Project of Ruchi BhavsarFINAL PROJECT REPORT

A
PROJECT ON
“FINANCIAL ANALYSIS AND REVIEW”
FOR
“KIRLOSKAR OIL ENGINES LIMITED”
SUBMITTED TO
UNIVERSITY OF PUNE
IN PARTIAL FULFILMENT OF TWO YEARS FULL TIME
COURSE
MASTERS IN BUSINESS ADMINISTRATION (MBA)
SUBMITTED BY
RUCHI. S. BHAVSAR
(MBA 2008-10)
RAJARSHI SHAHU COLLEGE OF ENGINEERING PUNE
1
INDEX
SR. CONTENTS PAGE
NO. NO.
1. ACKNOWLEDGEMENT 3
2. CERTIFICATE OF ATTENDENCE 4
BY COMPANY
3. CERTIFICATE BY INSTITUTE 5
4. PROJECT PROFILE 6
5. COMPANY PROFILE 15
6. RESEARCH STUDY 23
7. CONCLUSION AND 103

RECOMMENDATIONS
8. LIMITATION 104
9. ANNEXURE 105
10. BIBILIOGRAPHY 108
2
CHAPTER 1 - ACKNOWLEGEMENT
I hereby take the opportunity to express my
gratitude towards those who have made great contribution in
completion of this project work. I feel immense pleasure to thanks
to the Chief Financial Officer Mr. Parande, to the Senior General
Manager Corporate Finance Mr. C. L. Bapat, Mr. A. S. Deshpande
the General Manager who were kind and helped me in providing
necessary information and guidance from time to time. Mr.
Malvadkar the Associate Vice President who has given me the
opportunity to work with Kirloskar Oil Engines Limited as project
trainee. I am immensely thankful to my external project guide
Mr. Mahesh. M. Joshi the Deputy Manager and internal project
guide Prof. Ramesh Mehta who has been a constant source of
inspiration. Both have keen interest and encouraging guidance,
which leads to completion of this project in time, is hard to express
in words.
I offer my sincere thanks to Mr. V. D. Gutte
Manager Corporate Finance, Mr. Limaye Manager Corporate
Finance, Mr. Jawalkar Deputy Manager and the whole Corporate
Finance Staff who spared their valuable time and was always
available for guidance in spite of their busy schedule. I am thankful
to Mr. Saurab Jain Manager Cost and works department, Mr.
Mohanty Manager Human Resource, Miss Disha Sharma the
section coordinator and the entire human resource team for
reposing faith and support in the endeavor to carry out the project.
In the end, I would like to express my gratitude
towards the respondents, who selflessly adjusted their schedules to
accommodate me in the scheme of things. This project would not
have been successful without their valuable help. I also express my
sincere thanks to all those who contributed in bringing this project
into its current physical form.
3
CHAPTER 2 - CERTIFICATE OF ATTENDENCE
This is to certify Miss Ruchi Bhavsar has completed Summer Training

Program titled, “Financial Analysis and Review”. In our Orgnisation
‘Kirloskar Oil Engines Limited’ Khadki, Pune. Under the guidance of Mr.
Mahesh M. Joshi (Deputy Manager- Corporate Finance) from 18th May 2009
to 17th July 2009. She has duly acknowledged all the sources of references
used in this report. This report is based on the Master In Business
Administration (M.B.A) program of University Of Pune.
For Kirloskar Oil Engines Ltd
Mahesh M. Joshi
Deputy Manager – Corporate Finance
4
CERTIFICATE BY INSTITUTE
5
CHAPTER - 4
PROJECT
PROFILE
-INTRODUCTION OF
-SUBJECT
-OBJECTIVE
-DATA ANALYSIS
-RESEARCH
-METHODOLOGY
6
-HYPOTHESIS
INTRODUCTION OF SUBJECT
Finance is defined as the art and science of managing money. The major areas of finance
are:
 Financial services
 Financial management
While financial services is concerned with the design and delivery of advice and financial
products to individuals, businesses and governments within the areas of banking and
related institutions, personal financial planning, investments, real estate, insurance and so
on, financial management is concerned with the duties of financial managers in the
business firm. Financial managers actively manage the financial affairs of any type of
business, namely, financial and non-financial, private and public, large and small, profit
seeking and not-for-profit. They perform such varied tasks as budgeting, financial
forecasting, cash management, credit administration, investment analysis, funds
management and so on.
Financial Analysis and Review:-
Financial Analysis and Review involves the application of analytical

tools and techniques to the financial data to get information that is useful in decision
making. The foundation of any good analysis is a thorough understanding of the
objectives to be achieved and the uses to which it is going to be put. Such understanding
leads to economy of effort as well as to a useful and most relevant focus on the points that
need to be clarified and the estimates and projections that are required.
Financial analysis is oriented towards the achievement of definite

objectives. There are three types of users to whom the financial analysis could be useful.
They are short-term lenders, long-term lenders and finally stockholders. The process of
financial analysis can described in various ways, depending on the objectives to be
obtained. Financial analysis can be used as a preliminary screening tool in the selection of
stocks in the secondary market. It can be used as a forecasting tool of future financial
conditions and results. It may be used as a process of evaluation and diagnosis of
managerial, operating and other problem areas. Financial analysis reduces reliance on
intuition, guesses and thus narrows the areas of uncertainty that is present in all decision
7
making process. Financial analysis does not lessen the need for judgment but rather
establishes a sound and systematic basis for its rational application.
Sources of financial information:-
The financial data needed in the financial analysis come from

many sources. The primary source is the data provided by the firm itself in its annual
report and required disclosure. The annual report comprise of the income statement, the
balance-sheet and the statement of cash flows, as well as footnotes to those statements.
Besides this, information such as the market price of securities of publicly traded
corporations can be found in financial press and the electronic media daily. The financial
press also provides information on stock price indices for industries and for the market as
a whole.
Financial statement:-
Every financial manager is involved in financial decision making and

financial planning in order to take right decision at right time, he should be equipped with
sufficient past and present information about the firm and its operations and how it is
changing overtime. Much of this information that is used by financial manager to take
various decisions and to plan for the future is derived from the financial statements. A
financial statement is the compilation of data, which is logically and consistently
organized according to accounting principles. Its purpose is to convey an understanding
of some financial aspects of a business firm. It may show a position at a moment in time,
as in the case of balance-sheet, or may reveal a series of activities over a given period of
time, as in the case of an income statement. Financial statements are the major means
through which firms present their financial situation to creditors, stock-holders and
general public. The majority of firms include extensive financial statements in their
annual reports, which are distributed widely
Financial analysis involves the use of various financial statements. These
statements do several things. First, the balance sheet summarizes the assets, liabilities and
owners equity of a business at moment in time, usually the end of a year or a quarter.
Next the income statement summarizes the revenues and expenses of the firm over a
period of time while balance sheet represents a snapshot of the firm s financial position at
a moment in time.
Financial management is planning and controlling of financial resources of
a firm with a specific objective. Since, financial management as a separate discipline is of
recent origin, it is still in a developing stage. It is very crucial for an organization to
manage its funds effectively and efficiently. Financial management has assumed greater
importance today as the financial strategies required to survive in the competitive
environment have become very important. In the financial markets also new instruments
and concepts are coming and one must say that a finance manager of today is operating in
a more complex environment. A study of theories and concepts of financial management
has therefore become a part of paramount importance for academics as well as for
practitioners but there are many concepts and theories about which controversies exist as
no unanimous opinion is reached as yet.
8
IMPACT OF OTHER DISCIPLINES ON FINANCE IN DIGRAMATIC FORM:-
9
OBJECTIVE
10
- To study Financial Statements like income and expenses and balance
sheet
- To obtain a true insight into financial position of the company.
- To make comparative study of financial statements of different years.
- To study various ratios to determine the relationship of different factors
which have impact on the financial position of the company.
- To identify the financial strengths and weakness of the company
- To find out the reasons for unsatisfactory results.
- Evaluating company s performance relating to Financial Statement
Analysis.
- To analyze the Cash Flow Statement, and know the cash management of
the company.
- To analyze the Fund Flow Statement, and to know how the funds are
managed by the company
- To analyze the working Capital Management, to know how company
manages the cash for day to day requirement, inventory, debtors, creditors
etc.
RESEARCH METHODOLOGY
11
Research: Introduction
Research is a purposive investigation of hypothetical propositions. Research as a

process involves defining and redefining problems, hypothesis formulation, organizing and evaluating
data, deriving deductions, inferences and conclusion, after careful testing.
Research: Definition
“Research concerns itself with obtaining information empirical observation that can used to
systematically develop logically related propositions so as to attempt to establish casual relationship
among variables.”
-Black and Champion
Steps in Research Methodology:
Step 1: To decide Objective of the study

 Study the constituents and the concept of Financial Analysis and Review.
 Analyze and interpret Financial Position of the Kirloskar Oil Engines Ltd.
Step 2: To decide Research Design

 What is Research Design?
 Research Design is a logical and systematic planning and directing of

piece of research. Research design attempts to integrate various aspects of research study. Such
as what, where, when, how, etc. It is a plan structure and strategy of investigation.
Research Design used for project:
- Descriptive Research:
Descriptive study determines the frequency of occurrence of phenomenon of interest or of its association
with something. Descriptive study narrates facts or characteristics. Descriptive study often helps the
researcher to do a lot of spade work and act as launch pads of further researchers.
Descript studies usually employ the principle of sampling as they attempt to make certain
generalizations. They also provide valuable information for policy formulation (Annual Reports).
12
Characteristics:
 They are well structured.
13
 The approach cannot be changed every now and then.
 Primary data is collected.
- Exploratory Research:
Exploratory design aims at discovering more about various dimensions of the research problem and
associated aspects. The first level of exploratory research aims at discovery of significant variables
involved in the situation. The second level focuses on relationship among variables.
Characteristics:
 Focus is to discover ideas.
 Based on secondary data.
 Researcher has to change his focus depending on the availability of new ideas.
Step 3: To determine Sources of Data

What are Sources of Data?
A data source is used to carry out or research or to collect fresh data for obtaining results. There are two
sources of data:
 Primary Data
 Secondary Data
Primary Data: Data that is collected for the specific purpose at hand is Primary Data.
Characteristics:
 It is expensive mode of data collection.
 Lot of time is spent.
 It gives accurate results if sample is efficiently selected.
 Data used is original in nature.
Primary data sources used in this project:
 Observation Method
 Questionnaire Method
Secondary Data: Data that has been collected earlier for some purpose other than the purpose for
present study.
Characteristics:
 It is economical as the cost of collecting original data is saved.
 Time involved is comparatively less than primary data.
Secondary data sources used in this project:
 Books
 Journals
 Website of Company
Step 4: To design Data Collection Forms

There are three types of modes to collect data:
 Observatory Method
 Survey Method
 Questionnaire Method
14
As far as my data collection method is concerned used ‘Observational Method’ initially and survey
method was used for the study of project.
Step 5: To determine Sampling Design

Sampling is the process of obtaining information about an entire population by examining only part of it.
The items selected constitute what is technically called as Sample.
Their selection process or technique is called as Sample Design.
Survey conducted on the basis of sample is Sample Survey.
Step 6: To organize and conduct field survey

The survey was done with the help of non-structured questionnaire, by interviewing the Corporate
Manager to get the feedback.
Step 7: To Process and Analyze collected data

The study and access of the Financial Position of the company as well as the procedure of the Treasury
Management process data collected by survey.
Step 8: To prepare Research Report

