A

Summer Training Report

On

“ A Study On Analysis Of Financial Performance

On The Basis Of Ratio’s At PepsiCo ”

Submitted To :

Under The Supervision: SubmittedBy:

Rahul Mehta

MBA ( 2nd Year )

Roll No : 180175207

SETH JAI PARKASH MUKAND LAL INSTITUDE OF ENGINEERING &

TECHNOLOGY ( YAMUNANAGAR , 135001 )

( Approved by AICTE & HRD ministry, Affiliated to Kurukshetara University )

Declaration

I, Rahul Mehta , Roll no. 201837, MBA (Semester III) of the Seth Jai Parkash Mukand
Lal Institute of Management and Technology, hereby declared that the training Project entitled “
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A Study On Analysis Of Financial Performance On The Basis Of Ratio’s At Pepsico ” prepared
by me and submitted in partial fulfillment of the requirement for the degree of Master of
Business Administration from Kurukshetra University

This work done by me and the information provided in the study is authentic to the best
of any knowledge. This study has not been submitted to any other instruction or university for
the award of any ther degree.

( Rahul Mehta )

SETH JAI PARKASH MUKAND LAL INSTITUTE OF ENGINEERING & TECHNOLOGY

A SELF FINANCED ISO 9001:2008 CERTIFIED INSTITUTE

APPROVED BY AICTE & AFFILIATED TO

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 KURUKSHETRA UNIVERSITY, KURUKSHETRA

( Chhota Baans ) , Radaur - 135133 ( YamunaNagar )

//To Whom So Ever It May Concer//

This is to certify that Rahul Mehta S/o Mr. Charanjeet Singh bearing Roll No.
180175207 , University Registration No. 14-SNM-258 and Class Roll No. 201837 a
bonafide student of MBA , has completed his work on Training Project entitled “ A Study
On Analysis Of Financial Performance On The Basis Of Ratio’s At PepsiCo” under my
supervision.

His work is original , satisfactory and fit for the purpose of further evaluation
towards the partial fulfillment for the award to the degree of Master’s Business
Administration.

Acknowledgement

With immense pleasure I acknowledgement my gratitude to all persons whose guidance

have helped me in carrying out this project work.

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 I take this opportunity to express my profound sense of sincere and deep gratitude to
Mrs. Anjali Grover my mentor his constant supervision and above all extraordinary
encouragement during the entire course of the project.

It is my proud privilege to express my profound gratitude to the Head of Department

Mrs. Anuja Goel (H.O.D.) and the entire faculty of department, Seth Jai Prakash Mukand Lal
Institute of Management And Technology and teachers of department for providing me with
opportunity to avail the excellent facilities and infrastructure. The Knowledge and values
inculcated have proved to be of immense help at very start of my career.

I would like to express my gratitude to all my friends for their invaluable support and
cooperation during the course of the project.

Last but not the least I would express my gratitude to all the members of JMIT from
whom I got all the necessary help whenever required.

Rahul Mehta

Preface

In order to achieve positive and concrete result with theoretical concept the exposure to
real life situations existing in corporate world is very much needed. In today‟s scenario the
practical knowledge in education especially in professional course is very essential.

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 Final project in MBA course and study content of such as practical knowledge it makes
the student confident and introduce them about their ability.

I am interested in Finance so I have done my final project on topic – “ A Study On

Analysis Of Financial Performance On The Basis Of Ratio’s ’’

Table Of Content

CHAPTER 1 :-

1.1 : Introduction Of Ratio Analysis

 Meaning Of Ratio Analysis

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  Nature Of Ratio Analysis
 Objectives of Ratio Analysis
 Use And Significance of Ratio Analysis
 Interpretation Of Ratio Analysis
 Precaution For Use Of Ratio Analysis
 Classification Of Ratio Analysis
 Advantages of Ratio Analysis
 Limitations Of Ratio Analysis

1.2 : Organisation Profile

1.3 : Need For Study

1.4 : Objectives

CHAPTER2 :- Review Literature

 Cooper (2000)
 Gerrard (2001)
 Schmidgall (2003)
 Murinde (2003)
 Mc Mahon (2005)
 Lee (2008)
 Maria Zain (2008)
 Johnson (2009)
 Jo Nelgadde (2009)
 MunyaMtetwa (2010)
 Jo Nelgadde (2010)

CHAPTER 3 :- Research Methodology

 Research
 Research Methodology
 Research Design
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  Financial Device Used
 Essential of a Good Research Study

CHAPTER 4:- Analysis And Discussion

 Liquidity Ratios
 Solvency Ratios
 Activity Ratios
 Profitability Ratios

CHAPTER 5:- Conclusion

CHAPTER 6:- Recommendation

6.1 : Suggestions

6.2 : Bibliography

6.3 : Annexure

CHAPTER – 1

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 INTRODUCTION OF RATIO ANALYSIS

 1.1 : INTRODUCTION AND MEANING OF RATIO

There are various methods and techniques used in analyzing financial statements, such as
comparative statement, trend analysis, common size statement; schedule of changes in working
capital, fund flow and cash flow analysis, cost volume profit analysis and ratio analysis. The ratio
analysis is one of the most powerful tools of financial analysis. It is the process of establishing and
interpreting various ratios. It is with the help of ratios that financial statements can be analyzed
more clearly and decision made from such analysis.

Ratio is a simple arithmetical expression of the relationship of one number to another. A

financial ratio is the relationship between two Accounting figures expressed mathematically.

Ratio Analysis is a technique of analysis and interpretation of financial statements. It is the

process of establishment and interpreting various ratios for helping in making certain decision.

A relationship between various accounting figures, which are connected with each
other, expressed in mathematical terms is called ratio.

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According to Kennely and Macmillan, “The relationship of one item to another expressed in
simple mathematical form is known as ratio.”

