ASSETS
Non-current assets
fixed assets
non-current investments
deferred tax asset
long term loans and advances
3783.7
8
7.5
75.28
3866.5
6
Current assets
inventories
trade receivables
cash and cash equivalents
short term loans and advances
other current assets
6600.6
6
28.71
3777.7
5
496.29
14.13
10917.
54
133
3261.2
22.76
348.07
207.99
3.88
3843.9
13802.
54
TOTAL
9550.2
9
9532.3
8637.4
9
7710.4
6
2014
Rs in
lakhs
2013
Rs in
lakhs
89970.
05
1208.8
2
91178.
87
80630.
33
69717.
71
54222
45368.
03
89.78
80720.
11
108.18
69825.
89
114.28
54336.
28
68.04
45436.
07
74019.
27
69121.
63
60474.
34
45026.
54
38060.
08
6556.9
5
5784.3
5601.6
4
4730.8
9
4161.0
5
3383.0
4
194.49
2857.8
8
236.66
2348.0
7
313.65
2287.0
7
245.27
1855.1
4
236.64
Depreciation/amortisation
636.19
84789.
94
375.77
78376.
24
422.1
69159.
8
459.47
52749.
24
455.85
44768.
76
6388.9
3
2025.5
2
4363.4
1
2343.8
7
666.09
1587.0
4
667.31
PARTICULARS
2012
Rs in
lakhs
2011
Rs in
lakhs
Revenue
Sales
Other income
Expenses
Raw materials and
finished goods
Manufacturing,Administr
ative,selling and other
expense
Employees benefits
expense
Finance costs
134
806.51
1537.3
6
200.79
465.3
542.11
1044.9
3
217.5
449.81