The culmination of the entire research process is “Research Report.”
Definition:
“To convey to the interested persons the whole result of the study in sufficient detail and so arranged as
to enable each reader to comprehend the data and to determine for himself the validity of conclusions.:
-American Marketing Society.
The research report has been prepared according to the report writing principles. I have tried my best to
maintain the objectivity, coherence and clarity in the presentation of the ideas. The essence of good
report is that it effectively communicates its research findings.
HYPOTHESIS
Hypothesis testing refers to as ‘Statistical Decision-Making.’ Hypothesis is a
tentative solution or answer to the research problem, which the researcher has to test based on the
available body of knowledge, or on knowledge that can be known.
A hypothesis may be defined as a proposition or a set of propositions set forth as
an explanation for the occurrence of some specific groups of phenomenon either asserted merely as a
provisional conjecture to guide some investigation or accepted as highly probable in the light of
established facts.
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CHAPTER - 5
COMPANY
PROFILE
- HISTORY
- ABOUT KIRLOSKAR
OIL ENGINES LIMITED
- INTRODUCTION
- BOARD OF DIRECTORS
- ORGANISATION
CHART
16
HISTORY
A highlight of the
early history of
the group is
Kirloskarwadi,
India's first
industrial
township. A
model factory-
The Founder and the village created by
First Factory Village Laxmanrao and
The Kirloskar story starts with Laxmanrao his band of
Kirloskar, the founder. A man who believed
that, understanding of one's environment and
dedicated
reality was essential to the manufacture of workers.
path-breaking industrial implements. From this
steadfast belief was born the iron plough, the
first Kirloskar product. Originally intended as an essential aid to agriculture, the plough soon became an
icon of reform and revolution.
In January 1910, when the Kirloskar were being ousted from Belgaum to make room for a new suburb,
they found themselves in dire need of a place to live and work. Sensing this need, the Raja of the
princely state of Aundh, who admired and respected Laxmanrao Kirloskar, offered the latter all the land
he needed in Aundh state.
Two months later, Laxmanrao Kirloskar set foot on 32 acres of barren land strewn with cacti and
infested with cobras. Driven by his faith in human ability, Laxmanrao banded together 25 workers and
17
their families and succeeded in transforming the barren expanse into his dream village.
Ramuanna, Laxmanrao's brother, planned and administered the township, Shamburao Jambhekar an all-
round healing man, K.K.Kulkarni, an unsuccessful student, became a manager, treasurer and odd jobs
man, Mangeshrao Rege was the clerk and chief accountant, Anantrao Phalnikar, a school drop-out
flowered into an imaginative engineer. Such was our founder's faith in the human being that, Tukaram
Ramoshi and Pirya Mang, both convicted dacoits, became the trusted guards of Kirloskarwadi
The First Kirloskar Group Company
Kirloskar Brothers Limited (KBL) - the first Kirloskar

venture at Kirloskarwadi was to become the base for all of
the Kirloskar Group's subsequent enterprises. It began as the
only Indian company with its own standard products - the
fodder cutter and the iron plough, which competed with the
British products.
ABOUT
Kirloskar Oil Engines Limited
18
Late.Mr.Shantanurao Kirloskar established, Kirloskar Oil Engines Limited in 1946 with the object of
carrying on the business of manufacturing and selling of all types of combustion engines. The Khadki
(Pune) plant is situated on 55 acres of land and was inaugurated on 25 April 1949, production
commenced immediately thereafter.
Initially production was restricted to small diesel engines having agricultural and industrial applications.
Over the period of time Company developed medium and large engines, bimetal bearings, strip and
bushes. The year 1954-55 was the beginning of the new era of rapid growth. Central Government of
India banned import of small engines in the country. Consequently demand for KOEL’s engines picked
up. The Company began exporting to Germany, Middle East and Far Eastern Countries.
In 1954 Company started manufacturing bearings primarily for the captive use in stationary engines.
Over a period of time, the Company also developed bearings for automotive engines. With the
development in agriculture and irrigation under the five year plans the demand for Company’s engines
soared rapidly. To cope up with increasing demand, Company launched first phase of expansion in
1958.
In 1985-86 Letters Of Intent for manufacture of pipe handling tools was converted into Industrial
License. Company also launched material handling components. In 1992-93 Letter Of Intent was
received for manufacture of Camshafts and Crankshaft for automotive applications.
In 1989-90 Company undertook a scheme for modernization of plan at Pune and Ahmednagar. During
1990-91 Company undertook packing of Gas Turbines for Industrial Power Generation markets in
1MW-10MW range in association with Solar Turbines Inc. U.S.A.
In early 1993 KOEL purchased the products know how and selected manufacturing line from IFA an
East German Company. In late 1993 Company secured ISO-9001 certificate in the first go. Company
has also acquired the ISO-14001 EMS i.e. Environment Management System.
INTRODUCTION
Kirloskar Oil Engines Limited (KOEL) operates in different business segments of a

wide range of diesel engines, auto components etc. There are currently 12 such segments known as
Strategic Business Units. The SBUs have manufacturing facilities located at different parts of the
country and they deal with a large number of customers spread across the country and overseas.
Business Groups
SEBG: Small Engine Business Group
MEBG: Medium Engine Business Group
LEBG: Large Engine Business Group
19
ACBG: Auto Component Business Group
SBUs are independent profit centers and they generate their surplus funds from their
operations. These SBUs also borrow from the Corporate Finance Department (CFD) from time to time if
the need arises. As per Corporate Policy the surplus funds can be invested by CFD only and not by
SBUs directly. Besides, surplus funds of SBUs, CFD also generate funds from funds management or
other financial activities.
Investment of surplus funds by CFD is an important activity having significant

bearing on overall financial performance and profitability of KOEL. Therefore, timely consolidation of
available funds, their management, accounting and controls ensuring investment in best available
avenues commensurate with risk and liquidity considerations is crucial to ensure optimum returns at
acceptable level of risk and maturity.
VISION
“We will become a major Global Player in off–highway engines and power generation
businesses by offering winning combinations of Quality, Cost and Delivery through
innovation and unmatched service.
We will be amongst the Top Five engine companies of the world.
While pursuing the above, we will continue to enhance the value of engine bearing and
valves business.”
BOARD OF DIRECRORS
Mr. Atul C. Kirloskar : Chairman & Managing

Director
Mr. Sanjay C. Kirloskar : Vice Chairman
Mr. Gautam A. Kulkarni : Joint Managing Director
Mr. Rahul C. Kirloskar : Director (Exports)
20
Mr. D. R. Swar : Director (Corporate
Services)
[Ceased w.e.f. 19 April
2007]
Mr. R. R. Deshpande : Executive Director
Mr. Vikram S. Kirloskar

Mr. U. V. Rao
Mr. H. M. Kothari
Dr. N. A. Kalyani [ceases w.e.f 23 April
2007]
Mr. P. G . Pawar
Mr. V. K. Bajhal
Mr. R. Srinivasan
Dr. Naushad Forbes
Mr. A.N. Alawani (w.e.f. 21 January 2009)
Mr. M Lakshminarayan (w.e.f. 24 April 2009)
Mr. Nihal Kulkarni (w.e.f. 24 April 2009)
Mr. Sanjay D. Parande : Chief financial officer
21
Ms Aditi Chirmule : Company secretary
M/s. Dalal & Shah : Auditors
Bankers : State Bank of India,
Bank of Maharashtra,
HDFC Bank Ltd,
ICICI Bank Ltd,
HSBC Ltd
Registrar : Link Intime India Private Ltd
Register office : Laxmanrao kirloskar road,
khadki
Pune - 411003
Location of factories : Pune, Ahnednagar, Nasik,
Kagal,Phursungi (upto 15th
April 2009),
Rajkot, Silvass
22
ORGANISATION CHART
CHIEF
FINANCIAL
OFFICER
TREASURE CONTROL
R LER
FINANCI COST
CASH CREDIT AL ACCOU
MANAG MANAGE ACCOUN NTS
ERRRR R TS MANAG
MANAGE ER
R
CAPITAL FUND
BUDGETIN RAISING TAX DATA
G MANAGE MANAGE MANAGE
MANAGER R R R
PORTFOL 23
IO INTERNAL
MANAGE AUDITOR
R
CHAPTER - 6
RESEARCH
STUDY
- RATIO ANALYSIS
- DU-PONT ANALYSIS
- LEVERAGES
- FUNDS FLOW STATEMENT
- CASH FLOW STATEMENT
- COST OF CPITAL
24
- WORKING CAPITAL
- RECEIVABLES
MANAGEMENT
- COST-SHEET
- BREAK-EVEN ANALYSIS
RATIO ANALYSIS
Ratio analysis is widely used-tool of financial analysis. It

can be used to compare the risk and return relationship of firms of different
sizes. It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weakness of the firm as well as its historical
performance and current financial condition can be determined. Trend ratios
involve a comparison of the ratios of a firm over time, that is, present ratios are
compared with past ratios for the same firm. The comparison of the
profitability of a firm, say, year 1 through 5 is an illustration of a trend ratio.
Trend ratios indicate the direction of change in the performance-improvement,
deterioration or constancy over the years.
Ratio analysis is the process of determining and

interpretation mathematical relationship based on financial statement. The
comparison of financial ratios against the norms established helps to diagnosis
the financial condition and arrive at conclusions.
The comparison of financial ratios is done against the following:-
 Standard set
 Historical figures
 Inter-firm analysis (head hunting)
25
Ratio analysis is considered as a powerful tool of financial
analysis through which economic and financial position of the business can be
fully X-rayed. They provide a coordinated frame of reference for judging
financial performance. They convey the entire story of the ‘financial adventure’
of the enterprise. They comprehend and simplify a heap of financial data
through one particular figure which conveys the complete meaning. They focus
on the specific relationship in the financial statements.
Basis of comparison: -
Ratios are relative figures reflecting the relationship

between variables. This enables the analysis to draw conclusion regarding
financial operations. The use of ratio as a tool of financial analysis involves
their comparison, for a single ratio, like absolute figures, fails to reveal the true
position. For example,
P /E ratio (price/earnings ratio for a particular script) should be compared over

a period of time to get a true picture of company performance.
Thus comparisons with related facts is the basis of ratio analysis
In ratio analysis, four types of comparisons are involved.
 Trend Ratio
 Inter firm comparisons
 Comparisons of items within a single year s financial statement of a firm.
 Comparisons with standard or plans
Uses of ratio analysis:-
 It helps to understand the efficiency and performance of the firm as a

whole.
 Its main purpose is to gain insights into the operating and financial
problems confronting the firm.
 It helps to identify the trouble or potential trouble spots of the firm.
This would impel the management to investigate those areas more
thoroughly.
 It helps to pinpoint relationship that is not obvious from the financial
statements.
 It helps to highlight the factors responsible for the present state of
financial statements.
26
 It helps the shareholders in evaluating the firm’s activities and policies
that affect the profitability, liquidity and ultimately the market price of
the shares
 It helps to examine the adequacy of funds, the solvency of the firm and
its ability to meet the financial obligations as and when they become
due.
 It is very useful in inter-firm and intra-firm analysis.
 A trend can be established by calculating ratios for number of years.
Limitations of ratio analysis:-
 There may be a difference between the inventory methods followed by

various firms or different method in the same firm.
 Firms follow various methods of depreciation.
 There may be a difference between the capital structures of the firms.
 Window dressing, which means artificially improving the financial
statements is another major drawback
 Inflationary factors are not taken into consideration. Thus when the
past performance is analyzed, the figures may have become outdated.
Classification of ratios:-
27
 LIQUIDITY RATIOS:-
The importance of adequate liquidity is

the ability of a firm to meet current or short term
obligations when they become due for payment can hardly
be overstressed. Liquidity is the prerequisite for the
survival of the firm. A proper balance between the two
contradictory requirements, that is, liquidity and
profitability, is required for efficient financial
management. Liquidity ratios indicate the financial
strength or solvency of a firm.
 PROFITABILTY RATIOS:-
The creditors, shareholders and
management are eager to measure its efficiency and
financial soundness. The shareholders invest their funds in
the expectation of reasonable returns. The profitability
ratios can be determined on the basis of either sales or
investments
 ACTIVITY RATIOS:-
Activity ratios are concerned with
measuring the efficiency in asset management. The
efficiency with which the assets are used would be reflected
in the speed and rapidity with which the assets are
converted into sales. The greater the rate of conversion, the
more efficient is the utilization of assets, other things being
equal.
 MARKET VALUE RATIOS:-
28
Market Value ratios are those ratios
which are measured by using market value of the shares.
This ratio is calculated to know the returns the
shareholders as compared to the amount invested in
market value of the shares.
 CAPITAL STRUCUTRE:-
The long term lenders would judge
the soundness of a firm on the basis of the long term
financial strength measured in terms of its ability to pay
the interest regularly as well as repay the installment of
the principal on due dates. The long term solvency is
examined by the capital structure ratio
These ratios are further divided into:-
29
 LIQUIDITY RATIOS:-
1.> CURRENT RATIO :-

CURRENT ASSETS
CURRENT RATIO =
-----------------------------
30
CURRENT
LIABILITIES
Rs. In millions
YEAR 2005 2006 2007 2008 2009

CURRENT 3923234 5264473 6615365 7455319 6819921
ASSETS
CURRENT 2949585 4234316 5370163 6452601 4860721

LIABILITIES
RATIO 1.33 1.24 1.23 1.16 1.40
CurrentRatio
1.5
1
O
IT
A
R 0.5
Current Ratio
0
2005 2006 2007 2008 2009
YEAR
INFERENCE:-
This ratio indicates the solvency of the company. It shows the
proportion of current assets to current liabilities. Normally, it is expected that current ratio
should be 2: 1, which indicates that current assets should be twice as compared to current
liabilities. As the current ratio is less than the ideal ratio hence, it is advisable to the
company to increase its current ratio to be in a favorable position.
2.> ACID TEST RATIO :-

QUICK
ASSETS
ACID TEST RATIO =
----------------------------
QUICK
LIABILITIES
31
Rs. In millions
YEAR 2005 2006 2007 2008 2009

QUICK ASSETS 3057112 4155109 5131782 5514869 558112
3
QUICK LIABILITIES 2949585 4234316 5370163 6452601 4860721
RATIOS 1.04 0.98 0.96 0.85 1.15
INFERENCE:-
This ratio indicates the proportion of quick assets to quick liabilities. The
ideal Acid Test Ratio should be 1:1 which means that the quick assets should be equal to
quick liabilities. In 2005 the ratio was more or less favorable but in other years it should
be increased to be in a favorable condition to pay current liabilities.
2.> PROPREITORY RATIOS :-