 Nature Of Ratio Analysis :

Ratio analysis is a technique of analysis and interpretation of financial statements. It is the

process of establishing and interpreting various ratios for helping in making certain decisions.
However, ratio analysis is not an end in itself. It is only a means of better understanding of
financial strengths and weakness of a firm. Calculation of mere ratios does not serve any
purpose, unless several appropriate ratios are analyzed and interpreted. There are a number of
ratios, which can be calculated from the information given in the financial statements; but the
analyst has to select the appropriate data and calculate only a few appropriate ratios from the
same keeping in mind the objective of analysis. The following are the four steps involved in the
ratio analysis:

 Selection of relevant data from the financial statements depending upon the objective of
the analysis.

 Calculation of appropriate ratios from the above data.

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 Comparison of the calculated ratios with the ratios of the same firm in the past, or the
ratios developed from projected financial statements or the ratios of some other firms or
the comparison with ratios of the industry to which the firm belongs.

 Interpretation of the ratio.

 Objectives of Ratio Analysis :

Ratio analysis is indispensable part of interpretation of results revealed by the financial statements.
It provides users with crucial financial information and points out the areas which require
investigation. Ratio analysis is a technique which involves regrouping of data by application of
arithmetical relationships, though its interpretation is a complex matter. It requires a fine
understanding of the way and the rules used for preparing financial statements. Once done
effectively, it provides a lot of information which helps the analyst:

o To know the areas of the business which need more attention.

o To know about the potential areas which can be improved with the effort in the desired
direction.
o To provide a deeper analysis of the profitability, liquidity, solvency and efficiency levels in
the business.
o To provide information for making cross-sectional analysis by comparing the performance
with the best industry standards.

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 o To provide information derived from financial statements useful for making projections
and estimates for the future.

 Use And Significance of Ratio Analysis :

The ratio analysis is one of the most powerful tools of financial analysis. It is used as a device to
analyze and interpret the financial health of enterprise. Just like a doctor examines his patient by
recording his body temperature, Blood pressure etc. before making his conclusion regarding the
illness and before giving his treatment, a financial analyst analyses the financial statements with
various tools of analysis before commenting upon the financial health or weakness of an
enterprise. A ratio is known as a symptom like Blood Pressure, the pulse rate or the temperature of
an individual. It is with the help of ratios that financial statements can be analyzed more clearly
and decision made from such analysis. Thus the ratio has wide applications and is of immense use
today.

 Utility to Managers : -

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 1) Helps in decision making: - Financial statements are prepared primarily for decision
making but the information provided in financial statements is not an end in itself and
no meaningful conclusion can be drawn from these statements alone.

2) Helps in financial forecasting and planning: - Ratio analysis is of much help in

financial forecasting and planning. Planning is looking ahead and the ratios calculated
for a number of years work a guide for the future.

3) Helps in communicating: - The financial strength and weakness of a firm are

communicating in a more easy and understandable manner by the use of ratios. The
information contained in the financial statements is conveyed in a meaningful manner
to the one for whom it is meant.

4) Helps in Co-coordinating: - Ratio even help in co-ordination which is of utmost

importance in effective business management. Better communication of efficiency
and weakness of an enterprise results in better coordinating in the enterprise.

5) Helps in controls: - Ratio analysis even help in making effective control of the
business. Standard ratios can be based upon the Performa financial statements and
variances or deviation which helps in effective control of the business.

 Utility to Creditors: - The creditors or suppliers extend short term credit to the concern.
They are interested to know whether financial position of the concern warrants their
payments at a specified time or not. The concern pays short term creditors out of its
current assets. If the current assets are quite sufficient to meet current liabilities then the
creditor will not hesitate in extending credit facilities. Current and Acid test ratios will
give an idea about the current financial position of the concern.

 Utility to employees: - The employees are also interested in the financial position of the
concern especially profitability. There wage increases and amount of fringe benefits are
related to the volume of profits earned by the concern. The employees make use of
information available in the financial statements. Various profitability ratios relating to
gross profit, operating profit, net profit etc. enables employees to put forward their
viewpoint for the increase wages and other benefits.
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 Utility to Government: - Government is interested to know the overall strength of the
industry. Various financial statements published by industrial units are used to calculate
ratios for determining the short term, long term and overall financial position of the
concerns. Profitability index can also be prepared with the help of ratios. Government
may base its future policies on the basis of industrial information available from various
units. The ratios may used as indicators of overall financial strength of public as well as
private sectors. In the absence of reliable economic information, governmental plans and
policies may not prove successful.

 Tax Audit requirements: - Section 44 AB was inserted in the Income Tax Act by the
Finance Act, 1984. Under this section every assesses engaged in any business and having
turnover or gross receipts exceeding Rs.40 Lacs is required to get the accounts audited by
Chartered Accountant and submit the Tax Audit Report before the due date for filing the
return of Income under section 139(1). In case of professional, a similar report is required
if the gross receipt exceed Rs.10 Lacs. Clause 32 of the Income Tax Act requires that the
following accounting ratios should be given :-

1.) Gross profit/turnover.

2.) Net profit/Turnover.

3.) Stock in trade/turnover.

4.) Material consumed/Finished goods produced.

Further, it is advisable to compare the accounting ratios for the year

under consideration with the accounting ratios for the earlier two years so that the auditor can
make necessary enquiries, if there is any major variation in the accounting ratios.

 Interpretation Of Ratio Analysis :

The interpretation of ratios is an important factor. Though calculation of ratios is also important
but it is only a clerical task whereas interpretation needs skill, intelligence and foresightedness.

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The impact of the factors such as price level changes, change in accounting policies, window
dressing etc. should also be kept in mind when attempting to interpret ratios.