TOTAL ASSETS
PROPREITORY RATIO=
------------------------------------
PROPREITORY FUNDS
32
Rs. In millions
YEAR 2005 2006 2007 2008 2009

TOTAL ASSETS 915425 1218556 15111223 19327629 18268538
4 0
PROPREITORY 562075 7183745 8513490 9149913 9600845
FUNDS 5
RATIO 1.63 1.70 1.77 2.11 1.90
INFERENCE:-
This ratio indicates the proportion of proprietors funds used for
financing the total assets. Ideally 2/3rd of assets should be financed through proprietors’
funds while balance should be financed through borrowed funds. In 2005 and 2006 the
ratio is favorable but in 2007 and 2008 the ratio is quite high hence the firm is not using
external funds adequately.
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3.> CURRENT ASSETS TO FIXED ASSETS :-
CURRENT ASSETS
CURRENT ASSETS TO FIXED ASSETS =
-----------------------------
FIXED ASSETS
Rs. In millions
YEAR 2005 2006 2007 2008 2009

CURRENT 392323 526447 661536 745531 6819921
ASSETS 4 3 5 9
FIXED ASSETS 144687 192220 332199 710896 672978
2 5 0 3 5
RATIO 2.71 2.74 1.99 1.05 1.01
INFERENCE:-
This ratio indicates the proportion of current assets to fixed assets. Current
assets are held for short-term purpose while fixed assets are held for long-term purpose.
In 2005, 2006, 2007 and 2008 current assets are more than fixed assets.
 PROFITABILITY RATIOS :-
34
1.> GROSS PROFIT RATIO :-
GROSS PROFIT
GROSS PROFIT RATIO = ------------------------ x
100
NET SALES
Rs. In millions
YEAR 2005 2006 2007 2008 2009

GROSS PROFIT 2250792 489464 6395092 7454893 7002799
9
NET SALES 12618856 1530712 20694761 23723049 22732435
6
RATIOS 17.84% 31.98% 30.90% 31.42% 30.81%
INFERENCE:-
This ratio shows the margin left after meeting the purchase and
manufacturing costs. It measures the efficiency of production as well as pricing. A high
gross profit ratio means a high margin for covering other expenses like administrative,
selling and distribution expenses. In 2005 gross profit is less which increased in 2006 and
again came slight downward in 2007 and 2008 which should be increased.
35
2.> NET PROFIT RATIO:-
NET PROFIT
NET PROFIT RATIO = -------------------- x 100
NET SALES
Rs. In millions
YEAR 2005 2006 2007 2008 2009
NET PROFIT 173894 2005874 1784090 1189516 1158930
6
NET SALES 126188 15307126 20694761 23723049 22732435
56
RATIO 13.78 % 13.10 % 8.62 % 5.014 % 5.10%
INFERENCE:-
This ratio shows the earnings left for share-holders as percentage of net
sales. It measures the overall efficiency of all the functions of business firm like
production, administrative, selling, financing, pricing, tax management etc. Higher the
ratio the better it is because it gives an idea of overall efficiency of the firm. As we see
the trend in this ratio it is decreased from 2005 to 2008 which is not favorable for the
company and should be increased.
36
3.> OPERATING NET PROFIT RATIO :-
OPERATING NET
PROFIT
OPERATING NET PROFIT RATIO =
------------------------------------- x 100
SALES
Rs. In millions
YEAR 2005 2006 2007 2008 2009
OPERATING NET 1583778 2226493 2872265 3176463 3089805

PROFIT
SALES 12618856 15307126 20694761 23723049 22732435
RATIO 12.55% 14.55% 13.88% 13.39% 13.59%
INFERENCE:-
This ratio establishes the relationship between the net sales and the
operating net profit. Operating net profit is the profit arising out of business operations
only. Higher the ratio the better it is because it gives an idea of overall efficiency of the
firm. In 2006 the ratio is highest but in 2005, 2007 and 2008 it should be increased to
increase the profitability.
37
4.> OPERATING RATIO:-
COST OF GOODS
SOLD+OPERATING EXPENSES
OPERATING RATIO =
------------------------------------------------------------------ x 100
NET SALES
Rs. In millions
YEAR 2005 2006 2007 2008 2009
COST OF GOODS 8213011 9994581 13792882 15739044 15294648

SOLD
OPERATING 373483 417896 506787 529112 434988
EXPENSES
NET SALES 12618856 15307126 20694761 23723049 22732435

RATIO 68.04% 68.02% 69.10% 68.58% 69.19%
INFERENCE:-
This ratio indicates the proportion of cost of goods sold and operating
expenses to net sales. The higher the ratio lower margin is left for operating profit hence
the ratio should be low. In the above chart the expenses more than 60% which reduces the
profitability hence it should be reduced.
38
5.> RETURN ON CAPITAL EMPLOYED:-
EBIT
RETURN ON CAPITAL EMPLOYED =
----------------------------- x 100
CAPITAL
EMPLOYED
Rs. In millions
YEAR 2005 2006 2007 2008 2009
EBIT 1086153 1582121 2314853 2071130 2116026

CAPITAL 6137998 7853752 9576638 12578828 13090696
EMPLOYE
D
RATIO 17.70% 20.14% 24.17% 16.47% 16.16%
INFERENCE:-
This ratio indicates the percentage of earnings before interest and tax
to total capital employed. This ratio is considered to be very important because it reflects
the overall efficiency with which capital is used. This ratio is highest in 2007 as compared
to 2005, 2006 and 2008.
NOTE: EBIT - EARNINGS BEFORE INTEREST & TAXES.
39
6.> RETURN ON EQUITY :-
SHARE-HOLDERS
EARNINGS
RETURN ON EQUITY =
--------------------------------------------- x 100
EQUITY SHARE-HOLDERS
FUNDS
Rs. In millions
YEAR 2005 2006 2007 2008 2009
OWNERS 1738946 2005874 1784090 1189516 1158930

EARNINGS
EQUITY SHARE 5620755 7183745 8513490 9149913 9600845
HOLDERS FUNDS
RATIO 30.94% 27.92% 20.96% 13.% 12.07%
INFERENCE:-
This ratio indicates the productivity of the owned funds employed in
the firm. It shows the percentage of net profit available for share-holders. In the above
chart it shows a downward trend which is not favorable for company and share-holders as
it decreases the earnings of share-holders. Hence it should be increased.
40
7.> RETURN ON TOTAL ASSETS:-
NET PROFIT
AFTER TAX
RETURN ON TOTAL ASSETS =
-------------------------------------- x 100
TOTAL
ASSETS
Rs. In millions
YEAR 2005 2006 2007 2008 2009
NPAT 1738946 2005874 1784090 1189506 1158930

TOTAL 9154254 12185560 15111223 19327629 18268538
ASSETS
RATIO 18.99% 16.46% 11.81% 6.15% 6.34%
INFERENCE:-
Returns on assets crudely reflect how well the firm uses its assets in
total. The higher the ratio is favorable as it indicates that the firm is utilizing its assets
profitably. In the above chart the ratio is decreasing which is not favorable for the
company hence it should be increased.
41
8.> RETURN ON NETWORTH:-
NET PROFIT
AFTER TAX
RETURN ON NETWORTH =
------------------------------------
NET -
WORTH
Rs. In millions
YEAR 2005 2006 2007 2008 2009
NPAT 1738946 2005874 1784090 1189506 1158930
NET 5620755 7183745 8513490 9149913 9600845

WORTH
RATIO 30.94% 27.92% 20.96% 13% 12.07%
INFERENCE:-
This ratio indicates the productivity of the owned funds employed in the
firm. It shows the percentage of net profit after tax available for share-holders which also
includes the net worth of the company. In the above chart it shows a downward trend
which is not favorable for company and share-holders as it decreases the earnings of
share-holders. Hence it should be increased.
42
9.> EARNINGS PER SHARE:-
OWNERS
EARNINGS
EARNINGS PER SHARE =
-----------------------------------
NO. OF EQUITY
SHARES
Rs. In millions
YEAR 2005 2006 2007 2008 2009
OWNERS 1738946000 2005874000 1778324000 1189516000 1158930000

EARNINGS
NO. OF EQUITY 97086190 97086500 194173000 194173000 194173000

SHARES
RATIO 17.91 20.66 9.16 6.13 5.97
INFERENCE:-
This ratio is an important indicator of performance of the company. It
indicates the amount of profit available for distribution amongst the equity shareholders.
This ratio should be higher as return to increases. Market price of the company’s shares is
directly proportional to earnings per share of the company. In the above chart it shows a
downward trend hence it should be increased.
1.> DIVIDEND PER SHARE:-

43
PROPOSED
DIVIDEND
DIVIDEND PER SHARE =
-----------------------------------
NO. OF EQUITY
SHARE Rs. In millions
YEAR 2005 2006 2007 2008 2009
PROPOSED DIVIDEND 242717000 388346000 388346000 38834600 194173000

0
NO. OF EQUITY SHARES 97086500 97086500 194173000 19417300 194173000

0
RATIO 2.5 4 2 2 1
INFERENCE:-
This ratio indicates the dividend declared per share. This ratio should high as
it indicates the returns to the shareholders. In the above chart dividend per share is highest
in 2006 as compared to 2005, 2007 and 2008.
44
1.> DIVIDEND PAYOUT RATIO :-
DIVIDEND PER
SHARE
DIVIDEND PAYOUT RATIO =
-------------------------------------- x 100
EARNINGS PER
SHARE
Rs. In millions
YEAR 2005 2006 2007 2008 2009
DIVIDEND PER SHARE 2.5 4 2 2 1
EARNINGS PER SHARE 17.91 20.66 9.16 6.13 5.97
RATIO 13.96% 19.36% 21.83% 32.63% 16.75%
INFERENCE:-
Dividend payout ratio indicates the percentage of profit distributed as
dividend to the shareholders. A higher ratio indicates that the company is following a
liberal policy regarding the dividend while lower ratio indicates a conservative approach
of the management towards the dividend. The higher the ratio more will be the
investment. In the above chart it shows an upward trend hence it is favorable for the
company.
 MARKET VALUE RATIOS:-

45
2.> PRICE EARNINGS RATIO :-
MARKET PRICE PER
EQUITY SHARE
PRICE EARNINGS RATIO =
------------------------------------------------------
EARNINGS
PER SHARE
Rs. In millions
YEAR 2005 2006 2007 2008 2009
MARKET PRICE 146 154 166 200 122.80
EARNINGS PER 17.91 20.66 9.16 6.13 5.97

SHARE
RATIO 8.15 7.45 18.12 32.63 16.75%
INFERENCE:-
This ratio highlights the relationship between the market price of
shares and current earnings per share. Companies with ample opportunities for growth
generally have high price earnings ratio. In the above chart it shows an upward trend
hence it is favorable for the company.
3.> EARNINGS YIELD RATIO:-
46
EARNINGS
PER SHARE
EARNINGS YIELD RATIO =
-----------------------------------
MARKET
PRICE PER SHARE
Rs. In millions
YEAR 2005 2006 2007 2008 2009
EARNINGS PER 17.91 20.66 9.16 6.13 5.97

SHARE
MARKET PRICE PER 146 154 166 200 122.80

SHARE
RATIO 0.12 0.13 0.055 0.031 0.049
INFERENCE:-
This is the capitalization rate at which the stock market capitalizes the
value of current earnings. The yield is expressed in terms of the market price of the share.
It serves as a guiding ratio for the intended investors.
4.> DIVIDEND YIELD RATIO:-
47
DIVIDEND PER
SHARE
DIVIDEND YIELD RATIO =
-------------------------------------------- x 100
MARKET PRICE PER
SHARE
Rs. In millions
YEAR 2005 2006 2007 2008 2009
DIVIDEND PER SHARE 2.5 4 2 2 1
MARKET PRICE PER SHARE 146 154 166 200 122.80
RATIO 1.71% 2.60% 1.25% 1% 0.81%
INFERENCE:-
This ratio compares the dividend per share to market price of the share. This ratio is a
very important for investors who purchase their shares in open market; they will evaluate
their returns against investment done i.e. the market price paid by them. The higher the
ratio more will be the investments. In the above chart it is advisable to increase the ratio.
 ACTIVITY RATIO:-
1.> WORKING CAPITAL TURNOVER RATIO:-
48
NET
SALES
WORKING CAPITAL TURNOVER RATIO =
---------------------------------------
NET
WORKING CAPITAL
Rs. In millions
YEAR 2005 2006 2007 2008 2009
NET SALES 12618856 15307126 20694761 23723049 22732435
NET WORKING CAPITAL 973649 1030157 1245202 1002718 1959200
RATIO 12.96 14.86 16.62 23.66 11.60
INFERENCE:-
This ratio compares the net sales with the net working capital of the
business firm. This ratio indicates number of times working capital is turned around a
particular period. The higher the ratio, the better is utilization of the working capital and
also indication of lower working capital. However a very high ratio is a sign of over
trading and a firm may face shortage of working capital. In the above chart it shows an
upward trend hence it is favorable for the firm.
NOTE: - NET WORKING CAPITAL=CURRENT ASSETS – CURRENT LIABILITIES
2.> DEBTORS TURNOVER RATIO:-
49
CREDIT SALES
DEBTORS TURNOVER RATIO =
-----------------------------------------
AVERAGE
ACCOUNTS RECEIVABLE
Rs. In millions
YEAR 2005 2006 2007 2008 2009
CREDIT SALES 12618856 15307126 20694761 23723049 22732435
AVERAGE DEBTORS 2040498 2641021 3488407.5 3728544 2924316
RATIO 6.18 5.80 5.93 6.36 7.77
NOTE: -
AVERAGE ACCOUNTS RECEIVABLE =
OPENING DEBTORS, BILLS RECEIVABLE + CLOSING DEBTORS,

BILLS RECEIVABLE
2
DEBTORS COLLECTION PERIOD:-

12MONTHS
DEBTORS COLLECTION PERIOD =
------------------------------------- 50
DEBTORS
TURNOVER RATIO
Rs. In millions
YEAR 2005 2006 2007 2008 2009
MONTHS 12 12 12 12 12
DEBTORS TURNOVER RATIO 6.18 5.80 5.93 6.36 7.77
DEBTORS COLLECTION 1.94 2.06 2.02 1.89 1.54

PERIOD
INFERENCE:-
This ratio indicates the efficiency of the firm in collecting its
receivables from its customers to whom the firm has sold on credit. It also indicates how
quickly the debtors are turned into cash. The higher the ratio lower is the collection
period, on the other and lower the ratio higher will be the collection period. In the above
charts the debtors turnover ratio should be increased to reduce the collection period.
3.> CREDITORS TURNOVER RATIO: -

CREDIT
PURCHASES
CREDITORS TURNOVER RATIO =
--------------------------------------------
AVERAGE
ACCOUNTS PAYABLE 51
Rs. In millions
YEAR 2005 2006 2007 2008 2009
CREDIT PURCHASES 9994581 8213011 13792882 15739044 15294648
AVERAGE CREDITORS 1608077.5 2017569.5 2714362.5 3521925 2454362
RATIO 6.22 4.07 5.08 4.47 6.23
NOTE: -
AVERAGE ACCOUNTS PAYABLE =
OPENING CREDITORS, BILLS PAYABLE +CLOSING CREDITORS, BILLS PAYABLE
CREDITORS PAYMENT PERIOD:-
12MONTHS
CREDITORS PAYMENT PERIOD =
--------------------------------------------
CREDITORS
TURNOVER RATIO
52
Rs. In millions
YEAR 2005 2006 2007 2008 2009
MONTHS 12 12 12 12 12
CREDITORS TURNOVER RATIO 6.22 4.07 5.08 4.47 6.23
CREDITORS PAYMENT PERIOD 1.93 2.95 2.36 2.68 1.93
INFERENCE:-
The Creditors Turnover Ratio indicates the credit period allowed by
the creditors to the firm. A high turnover ratio indicates that the payment to the creditors
is quite prompt but it also implies that the firm is not taking full advantage of the credit
allowed by the creditors. A lower ratio indicates that there is not much promptness in
payment made to creditors and needs to be improved. In the above charts creditors
turnover ratio and creditors payment period is favorable for the firm.
4.> INVENTORY TURNOVER RATIO :-

COST OF
GOODS SOLD
INVENTORY TURNOVER RATIO =
-----------------------------------
AVERAGE
53
INVENTORY
NOTE: -
AVERAGE INVENTORY =
OPENING INVENTORY + CLOSING INVENTORY

---------------------------------------------------------------------
2
Rs. In millions
YEAR 2005 2006 2007 2008 2009
COST OF GOODS SOLD 9994581 8213011 13792882 15739044 15294648
AVERAGE INVENTORY 803576 987743 1296473.5 1712016.5 1238798
RATIO 12.44 8.31 10.64 9.19 12.35
INVENTORY HOLDING PERIOD:-

12MONTHS
INVENTORY HOLDING PERIOD =
------------------------------------------
54
INVENTORY
TURNOVER RATIO
Rs. In millions
YEAR 2005 2006 2007 2008 2009
MONTHS 12 12 12 12 12
IVENTORY TURNOVER RATIO 12.44 8.31 10.64 9.19 12.35
INVENTORY HOLDING PERIOD 0.96 1.44 1.13 1.31 0.97
INFERENCE:-
This ratio establishes the relationship between the cost of goods sold
during a given period and the average amount of inventory held during that period. The
higher ratio is better as it shows the rapid turnover of stock and consequently shorter
holding period, on the other hand if the ratio is lower indicate that the stock is slow
moving and there is longer holding period. In the above chart inventory turnover ratio is
showing a downward trend, hence it should be increased to reduce the holding period.
5.> FIXED ASSETS TURNOVER RATIO:- NET

SALES
FIXED ASSETS TURNOVER RATIO =
-----------------------------
55
NET
FIXED ASSETS
Rs. In millions
YEAR 2005 2006 2007 2008 2009
NET SALES 12618856 15307126 20694761 23723049 22732435
NET FIXED ASSETS 1446872 1922205 3321990 7108963 6729785
RATIO 8.72 7.96 6.23 3.34 3.38
NOTE: - NET FIXED ASSETS= COST OF ASSETS – DEPRECIATION
INFERENCE:-
This ratio indicates the amount of sales realized per rupee of investment in
fixed assets. This ratio is more important in manufacturing concerns, as it indicates the
utilization of fixed assets. The higher the ratio higher will be the amount of sales
generated per rupee of investment in fixed assets. In the above chart it is advisable to the
firm to increase the ratio, which will result in higher amount of turnover.
5.> SALES TO CAPITAL EMPLOYED :-

NET SALES
SALES TO CAPITAL EMPLOYED = 56
-------------------------------
CAPITAL
EMPLOYED
Rs. In millions
YEAR 2005 2006 2007 2008 2009
NET SALES 12618856 15307126 20694761 23723049 22732435
CAPITAL EMPLOYED 6137998 7853752 9576638 12578828 13090696
RATIO 2.05 1.95 2.16 1.89 1.74
INFERENCE:-
It indicates the frequency with which sales are generated in relation
to capital employed. Higher the ratio, the better it is as it will indicate better utilization of
capital employed, which will result in higher amount of turnover. In the above chart the
ratio should be increased.
NOTE: -NET SALES= TOTAL SALES – RETURN INWARD
CAPITAL EMPLOYED = SHARE HOLDERS FUNDS + LONG TERM LIABILITY
6.> TOTAL ASSETS TURNOVER RATIO:-
57
SALES
TOTAL ASSETS TURNOVER RATIO =
--------------------
TOTAL ASSETS
Rs. In millions
YEAR 2005 2006 2007 2008 2009
SALES 12618856 15307126 20694761 23723049 22732435
TOTAL ASSETS 9154254 12185560 15111223 19327629 18268538
RATIO 1.38 1.26 1.37 1.23 1.24
INFERENCE:-
This ratio indicates the amount of sales realized per rupee of investment
in total assets. This ratio is more important in manufacturing concerns, as it indicates the
utilization of total assets. The higher the ratio higher will be the amount of sales generated
per rupee of investment in assets. In the above chart it is advisable to the firm to increase
the ratio, which will result in higher amount of turnover.
 CAPITAL STRUCTURE RATIOS:-

58
1.> CAPITAL GEARING RATIO:-
FIXED CHARGES
BEARING SECURITIES
CAPITAL GEARING RATIO =
-----------------------------------------------------
EQUITY
SHAREHOLDERS FUNDS
Rs. In millions
YEAR 2005 2006 2007 2008 2009
INTEREST 69802 97367 144024 197054 375953

EQUITY SHAREHOLDERS FUNDS 5620755 7183745 8513490 9149913 9600845
RATIO 0.012 0.013 0.016 0.021 0.039
INFERENCE:-
This ratio indicates the proportion between fixed charge bearing securities
and equity capital. A firm raises finance through owned funds and borrowed funds. A
firm will be considered to be highly geared, if the major portion of total capital is raised
through fixed charges bearing securities. In the above chart the ratio should be increased.
59
2.> DEBT-EQUITY RATIO:-
LONG-TERM DEBT
DEBT-EQUITY RATIO =
---------------------------------
SHARE-HOLDERS
FUNDS
Rs. In millions
YEAR 2005 2006 2007 2008 2009
LONG-TERM DEBT 517243 670007 1063148 3428915 348985

1
SHARE-HOLDERS FUNDS 5620755 718374 8513490 9149913 960084

5 5
RATIOS 0.09 0.09 0.12 0.37 0.36
INFERENCE:-
This ratio indicates the proportion of borrowed funds to proprietor’s
funds. Ideally this ratio should be 2:1 which means that the debt should be twice the
owned capital, if it is less than 2:1 will indicate that firm is not taking any risk. As Debt
Equity Ratio is less than the ideal ratio hence it is advisable to increase this ratio to be in a
more favorable position.
60
3.> INTEREST COVERAGE RATIO :-
EARNINGS BEFORE
INTEREST & TAXES
INTEREST COVERAGE RATIO =
---------------------------------------------------
EARNINGS
BEFORE TAXES
Rs. In millions
YEAR 2005 2006 2007 2008 2009
EBIT 2082580 2557062 2539044 2071130 2116026

INTEREST 69802 97367 144024 197054 375953
RATIO 29.84 26.26 17.63 10.51 5.63
INFERENCE:-
This ratio measures how ably the firm can meet its interest obligations. It
describes how well and how easily the firm can service its debt. The higher the ratio the
better is the ability of the firm to discharge its interest expense. In the above chart it
shows a downward trend, hence should be improved.
61
DU-PONT ANALYSIS
A method of performance measurement that was started by the DuPont Corporation of
USA in the 1920s, and has been used by them ever since. With this method, assets are
measured at their gross book value rather than at net book value in order to produce a
higher Return on Investment (ROI). It is system of financial analysis, which has received
very good recognition and acceptance world-wide. DuPont analysis helps locate the part
of the business that is underperforming. DuPont analysis tells us that ROE is affected
by three things:-
 Operating efficiency, this is measured by profit margin.
 Asset use efficiency, which is measured by total asset turnover.
 Financial leverage, which is measured by the equity multiplier.

The higher the result the higher will be the return on equity.
Du-Pont analysis divides a particular ratio into components and studies the effect of each
and every component on the ratio. Comparative analysis gives an idea where a firm
stands across the industry and studies the financial trends over a period of time.
FORMULA:-
RETURN ON EQUITY = NET PROFIT MARGIN x ASSETS TURNOVER

RATIO x EQUITY MULTIPLIER
ASSETS
EQUITY MULTIPLIER = --------------------------------
EQUITY SHAREHOLDERS
RETURN ON ASSETS = NET PROFIT MARGIN (RATIO) x TOTAL ASSETS

TURNOVER RATIO
62
NET PROFIT
NET PROFIT RATIO = --------------------
NET SALES
SALES
TOTAL ASSETS TURNOVER RATIO = ---------------------
TOTAL ASSETS
COMPARATIVE ANALYSIS OF RETURN ON ASSETS (INVESTEMENT)
Rs. In millions
PARTICULARS 2005 2006 2007 2008 2009
NET PROFIT 13.78 % 13.10 % 8.62 % 5.01% 5.10%

RATIO
TOTAL 1.38 1.26 1.37 1.23 1.24
ASSETS
TURNOVER
RATIO
RETURN ON 19 17 12 6 6
ASSETS
COMPARATIVE ANALYSIS OF RETURN ON EQUITY:-

Rs. In millions
PARTICULARS 2005 2006 2007 2008 2009
NET PROFIT 13.78 % 13.10 % 8.62 % 5.014 % 5.10%

RATIO
TOTAL ASSETS 1.38 1.26 1.37 1.23 1.24
TURNOVER
RATIO
EQUITY 1.63 1.70 1.78 2.11 1.90
MULTIPLIER
RETURN ON 40 28 21 13 12
63
EQUITY
DU-PONT ANALYSIS TREE DIAGRAM FOR RETURN ON ASSETS