A single ratio in itself does not convey much of the sense. To make ratio useful they have to
be further interpreted. The interpretation of the ratios can be made in the following ways:-

o Single absolute ratio: -Generally speaking one cannot draw any meaningful conclusion
when a single ratio is considered in isolation. But single ratio may be studied in relation
to certain rules of thumb which are based upon well proven conventions as for example
2:1 is considered to be good ratio for current assets to current liabilities.

o Group of ratios: - Ratio may be interpreted by calculating a group of related ratios. A

single ratio supported by other related additional ratios becomes more understandable and
meaningful. For example, the ratio of current assets to current liabilities may be
supported by the ratio of liquid assets to liquid liabilities to draw more dependable
conclusions.

o Historical comparison: - One of the easiest and most popular ways of evaluating the
performances of the firm is to compare its present ratios with its past ratios called
comparison overtime. When financial ratios are compared over a period of time, it give
an indication of the direction of change and reflects whether the firm’s performance and
financial position has improved, deteriorated or remained constant over a period of time.
But while interpreting ratios from comparisons over time, one has to be careful about the
changes, if any, the firm’s policies and accounting procedures.

o Projected ratios: - Ratiocan also be calculated for future standards based upon the
projected or Performa financial statements. These future ratios may be taken as standard
for comparison and the ratios calculated on actual financial statements can be compared
with the standard ratios to find out the variances, if any. Such variances help in
interpreting and taking corrective action for improvement in future.

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 o Inter-firm comparison: - Ratios of one firm can also be compared with ratios of some
other selected firms in the same industry at the same point of time. This kind of
comparison helps in evaluative relative financial position and performance of the firm.
But while making use of such comparison one has to be very careful regarding the
different accounting methods, policies and procedures adopted by different firms.

 Essential For Efficient Ratio Analysis :

The calculation of May not be difficult task but their use is not easy. The
information on which these are based, the constraints of financial statements, objective for using
them, the caliber of the analyst etc. are important factors which influence the use of ratios.
Following guidelines or factors may be kept in mind while interpreting various ratios:-

o Accuracy of financial statements: - The ratios are calculated from the data available in
financial statements. The reliability of ratios is linked to the accuracy of information in
these statements. Before calculating ratios one should see whether proper concepts and
conventions have been used for preparing financial statements or not. These statements
should also be properly audited by competent auditors. The precautions will establish the
reliability of data given in financial statements.

o Objective of analysis: - The type of ratios to be calculated will depend upon the purpose
for which these are required. If the purpose is to study current financial position then
ratios relating to current assets and current liabilities will be studied. The purpose of
‘USER’ is also important for analysis of ratios. A creditor, a banker, an investor, a
shareholder, all has different objects for studding ratios. The purpose or object for which
ratios are required to be studied should always be kept in mind for studied various ratios.

o Selection of Ratios: - Another precaution in ratio analysis is the proper selection of

appropriate ratios. The ratio should match the purpose for which these are required.
Calculation of large number of ratio without determining their need in the present context

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 may confuse the things instead of solving them. Only those ratios should be selected
which can through proper light on the matter to be discussed.

o Use of standards: - The ratios will give an indication of financial position only when
discussed with reference to certain standards. Unless otherwise these ratios are compared
with certain standards one will not be able to reach at conclusions. These standards may
be rule of thumb as in case of current ratio (2:1) and acid test ratio (1:1) may be industry
standards, may be budgeted or projected ratios etc. The comparison of calculated ratios
with the standards will help the analyst in forming his opinion about financial situation of
the concern.

o Caliber of the analyst: - The ratios are only the tools of analysis and their interpretation
will depend upon the caliber and competence of the analyst. He should be familiar with
various financial statements and significance of changes. A wrong interpretation may
create havoc for the concern since wrong conclusions may lead to wrong decisions. The
utility of ratios is linked to the expertise of the analyst.

o Ratios provide only a base: - The ratios are only guidelines for the analyst; he should
not base his decisions entirely on them. He should study any other relevant information,
situation in the concern, general economic environment etc. before reaching final
conclusions. The study of ratios in isolation may not always prove useful. A businessman
will not afford a single wrong decision because it may have far-reaching consequences.
The interpreter should use the ratios as guide and may try to solicit any other relevant
information which helps in reaching a correct decision.

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  Classification Of Ratio Analysis :

The use of ratio analysis is not confined to financial manager only. There are
different parties interested in the ratios analysis for knowing the financial position of a firm for
different purposes. In view of various users of ratios, there are any types of ratios which can be
calculated from the information given in the financial statements. The particular purpose of the
user determines the particular ratios that might be used for financial analysis.

CLASSIFICATION OF RATIO
ANALYSIS

SHORT T ERM LONG T ERM P ROFITABILITY

F INANCIAL SOLVENCY ANALYSIS
STATEMENT ANALYSIS
ANALYSIS

Current Assets
LIQUIDITY Movement
Analysis
ANALYSIS

(1) SHORT TERM FINANCIAL STATEMENT ANALYSIS :

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 The Short term creditors of a company like suppliers of goods of credit and commercial
banks providing short term loans are primarily interested in knowing the company's ability to
meet its current or short term obligations as and when these become due. Therefore a firm must
ensure that it does not suffer from lack of liquidity or the capacity to pay its current obligations.
If a firm fails to meet such current obligations due to lack of good liquidity position, its goodwill
in the market is likely to be affected beyond repair. It will result in a loss of creditor's confidence
in the firm and may cause even closure of the firm. Two types of ratios can be calculated for
measuring short-term financial position or short-term solvency of a firm.