(INVESTEMENT):-
64
DU-PONT ANALYSIS TREE DIAGRAM FOR RETURN ON
EQUITY:-
INFERERNCE:-
In Du-Pont Analysis the higher the result the higher will be the return on
equity. In the above calculation it shows a downward trend of returns in both the cases in
65
Return on Assets and Return on Equity which is not favorable for the company. Hence it
is advised to firm to increase the sales and the surplus on sales.
LEVERAGES
Leverage represents a power or an influence of one financial variable
over the other related financial variable. Leverages are classified into three
categories namely, Operating Leverage, Financial Leverage and Combined
Leverage. Generally, it is said that one leverage should be low accompanied by the
other high leverage. If operating leverage is on lower side, financial leverage can
be kept on higher side by employing more debt in the capital structure.
There are three types of leverages they are as follows:-
OPERATING LEVERAGE: -
The Operating Leverage measures the change in the
earnings before interest and tax as a result of change in sales. This leverage is because of
fixed cost in the cost structure. A higher operating leverage indicates that the proportion
of fixed cost is higher, but at the same time it cannot be overlooked that if sales decrease,
the earnings before interest and tax will decrease at higher rate. Therefore operating
leverage is said to be a double edged weapon.
66
FINANCIAL LEVERAGE:-
The Financial Leverage measures the percentage change in
earnings before tax as a result of changes in earnings before interest and tax. Financial
Leverage will be higher if the difference between earnings before interest and tax and
earnings before tax is higher. This difference will be higher if amount of interest is high.
Therefore it indicates the proportion of debt in capital structure is high or low. The
financial leverage helps to identify the financial risk.
COMBINED LEVERAGE:-
The Combined Leverage expresses the relationship between
contribution and the taxable income. It helps in finding out the resulting percentage
change in taxable income on account of percentage change in sales
FORMULA:-
CONTRIBUTION
OPERATING LEVERAGE =
--------------------------------------------------
EARNINGS BEFORE
INTERST AND TAX
EARNINGS BEFORE
INTERST AND TAX
FINANCIAL LEVERAGE =
-----------------------------------------------------
EARNINGS
BEFORE TAX
CONTRIBUTION
EARNINGS BEFORE INTERST AND TAX
COMBINED LEVERAGE = ------------------------------------------ x
-----------------------------------------------
EARNINGS BEFORE INTERST AND TAX
EARNINGS BEFORE TAX
67
COMPARATIVE STATEMENT OF LEVERAGES
INCOME STATEMENT
Rs. In millions
PARTICULARS 2005 2006 2007 2008 2009
SALES 12618856 15307126 20694761 23723049 22732435

LESS: VARIABLE 10245906.4 12782121.2 17644122.2 20028459.8 18444347.28
COST 2 5 2 3
CONTRIBUTION 2372949.58 2525004.75 3050638.78 3694589.17 4288087.72
LESS : FIXED 1886486.73 1957684.39 2363709.70 2860917.86 2523012.95
COST
EARNINGS 486462.9 567320.4 686929.1 833671.3 1765074.77
BEFORE
INTEREST AND
TAX
LESS: INTERST 69802 97367 144024 197054 375953
EARNINGS 416660.9 469953.4 542905.1 636617.3 1389121.77
BEFORE TAX
LESS: TAX 273832 453821 510930 600560 646508
EARNINGS 142828.9 16132.4 31975.1 36057.3 742613.77
AFTER TAX
LEVERAGES
Rs. In millions
PARTICULARS 2005 2006 2007 2008 2009
OPERATING 4.88 4.45 4.44 4.43 2.43

LEVERAGE
FINANCIAL 1.17 1.21 1.27 1.31 1.27

LEVERAGE
COMBINED 5.70 5.37 5.62 5.80 3.09

LEVERAGE
68
INFERENCE: -
Operating Leverage:-
In the above calculation operating leverage is very high and shows a downward trend but
it is still not favorable as fixed cost is very high. Hence it is advised to reduce operating
leverage to some extent.
Financial Leverage:-
In the above calculation of financial leverage it has shown an upward
trend but it is still favorable for the firm.
Combined Leverage:-
In the above calculation combined leverage is very high and shows an
upward trend which is not favorable for the firm hence, should be reduced to some extent.
69
FUNDS FLOW ANALYSIS
DEFINITION:-
R. A. FOILKE – “A statement of sources and application of funds is a technical device

designed to analyse the changes in the financial condition of a business enterprise
between dates.”
ANTHONY R.N. – “The fund flow analysis describes the sources from which additional
funds are derived and the use to which these funds were put.”
MEANING:-
For the success of any business enterprise, it is but essential that there must be
a regular and smooth flow of funds for efficient conduct of all business operations.
Therefore, a statement showing the flow of funds is prepared to summarise for a given
period the resources made available to finance the activities of an enterprise and the uses
to which such resources have been put to. This statement helps in measuring and
assessing the financial soundness of the business at a particular date. It comprises of two
important words ‘fund’ and 'flow’. The concept of funds flow refers to the changes in
working capital through the sale and purchase of fixed assets, issue of shares and
debentures of floating of long term loans and their redemption and their reflection in the
increase or decrease of current assets and current liabilities. Funds flow statement
analysis helps to examine the liquidity position, its effect on current and future
profitability and generation of funds in the organization. Lack of liquidity would not only
threaten the short term solvency of the organization but also the long-term survival of the
concern.
SPECIMEN OF FUND FLOW STATEMENT
SOURCES OF FUNDS APPLICATION OF FUNDS

Issue of shares Repayment of loans
Issue of debentures Redemption of debentures
Funds from operation Redemption of preference shares
Sale of fixed assets Purchase of fixed assets
Long term loan taken Payment of dividends
Short term loan taken Payment of tax
Income from investments Increase in working capital
Sale of investments Operating loss
Decrease in working capital Loss by embezzlement
Commission received Cost in legal action
Compensation received
Damage received in legal action
Total Total
70
COMPARATIVE FUNDS FLOW STATEMENT FOR FIVE YEARS:-
Rs. In millions
PARTICULARS 2005 2006 2007 2008 2009
 SOURCES OF FUNDS
SHARE CAPITAL NIL NIL NIL 194173 450932

LOAN TAKEN (SECURED) 233899 153428 325898 2433488 61655
LOAN TAKEN (UNSECURED) NIL NIL 67243 NIL NIL
DEFFERED TAX LIABILITY 17190 30821 66930 131778 20921
INVESTMENT SOLD NIL NIL NIL 410521 44515
FUNDS FROM OPERATION 2219886 2398315 1377042 1517509 1813475
TOTAL 2470975 2582564 1837113 4687469 2391498
 APPLICATION OF
FUNDS
LOAN REPAID (SECURED) NIL NIL NIL NIL NIL

LOAN REPAID (UNSECURED) 13870 664 NIL 67721 719
FIXED ASSETS PURCHASED 351100 618753 471294 3908061 88740
CAPITAL W.I.P 60562 99687 344329 76532 467918
INVESTMENT PURCHASED 1769824 1214734 174986 NIL NIL
GRATUITY PAID 20348 25045 10244 41129 63664
COMPENSATED ABSENCES 145645 169316 177529 189588 306672
PENSION & OTHER NIL 13610 12590 8578 75134
RETIREMENT BENEFITS
WARRANTY CLAIMS PAID NIL 122813 170449 164991 204996
TAX PAID NIL NIL NIL NIL NIL
DIVIDEND PAID 97087 145630 194173 194173 194173
TAX PAID ON DIVIDEND 12439 20425 27233 33000 33000
NET INCREASE IN WORKING 100 151887 254286 3696 956482
CAPITAL
TOTAL 2470975 258256 1837113 4687469 2391498

4
71
INFERENCE:-
Funds flow statement is the report on the movement of funds

explaining how and from where the funds have been generated during the
year and the uses to which the funds have been applied during the year. In
other words, it is a technical device designed to highlight the changes that
have occurred in assets and liabilities between two balance-sheet dates. It
identifies the changes that have taken place and brings out their impact on
the liquid resources of the business.
 CHANGES IN WORKING CAPITAL:-
In funds flow statement net increase in

working capital is shown on application side, while net decrease
in working capital is shown on the sources side. Any increase in
current assets result in increase of working capital, while
increase in current liabilities result in decrease in working
capital. In the above funds flow statement working capital is
showing an upward trend which means increase in current
assets which is favorable for the firm, but the stock-out or
shortage situation must be avoided.
 FUNDS FROM OPERATION:-
In calculating funds from operation,

non-business expenses like dividend paid, taxes paid etc. or non
cash expenses like depreciation are added back in the net
profits. Similarly, non-cash as well as non-business expenses
are deducted from net profits. In the above statement of funds
flow, funds from operation has shown a decreasing trend which
is not favorable for the firm as its core business profits are
declining hence it is advisable to increase funds from operation.
72
CASH FLOW ANALYSIS
Cash Flow Statement is a statement which indicates sources

of cash inflows and transactions of cash outflows of a firm during an accounting period.
The activities which generate cash inflows are known as sources of cash and activities
which cause cash outflows are known as uses or application of cash. It is appropriately
termed as “Where Got Where Gone Statement”
The Institute of Chartered Accountants of India (ICAI)

issued Accounting Standard-3 (AS-3) relating to the preparation of cash flow statement
for accounting period commencing on or after April 1, 2000 for enterprise which:-
 Have turnover of more than Rs 50 crore.
 Is listed in stock exchange (in India or outside India).
 Are in the process of listing their equity or debt securities as evidenced by the
board of directors’ resolution in this regard.
Cash happens to be the most liquid of all the current assets. It

is this liquid asset which constitutes the medium of exchange. Every financial transaction
has an ultimate effect on cash at some time or the other. A large cash holding reduces
profitability. Similarly, inadequate cash holdings would have effect on liquidity and
therefore on profitability. Cash flow statement analysis can therefore be helpful in the
examining the cash effect of financial transactions. It reveals the complete story of cash
movements. It helps to know the reasons for low cash balance inspite of high profits and
high cash balance inspite of low profits. It also helps to understand at what point of time
during the period there was idle cash or excessive cash holdings or inadequate cash.
Appropriate steps can therefore be ensured to correct such situations.
Objectives of cash flow statement:-
 To identify the causes of increase or decrease in the cash position of the firm
during the specific period.
 To understand the cash generated on account of business operations during the

year.
73
 To understand the cash impact on the current assets and current liabilities during
the year.
 To understand the investment and financing pattern followed during the year.
 To ensure necessary action for maintenance of adequate liquidity.
 To help in the projection of future cash flows.
Uses of cash flow statement:-
 Payment of dividend in cash.
 Repayment of borrowings.
 Redemption of preference shares in cash.
 Purchase of fixed assets.
 Acquisition of other current assets as securities.
 Payment to creditors.
 Adapt to changing circumstances and opportunities.
 Assessing the ability of the company.
 Enhances comparability.
 To know how much cash is generated from business.
 To know the liquidity position.
There are two methods of cash flow:-
74
COMPARATIVE CASH FLOW STATEMENT
Rs. In millions
75
PARTICULARS 2005 2006 2007 2008 2009
Profit before tax 2012778 2459695 2395020 1874076 180543

8
ADD:-
DEPRECIATION 266465 279720 318070 437188 802727
LEASEHOLD LAND WRITTEN 44 44 44 1372 1357
OFF
LOSS ON ASSETS SOLD, 1796 1300 6993 7797 8161
DEMOLISHED,DISCARDED &
SCRAPPED
LOSS ON SALE OF INVESTMENT NIL NIL NIL NIL 1098
WRITTEN DOWN OF OBSOLETE 18885 7288 7490 103583 69055
& NON-MOVING COMPONENT
BAD DEBTS & IRRECOVERABLE 30708 38919 -115 15318 65547
BALANCES WRITTEN OFF
PROVISIONS FOR DOUBTFUL -10706 20968 9176 53331 44982
DEBTS & ADVANCES
INTEREST PAID 31636 59076 89367 128603 316924
VRS COMPENSATION PAID 2083 767 325 14648 32761
Total 348798 408082 431350 761840 1342612
LESS:-
PROFIT ON SALE OF NIL NIL 3329 NIL 65365
UNDERTAKING
PROFIT ON SALE OF 1133176 974941 190899 NIL NIL
INVESTMENT
PROFIT ON SALE OF MUTUAL 1760 1703 6980 30812 4417
FUNDS
SURPLUS ON SALE OF ASSETS 5417 32087 128783 28216 7371
INTEREST RECEIVED 12942 15355 10742 5732 1884
DEBITS(EXPENSES)PERTAINING 377 192 66 NIL NIL
TO EARLIER YEARS
SUNDRY CREDIT BALANCES 3552 8654 8953 8000 25799
APPROPRIATED
PROVISIONS NO LONGER 18398 45989 68690 45977 42775
REQUIRED WRITTEN BACK
DIVIDEND RECEIVED 191266 257190 422672 126283 126520
LEASE EQUILASITION 19426 -11754 -87417 NIL NIL
Total 1386314 1324357 783660 245020 274131
OPERATING PROFIT BEFORE 975262 1543420 2042710 2390896 2873919
WORKING CAPITAL CHANGES
ADJUSTMENTS FOR:-
TRADE & OTHER RECEIVABLES -384504 -1053007 -888410 -276924 -134553
INVENTORIES -143976 -250530 -437128 -560450 511392
TRADE PAYABLES 426492 1274168 1308694 978007 -1963511
-101988 -29369 -16844 140633 -1586672
CASH GENERATED FROM 873274 1514051 2025866 2531529 1287247

OPERATIONS
VRS COMPENSATION PAID -2083 -767 -325 -14648 -32761
NET CASH GENERATED FROM 871191 1513284 2025541 2516881 1254486
OPERATIONS
DIRECT TAXES -248135 -430047 -648580 -473780 -597665