I. Liquidity Ratios
II. Current Assets Movement or Efficiency Ratios

I. Liquidity Ratios :

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 Liquidity refers to the ability of a concern to meet its current obligations as and when
these become due. The short-term obligations are met by realizing amounts from current,
floating or circulating assets. The current assets should either be liquid or near liquidity. These
should be convertible into cash or paying obligations of short-term nature. The sufficiency of
current assets should be assessed by comparing them with short term (Current) liabilities-The
bankers, suppliers of goods and others. Short Term creditors are interested in the liquidity of the
concern. They will extend credit only if they are sure that current assets are enough to pay out
the obligations. To measure the liquidity of a firm, following ratios can be calculated:-

o Current Ratio.
o Quick or Acid Test

II. Current Asset Movement Analysis :

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 These ratios ignore the movement of current assets, it is important to calculate the following
turnover or efficiency ratios to comment upon the liquidity or the efficiency with which the
liquidity resources are being used by a firm.

The efficiency with which assets are managed directly affects the volume of sales. The better
the management of assets, the larger is the amount of sales and the profits. Activity ratios measure
the efficiency or the effectiveness with which a firm manages its resources or assets. These ratios
are called turnover ratios because they indicate the speed with which assets are converted or turned
over into sales. It includes following ratios:-

o Inventory Turnover Ratio

o Debtors Turnover Ratio

o Creditors Turnover Ratio

o Working Capital Turnover Ratio

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(2) Long TermSolvency Analysis :
The term solvency refers to the ability of a concern to meet its long-
term obligations. The long term creditors of a firm are primarily interested in knowing the firm's
ability to pay regularly interest on long term borrowings repayment of the principal amount at the
maturity and the security of their loans. Following ratios are calculated to know the long-term
solvency position of a company.

o Debt Equity Ratio

o Funded Debt to Total Capitalization Ratio
o Proprietary Ratio or Equity Ratio
o Solvency Ratio or Ratio of Total Liability to Total Assets:
o Fixed Assets to Net Worth Ratio
o Fixed Assets to Net Worth Ratio:

(3) ANALYSIS OF PROFITABILITY :

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 In the words of lord Keynes, ‘’profit is the engine that drives the business enterprise ‘’.
Businesses need profit not only for its existence but also for expansion and diversification. The
investors want an adequate return on their investment .workers want higher wages, crs. Want
higher security for their interest and loan and so on. A business enterprise can discharge its
obligations to the various segments of the socity only through earning of profits. Profits are, thus
a usefullmeaeure of overall efficiency of a business. Profits to the management are the test of
efficiency and a measurement of control to owners a measure of worth of their investement to the
margin of safty .

The primary objective of a business is to earn Profits. Profits earning is considered essential for the
survival of the business. A business needs profits not only for its existence but also for expansion
and diversification. The investors want as adequate return on their investments, workers want
higher wages creditors want higher security for their interest and loan and so on. Business
enterprises can discharge its obligations to the various segments of the society only through
earning of profits.

Generally profitability rarios are calculate either in relation to sales or in relation to investment the
variorus profitability are discussed below:-

o Gross Profit Ratio

o Net worth ratio
o Operating Profit Ratio
o Net Profit Ratio:

 Advantages of Ratio Analysis :

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The ratio analysis if properly done improves the user’s understanding of the efficiency with which
the business is being conducted. The numerical relationships throw light on many latent aspects of
the business. If properly analysed , the ratios make us understand various problem areas as well as
the bright spots of the business. The knowledge of areas which are working better helps you
improve the situation further. It must be emphasised that ratios are means to an end rather than the
end in themselves. Their role is essentially indicative and that of a whistle blower. There are many
advantages derived from ratio analysis. These are summarised as follows:

a) Helps to understand efficacy of decisions : The ratio analysis helps you to understand
whether the business firm has taken the right kind of operating, investing and financing
decisions. It indicates how far they have helped in improving the performance.

b) Simplify complex figures and establish relationships : Ratios help in simplifying the
complex accounting figures and bring out their relationships. They help summarise the
financial information effectively and assess the managerial efficiency, firm’s credit
worthiness, earning capacity, etc.

c) Helpful in comparative analysis : The ratios are not be calculated for one year only.
When many year figures are kept side by side, they help a great deal in exploring the trends
visible in the business. The knowledge of trend helps in making projections about the
business which is a very useful feature.

d) Identification of problem areas : Ratios help business in identifying the problem areas as
well as the bright areas of the business. Problem areas would need more attention and
bright areas will need polishing to have still better results.

e) Enables SWOT analysis : Ratios help a great deal in explaining the changes occurring in
the business. The information of change helps the management a great deal in
understanding the current threats and opportunities and allows business to do its own
SWOT (Strength- Weakness-Opportunity-Threat) analysis.

f) Various comparisons : Ratios help comparisons with certain bench marks to assess as to
whether firm’s performance is better or otherwise. For this purpose, the profitability,
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 liquidity, solvency, etc. of a business, may be compared: (i) over a number of accounting
periods with itself (Intra-firm Comparison/Time Series Analysis), (ii) with other business
enterprises (Inter-firm Comparison/Cross-sectional Analysis) and (iii) with standards set
for that firm/industry (comparison with standard (or industry expectations).

 Limitations Of Ratio Analysis

The ratio analysis is one of the most powerful tools of financial management. Though ratios are
simple calculate and easy to understand, they suffer from some serious limitations:-

a) Limited use of single ratio: -A single ratio, usually, does not convey much of sense. To
make a better interpretation a number of ratios have to be calculated which is likely to
confuse the analyst than help him in making any meaningful conclusion.

b) Lack of adequate standards: -There are no well accepted standards or rule of thumbs
for all ratios which can be accepted as norms. It renders interpretation of the ratios
difficult.

c) Inherent limitations of accounting: -Like financial statements, ratios are also suffer
from the inherent weakness of accounting record such as their historical nature. Ratios of
the past are not necessarily true indicators of the future.

d) Change of accounting procedures: -Change in accounting procedure by a firm often

makes ratios analysis misleading e.g. a change in the variation of methods of inventories,
from FIFO to LIFO increases the cost of sales and reduces considerably the value of
closing stocks which makes stock turnover ratio to be lucrative and an unfavorable gross
profit ratio.

e) Window Dressing: -Financial statements can easily be window dressed to present a

better picture of its financial and profitability position to outsiders.Hence, one has to be
very careful in making a decisions from ratios calculated from such financial statements..