76
NET CASH FLOW FROM 623056 1083237 1376961 2043101 656821
OPERATING ACTIVITIES
INFERENCE:-
The profit before tax has shown an upward trend but has declined in 2008.
In the above calculation the operating profit has shown an upward trend but after
deducting working capital changes the profit has declined, hence working capital should
be managed efficiently. The operating profit and non-operating profit has shown a
upward trend due to which even if the there is loss from activities the cash balance has
shown a upward trend which is not favorable for the firm, hence, it is recommended to
reduce the losses from activities and increase the profits.
COST OF CAPITAL
The term cost of capital is defined as the rate of return on investment
projects necessary to maintain the market price of the firm’s stock unchanged. It
represents the rate of return which the company must earn to pay to suppliers of capital to
justify their use. It is the discount rate which is used to discount the estimated future cash
inflows so as to determine their net present value.
Thus, the cost of capital of the firm is the rate of return required by
the investors who furnish the capital. This constitutes the required rate of return of the
firm because if that rate of return was not achieved, investors would not be willing to
invest the capital required. In essence, management acts as an agent of the investors in
selecting capital investment projects that the investors in the firm are willing to finance.
This willingness, in turn, is a function of expected return to be received by the investors
as compensation for foregoing the use of the invested funds and for bearing the risk that
77
those returns will not materialize. In the cost of capital is the rate of return the firm must
achieve on its aggregate investments for the market value of its securities to remain the
same.
The cost of capital can also be referred to as borrowing rate which

the combined cost of capital is arrived at after averaging the costs of each source of funds
employed by the firm. The cost of capital can also be described as opportunity cost which
refers to the rate of return which the company would have earned had it invested the
funds elsewhere. The cost of capital is a technical term that may be defined in several
ways, such as:-
 Minimum required return on investments (ROI).
 Cut off rate for capital expenditure.
 Targeted return on investments (ROI).
 Financial standard.
 The different costs of capital of different sources are as follow:-
COMPARATIVE STATEMENT OF COST OF CAPITAL
COST OF DEBT:-
INTEREST
COST OF DEBT = ----------------- x 100
TOTAL DEBT
78
Rs. In millions
YEAR 2005 2006 2007 2008 2009
INTEREST 6.8% 6.8% 12.85% 13.55% 14.65%

RATE
INTEREST 35172.52 45560.48 136614.52 464617.98 511263.17
TOTAL 517243 670007 1063148 3428915 3489851
DEBT
COST OF 6.80% 6.80% 12.85 13.55 14.65
DEBT
COST OF EQUITY:-
DIVIDEND PER SHARE
COST OF EQUITY = ---------------------------- x 100 +
GROWTH RATE
MARKET PRICE
Rs. In millions
YEAR 2005 2006 2007 2008 2009
DIVIDEND 2.5 4 2 2 1
PER SHARE
MARKET 382.25 300 200 103.50 51
PRICE
GROWTH 0.20 0.68 0.20 0.93 0.03
RATE
COST OF 0.85 2.01 1.2 2.86 1.99
EQUITY
Weighted average cost of capital:-
Rs. In millions
PARTICULAR 2005 2006 2007 2008 2009

S
EQUITY 5620755 7183745 8513490 9149913 9600845

CAPITAL
DEBT 517243 670007 1063148 3428915 3489851
CAPITAL
TOTAL 6137998 7853752 9576638 12578828 13090696
79
SPECIFIC 0.85 2.01 1.2 2.86 1.99
COST OF
EQUITY
SPECIFIC 0.068 0.068 0.1285 0.1355 0.1465
COST OF
DEBT
TOTAL 0.918 2.078 1.3285 2.9955 2.1365
CAPITAL 0.92 0.91 0.89 0.73 0.73

STRUCTURE
WEIGHT OF
EQUITY
CAPITAL 0.084 0.085 0.11 0.27 0.27
STRUCTURE
WEIGHT OF
DEBT
TOTAL 1.004 0.995 1 1 1
WEIGHTED 0.78 1.83 1.07 2.09 1.45

AVERAGE
COST OF
EQUITY
WEIGHTED 0.0057 0.0058 0.014 0.037 0.039
AVERAGE
COST OF
DEBT
TOTAL 0.7857 1.8358 1.084 2.127 1.49

(WEIGHTED
AVERAGE
COST OF
CAPITAL)
WEIGHTED 78.57 183.58 108.4 212.7 149

AVERAGE
COST OF
CAPITAL
PERCENT
INFERENCE:-
Cost of capital is the cost of raising funds through different sources. It is also
known as a rate of return that firm must earn on its investments so that the expectations of
80
the investors are satisfied. This return is calculated on the basis of cost of raising funds
from different sources for financing the investments of the firm.
In the above table the weighted average cost of equity shares and of debt is
calculated for five years. The Weighted Average Cost is showing an upward trend, which
means that the cost is rising and returns are decreasing hence measures should be taken
to reduce the cost of capital.
WORKING CAPITAL MANAGEMENT:-

Working capital management is concerned with the problems
that arise in attempting to manage the current assets, the current liabilities and the
81
interrelationship that exist between them. The goal of working capital management is to
manage the firm’s current assets and liabilities in such a way that a satisfactory level of
working capital is maintained. This is so because if the firm cannot maintain a
satisfactory level of working capital, it is likely to become insolvent and may even be
forced into bankruptcy. The current assets should be large enough to cover its current
liabilities in order to ensure a reasonable margin of safety. Each of the current assets must
be managed efficiently in order to maintain the liquidity of the firm while not keeping too
high level of any one of them. Each of short term sources of financing must be
continuously managed to ensure that they are obtained and used in the best possible way.
The interaction between the current assets and current liabilities is therefore, the main
theme of the theory of working management.
Working capital is the amount of financing required to sustain

optimal balances of the firm’s working capital assets. Working capital represents that
portion of capital which circulates from one form to another in the ordinary conduct of
business. This idea embraces the recurring transition from cash to inventories to
receivables to cash that forms the conventional chain of business operation. Working
assets are those assets that will turnover or release cash within a relatively short period of
time; they include inventory, accounts receivable, liquid assets etc. Current Assets are
those assets that should be converted into cash within a year. A portion of the current
assets is financed by current liabilities i.e. sundry creditors, bills payable, outstanding
liabilities, etc. Current Liabilities are those obligations which are due within a year.
Marketable securities are considered as a part of working

capital as they are a substitute for cash, similarly, the inclusion of prepaid expenses may
be justified because they represent services owed to the company that are used in carrying
out activities, thereby obviating the need for cash outlays. Gross working capital is the
total of current assets. Net working capital is the current assets less current liabilities. In
other words, net working capital is that portion of current assets financed by long-term
debt and equity sources. The concept of working capital is built on three important
elements:-
 Financing working capital assets i.e. current assets.
 The amount of cash tied up in working assets.
 The speed with which these assets are converted into cash
The task of the finance manager in managing working capital efficiently is to ensure
sufficient liquidity in the operations of the enterprise. The liquidity of a business firm is
measured by its ability to satisfy short-term obligations as they become due. The three
basic measures of the firm’s overall liquidity are:
82
WORKING CAPITAL CYCLE:-
EQUITY &
LOANS
PAYABL
CASH
ES
RECEIVAB OVERHEA
LES
DS
INVENT
ORY
SALES
OPERATING CYCLE FOR MANUFACTURING FIRM:-

83
Work -in-
Progress
Raw Materials Finish Goods

Stock Stock
Wages &
overheads
Trade
Selling Sales
Creditors
Expenses
Trade
CAS
H
Debtors
Taxation Shareholders
Fixed Loan
Assets Creditors
Lease
Payments
COMPARATIVE WORKING CAPITAL STATEMENT

Rs. In millions
84
SR. PARTICULARS 2005 2006 2007 2008 2009
NO.
A CURRENT ASSETS 3923234 5264473 6615365 7455319 6819921

LOANS &
ADVANCES
I INVENTORIES 866122 1109364 1483583 1940450 1238798

a STORES & SPARES 35277 39225 40967 97758 101016
b STORES IN TRADE
-RAW MATERIAL 424705 607095 911035 1000106 745159
-OBSOLUTE 1434 10694 2450 3683 3249
MATERIAL
-WIP 157410 205446 256820 382175 137969
-FINISHED GOODS 175866 192977 215919 352144 194287
c MATERIAL IN 17064 7340 33122 70663 57118
TRANSIT
d MATERIAL IN 54366 46587 23273 33921 NIL
BONDED
WAREHOUSE
II SUNDRY DEBTORS 2197738 3084304 3892511 3564577 2924316

a O/S FOR A PERIOD
OF 6MONTHS
b GOOD 189661 207319 176392 37968 115952
c DOUBTFUL 120476 102386 102871 177149 171325
LESS : -PROVISIONS -120476 -102386 -102871 -177149 -171325
d OTHERS 2008077 2876985 3716119 3526609 2808364
e RECEIVABLES
f DOUBTFUL 3094 3094 3094 3094 3094
LESS:- PROVISION -3094 -3094 -3094 -3094 -3094
III CASH & BANK 66926 176389 413024 615993 791132

BALANCE
a CASH ON HAND 495 1027 680 566 334
b BANK BALANCE :-
-SCHEDULED BANK
CURRENT ACCOUNT 61505 129304 353889 243823 790437
FIXED DEPOSIT 6926 46058 70 57902 70
INTEREST ACCRUED NIL NIL 2 553 2
-NON-SCHEDULED
CURRENT A/C NIL NIL NIL 371532 289
IV OTHER C.A. 275001 206511 54763 61765 212219

a INCOME 30395 12607 31997 33322 19408
RECEIVABLE
b LEASE AJUSTMENT 99171 87417 NIL NIL NIL
c INCENTIVE NIL NIL NIL NIL 145993
85
RECEIVABLES
d EXPORT INCENTIVE 45435 36487 22766 28443 46818
e LEASE RENTALS 100000 70000 NIL NIL NIL
V LOANS & 517447 687905 771484 1272534 1653456

ADVANCES
a AMOUNT NIL NIL NIL NIL 1949
RECOVERABLE
FROM SUBSIDIARY
b DEPOSITS NIL NIL NIL NIL 600000
c ADVANCES
RECOVERABLE
-GOOD 264257 307151 303598 745362 321252
-DOUBTFUL 81020 42858 83378 67839 118645
-LESS:- PROVISIONS -81020 -42858 -83378 -67839 -118645
D SALES TAX NIL NIL NIL 164453 282602
REFUNDED
d SUNDRY DEPOSITS 74233 88982 85718 76310 71986
e BALANCE WITH 45679 151329 142845 239693 192414
COLLECTORATE OF
CENTRAL EXCISE &
CUSTOMS
f TAX PAID IN 1117419 1547585 2196165 2669945 3267610
ADVAMCE
LESS:-PROVISION -984142 -1407142 -1956842 -2458776 -3084363
B CURRENT 2949585 4234316 5370163 6452601 4860721

LIABILITIES &
PROVISIONS
I LIABILITIES 2452746 3642098 4738704 5574962 3938647
a SUNDRY CREDITORS 1650818 2384321 3044404 3999446 2454362
b SUNDRY DEPOSITS 60339 63528 67309 72805 67200

c UNCLAIMED 6378 10896 11501 14026 14019
DIVIDENDS
d UNCLAIMED 153 152 152 152 152
REDEEMED PREF
SHARES
e UNCLAIMED 106 71 71 71 71
DEBENTURES
f INVESTORS NIL NIL NIL NIL 20
EDUCATION
PROTECTION FUND
g DERIVATIVE NIL NIL NIL NIL 480825
LIABILITY
h ADVANCE FROM 74865 101386 459333 640554 385707
CUSTOMER
i INTEREST ACCURED 5382 10718 15253 21541 18192
III PROVISION 496839 592218 631459 877639 922074
86
a PROVISIONS FOR 25045 10244 41129 63664 60686
GRATUITY
b PROVISIONS FOR 169316 177529 189588 306672 309164
LEAVE
ENCASHMENT
c PROVISIONS FOR 13610 12590 8578 75134 84209
LONG SERVICE
d PROVISIONS FOR 122813 170449 164991 204996 240842
WARRANTY CLAIMS
e PROVISIONS FOR 984142 1407142 1956842 2458776 3084363
TAXATION
LESS:- TAX PAID -984142 -1407142 -1956842 -2458776 -3084363
f PROPOSED 145630 194173 194173 194173 194173
DIVIDEND
g PROVISION FOR TAX 20425 27233 33000 33000 33000
ON DIVIDEND
WORKING CAPITAL = CURRENT ASSETS LOANS & ADVANCES – CURRENT

LIABILITIES & PROVISIONS
WORKING CAPITAL CALCULATION

Rs. In millions
SR.NO. PARTICULARS 2005 2006 2007 2008 2009

1. CURRENT 3923234 5264473 6615365 7455319 6819921
ASSETS LOANS
& ADVANCES
2. CURRENT 2949585 4234316 5370163 6452601 4860721
LIABILITIES &
PROVISIONS
3. WORKING 973649 1030157 1245202 1002718 1959200
CAPITAL
WORKING CAPITAL CYCLE OF 2005
87
RAW WIP FINISHED RECEIVABLES PAYABLE NUMBER
MATERIAL CONVERSION GOODS CONVERSION DEFFERAL OF ROLES
CONVERSION PERIOD CONVERSION PERIOD PERIOD TAKEN
PERIOD PERIOD
3 DAYS 4 DAYS 4 DAYS 58 DAYS 58 DAYS 13 ROLES
88
PERIOD PERIOD
4 6 6 62 89 15 ROLES

89
PERIOD PERIOD
3 5 5 61 122 17 ROLES
90

PERIOD PERIOD
3 6 6 58 71 24 ROLES
91

PERIOD PERIOD
3 DAYS 4 DAYS 4 DAYS 46.2 DAYS 57.9 DAYS 12 ROLES
92
INFERENCE:-
Working capital represents that portion of capital which

circulates from one form to another in the ordinary conduct of business.
Current assets are those assets which should be converted into cash within a
year. Current liabilities are those obligations which are due within a year.
Gross working capital is total of current assets whereas net working capital is
the current assets less current liabilities. In the above table working capital
has shown an upward trend till the year 2007 but in 2008 it has declined,
which is not favorable for the firm hence it is recommended to increase the
working capital.
93
RECEIVABLES MANAGEMENT
The substantial portion of current assets is in the form

of ‘TRADE DEBTORS’. Though this portion may vary from industry to industry and
also from firm to firm basis, it is estimated that 25% of the current assets are in the form
of debtors. This amount blocked in debtors if not controlled properly the firm may face
shortage of working capital and it may result in the firm being caught in the debt trap. The
management of trade debtors, which is also called as ‘Credit Management’ thus becomes
of paramount importance for management. The basic principle of managing the trade
debtors is trade off between liquidity and profitability or in other words it is striking
balance between too liberal credit and too conservative credit policy. Accounts receivable
is a key component to working capital management and the focus of credit policy. Credit
policy involves decision as to what should be the credit terms, how much credit should be
allowed at a time, which customers should qualify for credit and how the receivables
should be collected, managed and controlled within the set parameters to ensure smooth
circulation of working capital.
Credit sales are similar to a dangerous double edged

sword, which can cut both favorably or unfavorably depending upon its use. On one hand,
extending credit enhances sales by attracting customers that may otherwise be lost if
credit is not available. On the other hand, loose or reckless control over accounts
receivable result in scarce cash tied up in slow paying accounts, unnecessary losses from
bad debts and the need for additional financing. Hence it poses a crucial problem since
any of these unfavorable outcomes can spell financial disaster for the firm, if no proper
and adequate control is exercised on accounts receivables.
Accounts receivables are considered as assets because

each receivable represents ownership of a valuable claim on the customer’s net worth in
the event of default. When the credit sale takes place it deprives the firm of the liquidity
necessary to replace the resources used in creating that sale. It is only when the receivable
is actually collected that this assets releases cash and the firm is able to recoup its
investment.
Origin of trade debtors:-
If we peep into the transactions of sale of any business

organization, whether in manufacturing sector or in service sector, we will realize that
sales are basically of two types. The first is cash sales where is settled then and there
only. In other words, goods or services are sold and the cash is recovered on the spot.
Thus there is no risk as the transaction is over then and there only.
94
Formula:-
Credit sales
Debtors Turnover Ratio = ---------------------------------
Average accounts
receivable
12 months
Debtors Collection Period = ----------------------------------
Debtors turnover ratio
COMPARATIVE STATEMENT OF RECEIVABLES

MANAGEMENT
Rs. In millions
SR. PARTICULARS 2005 2006 2007 2008 2009

NO.
1.> SALES 12618856 15307126 20694761 23723049 22732435

2.> Less: 10245906.42 12782121.25 17644122.22 20028459.83 18444347.28
VARIABLE
COSTS
3.> Less: FIXED 1886486.73 1957684.39 2363709.70 2860917.86 2523012.95
COSTS
4.> Less: BAD 30708 38919 9176 15318 65547
DEBTS
5.> Less: COST OF 133495.59 172811.51 433559.26 487658.91 398924.45
INVESTMENTS
RETURN ON 6.8% 6.8% 12.85% 13.55% 14.65%
INVESTMENTS
6.> TOTAL COSTS 12296596.74 14951536.15 20450567.18 23392354.6 21431831.68
(2+3+4+5)
7.> PROFIT/LOSS 322259.26 355589.85 244193.82 330694.4 1300604

(1-6)
95
INFERENCE:-
In the above calculation variable cost and fixed cost are

showing an upward trend which is not favorable for the company, hence, it
should be kept in control. The bad debts and cost of investments should be
reduced down to increase the profits. The return on investment is showing an
upward trend; hence it is favorable for the firm. As the sales have shown an
increasing trend and even the profits are increasing hence it is a favorable
position for the firm.
96
COST-SHEET
COST:-
The Institute of Cost and Management Accountants London, has defined the
term as, “the amount of expenditure, actual or notional, incurred on or attributable to a
given thing.”
COSTING:-
According to “The Institute of Cost and Management Accountants” London,

“costing is the technique and process of ascertaining costs”
Costing consist of rules and principles of ascertaining of cost of a product or

service. For determining the total cost of production a statement showing the various
elements of cost is prepared. This statement is called as a “statement of cost” or “cost-
sheet”. Cost-Sheet is a statement, which provides for the assembly of the detailed cost of
a cost centre or cost unit. It is a statement showing the details of the total cost of job,
operation or order. It brings out the composition of total cost in a logical order, under
proper classification and sub-divisions. The period covered by the cost-sheet may be a
week, a month or so. Separate columns are provided to show the total cost and cost per
unit. In case of multiple products a separate cost sheet may be prepared for each product.
There are two main types of cost: -
97
Variable cost:-
Variable cost is the aggregate of direct material, direct labour and direct expenses and
variable overheads (i.e. prime cost + variable overheads), variable cost in total is termed
as a ‘Marginal Cost’ it is deduct from sales and contribution is ascertained.“Variable cost
is in operating expenses, or a group of operating expenses that vary directly and in
proportion to the level of activity, viz. sales or production. Examples are materials
consumed, direct labour, power, sales, commission, utilities, freight, packaging etc.
Fixed Cost: -
Fixed cost means total of all fixed overheads. But it is important to note that in India,
where
 Most of the labour force is on daily wages.
 Most of labour costs consist of Dearness allowance (DA)
 ‘Retrenchment’ & ‘Lay-off’ is not possible in the ordinary course of business.
Labors cost is also sometimes treated as fixed and included in fixed cost. Treatment of the
fixed cost in marginal costing is very peculiar ‘Fixed Cost’ are also known as ‘time cost’,
‘period Cost’, ‘capacity cost’, ‘stand-by-cost’, or ‘constant cost’. Fixed Costs are not
concerned with the output level. They are rather period costs. During the given period,
they are required to be incurred irrespective of the fact, whether the output is produced or
not. Therefore fixed costs are written-off to a marginal cost profit & loss account. They
are not included in cost of goods sold, neither in closing stock. At the end of the period,
contribution (i.e. difference between sales & marginal cost) is credited to marginal
costing profit & loss account to which fixed cost are debited. The contribution first
recoups fixed cost and then earns profit. If fixed cost is more than contribution, then there
is a loss.
98
PURPOSE OF COST-SHEET:-
 It gives the break up of total cost under different elements.
 It shows total cost as well as cost per unit.
 It helps comparison with previous years.
 It facilitates preparation of tenders or quotation.
 It enables the management to fix up selling price.
 It helps reduction in cost and control cost.
DIVISION OF COST:-
 PRIME COST: - It comprises of all direct materials, direct labour, direct

expenses.
 WORKS COST: - It is also known as factory cost or cost of manufacture. It is

the cost of manufacturing an article. It includes prime cost and factory overheads.
 COST of PRODUCTION: - It represents factory cost plus administrative

overheads.
 TOTAL COST: - It represents cost of production plus selling and distribution

overheads.
COMPOSITION OF SELLING PRICE:-
PROFI
T SELLIN
G
PRICE
99
SELLING
&
DISTRIBUTI
ON
OVERHEA
DS
OFFICE
OVERHE
ADS
FACTOR
Y
OVERHE
ADS
COST TOTAL
OF COST
DIRECT
EXPEN PRODU
SES FACTO
RY C-TION
DIRECT
PRIME COST
LABOU COST
R
DIRECT
MATERI
ALS
100
COMPARATIVE STATEMENT OF COST-SHEET
Rs. In millions
PARTICULARS 2005 2006 2007 2008 2009
MATERIAL 58725883.43 2231966622.7 1374625247.4 1599087871 450447165.4

CONSUMED 2 5
DIRECT WAGES 3828418.36 111529407.89 54255241.26 51328152.32 21971469.8
PRIME COST 62554301.79 2343496030.6 1428880488.7 1650416023 472418635.2

1 1
FACTORY
OVERHEADS
UTILITIES 1151519.09 36341873.75 16392176.84 19371209.87 7251861.81
CONSUMABLE 514727.8 14956477.65 7293564.67 6846787.23 2945174.55
STORES
DEPRECIATION 1617316.77 50203922.41 23000981.73 26027571.67 9992377.98
REPAIRS AND 717877.63 21688965.97 10282038.63 10225409.21 4299663.18
MAINTENANCE
OTHER WORKS 5264978.3 NIL 79258980.06 78881095.12 35332581.9
OVERHEADS
RESEARCH AND 96964540 45106528.74 17333279.36 19189920.53 9488176.95
DEVELOPMENT
QUALITY 914311.25 27058520.01 12968422.74 12853043.58 5344553.5
CONTROL
INTEREST AND 442446.76 15971328.44 97871242.69 11841756.6 2772220.44
FINANCIAL
CHARGES
WORK- IN -
PROGRESS
ADD: OPENING 1608877.96 1045583.24 2647815.12 10682171.08 8424895.45
LESS: CLOSING 1045583.24 -8701980.6 -10682171.08 -8424895.45 -715638.54
LESS: SALE OF 564684.93 -21461710.43 -12542181.83 - -4331322.2
SCRAP 15376198.23
WORKS COST 170140629.2 2525705539.7 1672704637.6 1822533895 553223180.3

9 4
ADMINISTRATIVE
OVERHEADS
SALARIES AND 26752.26 1248869.94 478256.26 530678.21 263733.6
WAGES
OTHER ADMIN 60809.68 2838765.23 1087108.59 1206267.21 599484.19
EXPENSES
OFFICE AND 3040508.23 109755479.13 58003115.52 81376929.55 19050787.39
EQUIPMENT
101
CHARGES
COST OF 173268699.4 2639548654.0 1732273118.0 1905647770 573137185.4

PRODUCTION 9 1
FINISHED GOODS
ADD: OPENING 71892.67 292911.45 927807.55 747872.98 338773.38
LESS: CLOSING -292911.45 -927807.55 -747872.98 -338773.38 -433607.72
COST OF GOODS 173633503.5 2638913757.9 1732453052.5 1906056869 573042351.1

SOLD 9 8
SELLING AND
DISTRIBUTION
OVERHEADS
PACKING COST 1637818.23 41040966.89 23256931.95 29832463.27 2256354.29
SALARIES AND 404049.93 14585289.64 7707972.73 10814094.17 2531639
WAGES
FREIGHT AND 1179703.06 42584615.79 22504939.24 31573870.44 NIL
TRANSPORT
COMMISSION TO 176648.42 2453530.15 18903055.02 48571429.15 NIL
SELLING AGENT
ADVERTISING 105056.7 3792309.55 2004143.85 2811764.02 658249.44
EXPENSES
ROYALTY ON 293600.94 10598330.57 5600961.31 7858009.53 1839603.31
SALES
WARRANTY 1378104.17 49746569.59 26030889.55 36520642.48 1507009.46
EXPENSES
FREE SUPPLY 139733.77 16104032.42 5065605.13 8772125.45 1431545.78
OTHER 525655.38 18974971.84 10027813.57 14068773.23 3293577.3
OVERHEADS
TOTAL COST 179473874.1 2838794374.4 1853555364.9 2096880041 586560329.7

3 3
PROFIT 1243938212 12468331626 18841205635 2162616895

6 9
SALE 1261885600 15307126000 20694761000 2372304900 22732435

0 0
INFERENCE:-
In the above table the prime costs, works costs, cost of production and
total cost are showing an upward trend, sales also in an increasing trend but the cost
should be kept in control. There is good scope for cost reduction which will ultimately
increase the profits.
102
BREAK-EVEN ANALYSIS
The term Break-Even Analysis is interpreted in two senses

namely narrow sense and broad sense. In its narrow sense, it refers to find out break-even
point that is a “point of no profit no loss”. In broad sense, it is an analysis used to
determine the probable profit or loss at any level of operation. Break-Even Analysis is
method of studying the relationship among sales revenue, variable cost and fixed cost to
determine the level of operation at which all the costs are equal to its sales revenue and it
is no profit no loss situation. This is an important technique used in profit planning and
managerial decision-making. Margin of safety is the difference between the actual sales
and the break-even sales this gap has to be increased to be in a favorable situation. Profit
Volume Ratio is ratio of contribution to sales.
A break-even analysis is concerned with the study of revenues and

costs in relation to sales volume and, particularly, the determination of that volume of
sales at which the firm’s revenue and total will be exactly equal (or net income is equal to
zero). Thus, the break-even point may be defined as a point at which the firm’s total
revenues are exactly equal to total costs, yielding zero income. The “no profit, no loss”
point is a break-even point or a point at which losses cease and profits begin.
The organizations study break-even analysis to know how far

they are from the break-even point which can be calculated by Margin of Safety. The
excess of actual sales revenue over the break-even sales revenue is known as margin of
safety. When the margin of safety is divided by the actual sales, the margin of safety ratio
is obtained. The Margin of Safety Ratio indicates the percentage by which he actual sales
may be reduced before they fall the break-even sales volume. It is important that there
should be a reasonable margin of safety, lest a reduced level of activity should prove
disastrous. The higher the Margin of Safety Ratio, the better it is from the point of view
of the company as it indicates that a “sizeable” sales volume can fall before the break-
even point is reached. This measure acquires special significance in depression or
recession.
FORMULA:-
CONTRIBUTION = SALES – VARIABLE COST