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  1.2 : INTRODUCTION OF THE COMPANY

Overview Of The Industry

THE FMCG INDUSTRY IN INDIA:

Fast Moving Consumer Goods (FMCG), also known as Consumer Packaged Goods
(CPG) is products that have a quick turnover and relatively low cost. Consumers generally put
less thought into the purchase of FMCG than they do for other products.

The Indian FMCG industry witnessed significant changes through the 1990s. Many
players had been facing severe problems on account of increased competition from small and
regional players and from slow growth across its various product categories. As a result, most of
the companies were forced to revamp their product, marketing, distribution and customer service
strategies to strengthen their position in the market.

By the turn of the 20th century, the face of the Indian FMCG industry had changed
significantly. With the liberalization and growth of the Indian economy, the Indian customer
witnessed an increasing exposure to new domestic and foreign products through different media,
such as television and the Internet. Apart from this, social changes such as increase in the
number of nuclear families and the growing number of working couples resulting in increased
spending power also contributed to the increase in the Indian consumers' personal consumption
companies to formulate customer. These changes had a positive impact, leading to the rapid
growth in the FMCG industry. Increased availability of retail space, rapid urbanization, and
qualified manpower also boosted the growth of the organized retailing sector.

HLL led the way in revolutionizing the product, market, distribution and service formats
of the FMCG industry by focusing on rural markets, direct distribution, creating new product,
distribution and service formats. Unlike other economy sectors, FMCG share float in a steady
manner irrespective of global market dip, because they generally satisfy rather fundamental, as
opposed to luxurious needs. The FMCG sector, which is growing at the rate of 9%, is the fourth
largest sector in the Indian Economy. The main contributor, making up 32% of the sector, is the
South Indian region. It is predicted that in the year 2011, the FMCG sector will be worth

25
Rs.143000 crores. The sector being one of the biggest sectors of the Indian Economy provides up
to 4 million jobs.

The FMCG sector consists of the following categories:

 Personal Care- Oral care, Hair care, Wash (Soaps), Cosmetics and Toiletries, Deodorants
and Perfumes, Paper products (Tissues, Diapers, Sanitary products) and Shoe care.

 Household Care- Fabric wash (Laundry soaps and synthetic detergents), Household cleaners
(Dish/Utensil/Floor/Toilet cleaners), Air fresheners, Metal polish and Furniture polish.

 Branded and Packaged foods and Beverages- Health beverages, Soft drinks, Staples/Cereals,
Bakery products , Snack foods, Chocolates, Ice-Cream, Tea, Coffee, Processed vegitable,
processed meat, Branded flour, Branded rice, Branded sugar.
 Spirits and Tobacco; the major players being; ITC, Godfrey, Philips and UB.

 1.3 : Need For Study

 The study has great significance and provides benefits to various parties whom directly or
indirectly with the company.

 To express the relationship between different financial aspects in such a way that it
allows the user to draw conclusion about the performance strengths and weakness of the
company.

26
 To diagnose the information contained in financial statement so as to judge the
profitability of the firm.

 The study helps to know a liquidity, solvency, profitability and turnover position of the
company.

 1.4 : Objectives :

27
The main objectives of the project are: -

o To determine return net worth.

o To assess the company’s liquidity position.
o To analyze the asset turnover ratio.
o To determine the solvency position of company.
o To know the working capital requirements of the company.

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 CHAPTER – 2

LITERATURE

REVIEW

 Bollen (1999)conducted a study on Ratio Variables on which he found three different

uses of ratio variables in aggregate data analysis: (1) as measures of theoretical concepts,
(2) as a means to control an extraneous factor, and (3) as a correction for
heteroscedasticity. In the use of ratios as indices of concepts, a problem can arise if it is
regressed on other indices or variables that contain a common component. For example,
the relationship between two per capita measures may be confounded with the common
population component in each variable. Regarding the second use of ratios, only under
exceptional conditions will ratio variables be a suitable means of controlling an
extraneous factor. Finally, the use of ratios to correct for heteroscedasticity is also often
misused. Only under special conditions will the common form forgers soon with ratio
variables correct for heteroscedasticity. Alternatives to ratios for each of these cases are
discussed and evaluated.

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 Cooper (2000)conducted a study on Financial Intermediation on which he observed that
the quantitative behavior of business-cycle models in which the intermediation process
acts either as a source of fluctuations or as a propagator of real shocks. In neither case do
we find convincing evidence that the intermediation process is an important element of
aggregate fluctuations. For an economy driven by intermediation shocks, consumption is
not smoother than output, investment is negatively correlated with output, variations in
the capital stock are quite large, and interest rates are procyclical. The model economy
thus fails to match unconditional moments for the U.S. economy. We also structurally
estimate parameters of a model economy in which intermediation and productivity
shocks are present, allowing for the intermediation process to propagate the real shock.
The unconditional correlations are closer to those observed only when the intermediation
shock is relatively unimportant.
 Gerrard (2001)conducted a study on The Financial Performanceon which he found that
Using ratio analysis the financial performance of a sample ofindependent single-plant
engineering firms in Leeds is examinedwith regard to structural and locational
differences in establishments.A number of determinants of performance are derived and
testedagainst the constructed data base. Inner-city engineering firmsperform relatively
less well on all indicators of performancecompared with outer-city firms. The study
illustrates the importanceof using different measures of performance since this affectsthe
magnitude and significance of the results. Financial supportis necessary to sustain
engineering in the inner city in thelong run.
 Schmidgall (2003)conducted a study on Financial Analysis Using the Statement of Cash
Flows on which he observed that Managers use many financial ratios to judge the health
of theirbusinesses. With the recent requirement of a statement of cashflow (SCF) by the
Financial Accounting Standards Board, managersnow have a new set of ratios that will
give a realistic pictureof the business. The ratios include cash flow-interest coverage,cash
flow-dividend coverage, and cash flow from operations tocash flow in investments.
These ratios are particularly usefulbecause they show changes in a hotel or restaurant's
cash positionover time, rather than at a given moment, as is the case withmany other
ratios.

30
 Murinde (2003)conducted study on Corporate Financial Structures on which he
observed that the financial structure of a sample of Indian non-financialcompanies using
a new and unique dataset consisting of a panelcontaining the published accounts of
almost 900 companies thatpublished a full set of accounts every year during 1989-99.In a
new departure in the literature, the dataset includes quotedand unquoted companies. We
compare the sources-uses approachto analyzing company financial structures with the
asset-liabilityapproach. We use both approaches to characterize and to comparethe
financial structures of Indian companies over time; betweenquoted and unquoted
companies; and between companies whichbelong to a business group and those that do
not. Finally, wecompare our results to those obtained previously for India andfor the
industrial countries.


McMahon (2005)conducted a study on Financial Informationon which he found that
financial statements mean little to the uninitiated. This paper, explains, in layman's terms,
how to understandfinancial information. It covers measures of profitability.The second
article will cover measures of company liquidityand the use of financial ratios. This paper
continues to explainhow to interpret and understand financial information. It dealswith
measures of liquidity, solvency and fund flows and describeshow to establish standards
against which a company's financialratios can be compared.

 Lee (2008)conducted a study on Financial Risk on which he observed that Financial

researchers, including those concentrating on the lodging industry, use various financial
risk measures for their studies. Examples of those risk measures are beta, earnings
variability, bankruptcy probability, debt-to-equity ratio and book-to-market ratio. The
purpose of this study is, first, to descriptively investigate various financial risk measures
used in the lodging financial literature by performing factor analysis and identifying four
distinct risk groups. Second, this study examines the predictive ability of the four risk
groups for lodging firm performance. The findings of this study suggest that strategic and
31
 stock performance risk factors better represent a lodging firm's financial risk than do
bankruptcy and firm performance risk factors, and also, ROA than ROE better estimates
lodging firm performance in terms of their relationships with financial risk factors.
 Maria Zain (2008) In this articles he discuss about the return on assets is an important
percentage that shows the company’s ability to use its assets to generate income. He said
that a high percentage indicates that company’s is doing a good utilizing the company’s
assets to generate income. He notices that the following formula is one method of
calculating the return on assets percentage. Return on Assets = Net Profit/Total Assets.
The net profit figure that should be used is the amount of income after all expenses,
including taxes. He enounce that the low percentage could mean that the company may
have difficulties meeting its debt obligations. He also short explains about the profit
margin ratio – Operating Performance .He pronounces that the profit margin ratio is
expressed as a percentage that shows the relationship between sales and profits. It is
sometimes called the operating performance ratio because it’s a good indication of
operating efficiencies. The following is the formula for calculating the profit margin.
Profit Margin = Net Profit/Net Sales.
 Johnson (2009)conducted a study on Financial Ratio patterns on which he found that the
properties and characteristics of financial ratios have received considerable attention in
recent years with interest primarily focused on determining the predictive ability of
financial ratios and related financial data. Principal areas of investigation have included
the prediction of corporate bond ratings , and the anticipation of financial impairment].
Related studies have examined the characteristics of merged firms the differences in
financial ratio averages among industries whether firms seek to adjust their financial
ratios toward industry averages the relationship between accounting-determined and
market-determined risk measures, and the influence of financial ratios on analysts'
judgments about impending bankruptcy The general conclusion to emerge from these
various research efforts is that a number of financial ratios have predictive and
descriptive utility when properly employed.

32
 Jo Nelgadde (2009) said that learn how to perform inventory analysis and inventory
turnover analysis to better understand a business as well as to identify effective inventory
management. He analyzing a company’s financial performance definitely includes
performing inventory analysis. He know that there are three types of business inventory:
Raw Materials (RM),Work-In-Progress (WIP),Finished Goods (FG).He give idea two
types formula of ratio such as Inventory Turnover = Cost of Goods Sold / Average
Inventory, Average age of Inventory = 360 days / Inventory Turnover.

 MunyaMtetwa (2010) In this article he short propose that about the fixed asset. He
define that fixed assets are assets that are used in production or supply of goods or
services and they are to be used within the business for more than one financial year.
Consequently, fixed assets represent the company's long term income generating assets
and they can either be tangible or non tangible. It includes land and buildings, plant and
equipment, golf courses, casinos, football players, machinery and hotels depending on the
nature of the business under consideration. Fixed asset turnover = Sales / Net fixed asset.

 Jo Nelgadde (2010)In this article he briefly about the asset management ratio. It divided
into different types of categories. He state that about the used to analyze accounts
receivable and other working capital figures to identify significant changes in the 12
company’s operations and financial accounts. He said that there are two categories about
this ratio such as account receivable turnover and average age of account receive. He
measurement the ratio as, Accounts receivable turnover = Sales / Average Accounts
receivable. Average age of accounts receivable/ collection period = 365 days / Accounts
receivable Turnover.