103
CONTRIBUTION
PROFIT VOLUME RATIO = ---------------------- x 100
SALES
FIXED COST
BEP (SALES) = -------------------------------
PROFIT VOLUME RATIO
MARGIN OF SAFETY =ACTUAL SALES – BREAKEVEN SALES
BREAK-EVEN ANALYSIS CHART
104
COMPARATIVE STATEMENT OF BREAK-EVEN ANALYSIS
Rs. In millions
YEAR 2005 2006 2007 2008 2009
SALES 12618856 15307126 20694761 23723049 22732435

VARIABLE 10245906.4 12782121.2 17644122.2 20028459.8 18444347.28
COST 2 5 2 3
CONTRIBUTION 2372949.58 2525004.75 3050638.78 3694589.17 4288087.72
FIXED COST 1886486.73 1957684.39 2363709.70 2860917.86 2523012.95
PROFIT 486102.85 567320.36 686929.08 833671.31 1765074.77
P/V RATIO 18.80% 16.50% 14.74% 15.57% 18.86%
BEP (SALES) 10036418.7 11864753.8 16036022.3 18374552.7 13377587.22
8 8 9 3
MARGIN OF 2582437.22 3442372.12 4658738.61 5348496.27 9354847.78
SAFETY
INFERENCE:-
In the above table the sales, contribution, profit and margin of

safety has shown an upward trend which is favorable trend. And the variable
cost, fixed cost should be reduced to increase contribution and profits. For
this, the company has to increase sales and reduce or control the costs. The
profit volume ratio (P/V Ratio) is showing a downward trend hence, it
should be increased as it shows the contribution through sales volume hence
sales show increasing but still contribution is less due to high cost. Hence,
cost should be controlled and sales should be increased.
105
CHAPTER 7 - CONCLUSION AND
RECOMMENDATIONS
 The business environment of the company is reasonably good. The

company s track record is always oriented towards profitable growth
and with strong fundamentals.
 As major portion of working capital is invested in sundry debtors,
company has to adopt factoring services so that cash realization will
be faster.
 Company should take corrective actions to write off or sell off the
inventory, which is of no use and occupies unnecessary space.
 Action on priority basis should be taken against pending jobs for more
than three months. Smooth functioning will release locked up capital
and improve the cash flow.
 Other factory capital deals with the expenditure that is done on assets
of less value, building and other direct assets. Capital consumption on
this head is in company s own hands hence more importance can be
given to this head. The capital should be used effectively with the
improvement in manufacturing activity and minimizing cost.
 Acquisition of new assets of heavy costs should be done with proper
capital budgeting supported by payback period.
106
CHAPTER 8 - LIMITATIONS
The analysis in all the research programmers’ and conclusion are extremely
crucial. Therefore, earnest of efforts were made to extract the true
information and present them in a comprehensive manner, yet the findings
are tied up within the following boundaries: -
 As our project is based on the data recorded by the company, we face

the limitation of extracting that particular data because our access is
limited for the sake of confidential information of the company.
 The grouping of different items in the balance sheet also created
hindrances, as it is very difficult to identify which item is clubbed with
which head. But thanks to finance personal who made it easy to
understand these clubbing.
 Findings of the study are based on the assumptions that the
respondents have given the correct information.
 The research is limited to the period of five years, i.e. 2004-2005,
2005-2006, 2006-2007, 2007-2008 and 2008-2009.
107
CHAPTER 9 - ANNEXURE
PROFIT AND LOSS ACCOUNT

Rs. In millions
PARTICULARS 2008-09 2007-08 2006-07 2005-06 2004-05
INCOME
SALES 22732435 2372304 2069476 1530712 12618856
9 1 6
less :- EXCISE DUTY 1632717 2158648 1864956 1353769 1132871
NET SALES 21099718 2156440 1882980 1395335 11485985
1 5 7
OPERATING INCOME 848532 552341 554080 484468 368204

FINANCIAL INCOME 132821 162827 440394 274248 205968
22081071 2227956 1982427 1471207 12060157
9 9 3
EXPENDITURE
MATERIAL CONSUMED 15294648 1573904 1379288 9994581 8213011
4 2
MANUFACTURING EXPENSES 434988 529112 506787 417896 373483
EMPLOYEE COST 1373839 1392991 1053055 894318 893287
SELLING&ADMINISTRATIVE 2063696 2231967 1871835 1544976 1231146
EXPENSES
DEPRECIATION& AMORTISATION 804084 438560 318114 279764 266509
INTEREST &FINANCE 375953 197054 144024 97367 69802
20347208 2052872 1768669 1322890 11047238
8 7 2
less:-EXPENSES CAPITALISED 6210 123235 33247 1583 3432
20340998 2040549 1765345 1322731 11043806
3 0 9
PROFIT BEFORE EXCEPTIONAL 1740073 1874076 2170829 1484754 1016351

ITEMS&TAXATION
EXECEPTIONAL INCOME 65365 NIL 224191 974941 996427
PROFIT BEFORE TAXATION 1805438 1874076 2395020 2459695 2012778
108
PROVISION FOR TAXATION
CURRENT TAX 605087 482900 525000 400000 256642
DEFFERED TAX 20921 182626 66930 30821 17190
FRINGE BENEFIT 20500 19034 19000 23000 nil
646508 684560 610930 453821 273832
PROFIT FOR THE YEAR AFTER 1158930 1189506 1784090 2005874 1738946
TAXATION
PRIOR PERIOD ADJUSTMENTS :
EXPENSES NIL NIL 66 192 377
TAXATION , NET NIL NIL 5700 -120 -449
NIL - -5766 -72 72
AS PER LAST ACCOUNT 1479540 1494370 1164625 1601635 388447
2638470 2683886 2942949 3607437 2127465
LESS:-
TRANSFFERED TO GENERAL 750000 750000 1000000 2000000 250000
RESERVES
INTERIM DIVIDEND NIL 194173 194173 194173 97087
TAX ON INTERIM DIVIDEND NIL 33000 27233 27233 12688
PROPOSED DIVIDEND 194173 194173 194173 194173 1456360
TAX ON PROPOSED DIVIDEND 33000 33000 33000 27233 20425
977173 1204346 1448579 2442812 525830
BALANCE CARRIED TO BALANCE 1661297 1479540 1494370 1164625 1601635
SHEET
BALANCE-SHEET
Rs. In millions
PARTICULARS 31-3-09 31-3-08 31-3-07 31-3-06 31-03-05
SOURCES OF FUNDS
SHARE HOLDERS FUNDS

SHARE CAPITAL 388346 388346 194173 194173 194173
RESERVES & SURPLUS 9212499 8761567 8319317 6989572 5426582
9600845 9149913 8513490 7183745 5620755
LOAN FUNDS
SECURED LOANS 3489391 3427736 994248 668350 514922
UNSECURED LOANS 460 1179 68900 1657 2321
3489851 3428915 1063148 670007 517243
DEFFERED TAX ADJUSTMENT
DEFFERED TAX LIABILITY 602435 523119 291207 225240 214524
109
DEFFERED TAX ASSETS 285314 226919 126785 127748 147853
317121 296200 164422 97492 66671
TOTAL 13407817 1287502 9741060 7951244 6204669
8
APPLICATION OF FUNDS
FIXED ASSETS
GROSS BLOCK 9923904 9213189 5305128 4833834 4215081
LESS : - DEPRECIATION 3375495 2753520 2555900 3140062 2896955
NET BLOCK 6548409 6459669 2749228 1693772 1318126
CAPITAL WIP INCL. CAPITAL 181376 649294 572762 228433 128746
ADVANCES
6729785 7108963 3321990 1922205 1446872
INVESTMENT 4718832 4763347 5173868 4998882 3784148
CURRENT ASSETS LOANS &

ADVANCES
INVENTORIES 1238798 1940450 1483583 1109364 866122
SUNDRY DEBTORS 2924316 3564577 3892511 3084304 2197738
CASH & BALANCES 791132 615993 413024 176389 66926
OTHER CURRENT ASSETS 212219 61765 54763 206511 275001
LOANS & ADVANCES 1653456 1272534 771484 687905 517447
6819921 7455319 6615365 5264473 3923234
LESS :- CURRENT LIABILITIES &
PROVISIONS
LIABILITIES 3938647 5574962 4738704 3642098 2452746
PROVISIONS 922074 877639 631549 592218 496839
4860721 6452601 5370163 4234316 2949585
NET CURRENT ASSETS 1959200 1002718 1245202 1030157 973649
TOTAL 13407817 1287502 9741060 7951244 6204669

8
110
CHAPTER 10 - BIBLIOGRAPHY
 FINANCIAL MANAGEMENT by M.Y. KHAN AND

P.K. JAIN, TATA MC-GRAW HILL
PUBLICATIONS.
 FINANCE MANAGEMENT by I.M. PANDEY,
VIKAS PUBLICATIONS.
 FUNDAMENTALS OF FINANCIAL
MANAGEMENT by Dr. S.N. MAHESHWARI,
SULTAN CHAND PUBLICATIONS
 FINANCIAL MANAGEMENT by A.P. RAO.
 FINANCIAL MANAGEMENT by PRASANNA

CHANDRA.
 FINANCIAL MANAGEMENT by SATISH
INAMDAR.
 FINANCIAL MANAGEMENT by SATISH SHAH.
 WEBSITE OF KIRLOSKAR
www.kirloskaroilengineslinited.com
111

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“FINANCIAL ANALYSIS AND REVIEW”

“KIRLOSKAR OIL ENGINES LIMITED”

RAJARSHI SHAHU COLLEGE OF ENGINEERING PUNE

7. CONCLUSION AND 103

10. BIBILIOGRAPHY 108

This is to certify Miss Ruchi Bhavsar has completed Summer Training

For Kirloskar Oil Engines Ltd

Deputy Manager – Corporate Finance

Financial Analysis and Review:-

Financial Analysis and Review involves the application of analytical

Financial analysis is oriented towards the achievement of definite

Sources of financial information:-

The financial data needed in the financial analysis come from

Every financial manager is involved in financial decision making and

Research is a purposive investigation of hypothetical propositions. Research as a

Steps in Research Methodology:

Step 1: To decide Objective of the study

Step 2: To decide Research Design

 Research Design is a logical and systematic planning and directing of

Research Design used for project:

Step 3: To determine Sources of Data

Step 4: To design Data Collection Forms

Step 5: To determine Sampling Design

Step 6: To organize and conduct field survey

Step 7: To Process and Analyze collected data

Step 8: To prepare Research Report

The First Kirloskar Group Company

Kirloskar Brothers Limited (KBL) - the first Kirloskar

Kirloskar Oil Engines Limited

Kirloskar Oil Engines Limited (KOEL) operates in different business segments of a

MEBG: Medium Engine Business Group

LEBG: Large Engine Business Group

Investment of surplus funds by CFD is an important activity having significant

We will be amongst the Top Five engine companies of the world.

Mr. Atul C. Kirloskar : Chairman & Managing

Mr. Sanjay C. Kirloskar : Vice Chairman

Mr. Gautam A. Kulkarni : Joint Managing Director

Mr. Rahul C. Kirloskar : Director (Exports)

Mr. R. R. Deshpande : Executive Director

Mr. Vikram S. Kirloskar

Ratio analysis is widely used-tool of financial analysis. It

Ratio analysis is the process of determining and

The comparison of financial ratios is done against the following:-

Ratios are relative figures reflecting the relationship

P /E ratio (price/earnings ratio for a particular script) should be compared over

Thus comparisons with related facts is the basis of ratio analysis

In ratio analysis, four types of comparisons are involved.

Uses of ratio analysis:-

 It helps to understand the efficiency and performance of the firm as a

Limitations of ratio analysis:-

 There may be a difference between the inventory methods followed by

The importance of adequate liquidity is

 MARKET VALUE RATIOS:-

These ratios are further divided into:-

1.> CURRENT RATIO :-

YEAR 2005 2006 2007 2008 2009

CURRENT 2949585 4234316 5370163 6452601 4860721

RATIO 1.33 1.24 1.23 1.16 1.40

2.> ACID TEST RATIO :-

YEAR 2005 2006 2007 2008 2009

RATIOS 1.04 0.98 0.96 0.85 1.15

2.> PROPREITORY RATIOS :-