33
 CHAPTER – 3

RESEARCH

METHODOLOGY

 Research :-

Research is a process to discover new knowledge . A systematic investigation (i.e., the gathering
and analysis of information) designed to develop or contribute
to generalizable knowledge.A hypothesis is an informed and educated prediction or explanation
about something. Part of the research process involves testing the hypothesis, and then
examining the results of these tests as they relate to both the hypothesis and the world around
you. When a researcher forms a hypothesis, this acts like a map through the research study. It
tells the researcher which factors are important to study and how they might be related to each
other or caused by a manipulation that the researcher introduces (e.g. a program, treatment or
change in the environment). With this map, the researcher can interpret the information he/she
collects and can make sound conclusions about the results. Some important points that can
explain what is research :

34
  A Voyage of discovery; A Journey; An attitude; an experience method of critical
thinking; a careful critical enquiry in see facts for principles.

 An art of scientific investigation, Scientific and systematic search for pertinent

information on a topic. Process of arriving at dependable solutions to problems
through planned and systematic collection, analysis and interpretation of collection
data.

 A systematized effort to gain new knowledge; A movement to known to the unknown,

search for new knowledge, facts through objectives, systematic and scientific method
of finding solution to a problem.

 Implicit questions + explicit answer + data to answer the questions, not synonymous
with commonsense, but systematic, objective (purposeful), reproducible, relevant
activity control over see factors.

 An activity caused by instinct of inquisitiveness to gain free insight / find answer to

questions / acquires knowledge.

 Research Methodology :-

For carrying out the project all of the information is collected

from the annual report of the company. My own experience & knowledge which I gathered
during my training duration

35
  Research Design :-

Research design is defined as a framework of methods and techniques chosen by a researcher to

combine various components of research in a reasonably logical manner so that the research
problem is efficiently handled. It provides insights about “how” to conduct research using a
particular methodology. Every researcher has a list of research questions which need to be
assessed – this can be done with research design.Research design which produces the least
margin of error in experimental research can be touted as the best. The essential elements of
research design are:

1. Accurate purpose statement of research design

2. Techniques to be implemented for collecting details for research

3. Method applied for analyzing collected details

4. Type of research methodology

5. Probable objections for research

6. Settings for research study

7. Timeline

8. Measurement of analysis

There are two types of data :-

 PRIMARY DATA

 SECONDARY DATA

Secondary Data Has Been Used In The Project

36
Secondary data means data that are already available i.e., the data which have already been
collected and analyzed by someone else. Sources of data are - manuals, annual financial reports
of INFOWIZ Pvt. Ltd.

 Financial Devices Used :

The ratio analysis is done to determine the financial position and results of operations as well; a
number of methods or devices are used to study the relationship between different statements
which clearly analyze the financial position of the enterprise.

The following devices are generally used:-

 Statement Of Profit & Loss :-

The profit and loss (P&L) statement is a financial statement that summarizes the revenues, costs
and expenses incurred during a specified period, usually a fiscal quarter or year. The P&L
statement is synonymous with the income statement. These records provide information about a
company's ability or inability to generate profit by increasing revenue, reducing costs or both.
Some refer to the P&L statement as a statement of profit and loss, income statement, statement
of operations, statement of financial results or income, earnings statement or expense statement.

An income statement or profit and loss account is one of the financial statements of a company
and shows the company’s revenues and expenses during a particular period. It indicates how the
revenues are transformed into the net income or net profit

 Cash Flow Statement:-

In financial accounting, a cash flow statement, also known as statement of cashflows, is

a financial statement that shows how changes in balance sheet accounts and income affect cash
37
and cash equivalents, and breaks the analysis down to operating, investing, and financing
activities. Essentially, the cash flow statement is concerned with the flow of cash in and out of
the business. As an analytical tool, the statement of cash flows is useful in determining the short-
term viability of a company, particularly its ability to pay bills. International Accounting
Standard 7 (IAS 7) is the International Accounting Standard that deals with cash flow statements.

A company's financial statements offer investors and analysts a portrait of all the transactions
that go through the business, where every transaction contributes to its success. The cash flow
statement is believed to be the most intuitive of all the financial statements because it follows the
cash made by the business in three main ways—through operations, investment, and financing.
The sum of these three segments is called net cash flow.

 Balancesheet Statements :-

The American institute of certified public accountants defines balance sheet as, “a tabular
statement of summary of balances carried forward after an actual and constructive closing of
books of account and kept according to principles of accounting.”

The balance sheet is one of the important statements depicting the financial strength of the
concern. It shows all the assets owned by the firm and all the liabilities and claims it owes to
owners and outsiders. The companies act, 1956 has prescribed a particular form for showing
assets and liabilities in a balance sheet for companies registered under this act.

In financial accounting, a balance sheet or statement of financial position or statement of

financial condition is a summary of the financial balances of an individual or organization,
whether it be a sole proprietorship, a business partnership, a corporation, private limited
company or other organization such as Government or not - for – profit entity . Assets
, liabilities and ownership equity are listed as of a specific date, such as the end of its financial
year.

38
  Essential of a Good Research Study :-

Some important factors, we must consider while doing research :

It should be Systematic – A research must be structured with specified steps in a

specified sequence, according to well defined set of rules.
It should be Logical – A research must be guided by logic reasoning and the logical
process of induction and deduction.
It should be Empirical – The research must be related to one or more aspects of real life
situations.
It should be Replicable – Other people must be able to verify and replicate the original
research report.
The purpose of the research should be clearly defined and common concepts used.
The research procedure should be well described in detail to permit replication.
The Design should be planned to yield results that are objective.
The researcher must report with complete frankness and flaws.
The analysis of data must be adequate and the method of analysis should be appropriate.
Conclusions must be confined to those justified by the data and limited to those for which
data is not adequate.
The Researcher is experienced, has good reputation and is a person of Integrity.

39
 CHAPTER – 4

ANALYSIS AND

DISCUSSION

Liquidity Ratio

1) Current Ratio :--

The current ratio is a liquidity ratio that measures a company's ability to pay short-term
obligations or those due within one year. It tells investors and analysts how a company can
maximize the current assets on its balance sheet to satisfy its current debt and other payables.

Current Ratio = Current Assets / Current Liabilities

Table No 1

Year Current assets Current liability Current ratio

40
 2015-16 50640.84 17462.36 2.9 : 1

2016-17 67306.33 25887.05 2.6 : 1

80000

70000

60000

50000

40000 Current Assets

Current Liability
30000

20000

10000

0
2015 - 16 2016 - 17

Interpretation :

Current Ratio of the company is 2.9 : 1 in the year 2015-16 & in 2016-17 it is 2.6 : 1 . It decrease
up to 0.3 in 2016-17. Ideal current ratio is 2 : 1 . So, we can say that liquidity position is
satisfactory butnot good.

2) Quick ratio :--

Quick ratio may be define as the relationship between liquid assets and current
liabilitiesInventres and prepaid expenses are not included in quick assets because they can not be
converted in to cash immediately.

41
Quick Ratio = Quick Assets/Quick Liabilities.

Table No. 2

Year Quick Assets Quick Liabilities Quick ratio

2015–16 33178.48 17462.36 1.9 : 1

2016 – 17 54362.86 25887.08 2.1 : 1

60000

50000

40000

30000 Series 1
Series 2

20000

10000

0
2015 - 16 2016 - 17

Interpretation :

Quick ratio of Company was 1.9 : 1 in the year 2015-16 &2.1 : 1 in 2016-17 .
It was Increases by 0.2.Ideal quick ratio is 1 : 1 . It shows that liquid assets are quite sufficient to
provide a cover to the current liabilities.

42
 Solvency Ratio

1) Debt equity ratio :-

The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by its
shareholder equity. The ratio is used to evaluate a company's financial leverage. It is a measure
of the degree to which a company is financing its operations through debt versus wholly-owned
funds. More specifically, it reflects the ability of shareholder equity to cover all outstanding
debts in the event of a business downturn.

Debt equity ratio= Debts / Equity

Table No. 3

Year Debts Equity Ratio

2015-16 177108.18 132450.56 1.33 : 1

2016-17 145023.46 168911.27 1:1.16

43
 200000

180000

160000

140000

120000

100000 Debts
Equity
80000

60000

40000

20000

0
2015 - 16 2016 - 17

Interpretation:-

A high debt equity ratio which indicate that the claim of outsides are greater then the owners
in the year 2015 – 16 but in the 2016 – 17 debts are decreased . A ratio of 1:1 to 1.5 : 1 may be
usually concedired to be satisfactory. The debt equity ratio of the firm is comparatively
satisfactory

2) Interest coverage ratio:--

The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily
a company can pay interest on its outstanding debt. The interest coverage ratio may be calculated
by dividing a company's earnings before interest and taxes (EBIT) during a given period by the
company's interest payments due within the same period.Interest coverage ratio indicate the
number of times is covered by the profit available to pay the interest charge generally higher the
ratio more safe are the long term crs. Because even if the earning of the firm fall the firm shall be
able to meet its commitment to fix interest charge.

44
Interest coverage ratio=EBIT / Interest Expense

Table No. 4

Year EBIT Interest Expense Ratio

2015-16 21833.66 1284.33 1:17

2016-17 32205.28 825.77 1:39

35000

30000

25000

20000
EBIT
15000 Interest Expense

10000

5000

0
2015 - 16 2016 - 17

3) Capital gearing ratio:-

The term capital gearing is used to describe the relationship between equity share capital
including reserve and surplus to preference share capital and other fixed interest. If the

45
preference share capital and other fixed interest bearing loans exceed the equity share capital
including reserve the firm said to be highly geared. The firm is said to be in low gear if
preference share capital and other fixed interest bearing loans are less than equity capital and
reserve.

Capital gearing ratio= equity share cap. + reserve & surplus / Preference capital +fixed int.

Table No. 5

Year ESP+R&P PR. C +F.INT RATIO

2015-16 132450.56 13472.36 9.8%

2016-17 168911.27 10202.94 16.5%

46
 Activity Ratio

1) Inventory turnover ratio:-

Inventory turnover is the number of times a company sells and replaces its stock of goods
during a period. Inventory turnover provides insight as to how the company manages costs and
how effective their sales efforts have been . The purpose is to see whether only the required
minimum funds here been locked up in inventory. Inventory average ratio indicate the number
of times the stock has been turnover during the period and evaluate the efficiency and include
firms is able to manage its inventory.

Inventory turnover ratio :- Net Sales / Average Stock

Table No. 6

Year Net sales Average stock Ratio

2015-16 89496.32 14009.88 6.38 times

2016-17 119570.57 14890.63 8 times

47
 7

0
2015 - 16 2016 - 17

Interpretation:-

Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a
high inventory turnover / stock velocity indicates efficient management of inventory. In the year
2016 -17 the ratio is greater then the previous. So its shares great satisfactory to the company. Its
shows the stock does not sale quickly and remain in store for the long time.

2) Debtors turnover ratio:-

Debtors Turnover ratio indicates the velocity of debt collection

of firm. In simple words , it indicates the number of times average debtors.

Debtors. Turnover ratio :- Net Annual Sales / Average Debtors

Table No. 7

Year Total sales Debtors Ratio

48
2015-16 89496.32 11950.06 7.48

2016-17 119570.57 15165.52 7.88

7.9

7.8

7.7

7.6

7.5

7.4

7.3

7.2
2015 - 16 2016 - 17

Interpretation:-

Generally the higher the value of debtors. Turnover the more efficient is the management of
debtors / sales or more liquid are the debtors. Similarly low debtors Turnover implies inefficient
management of debtors And less liquid debtors. Ideal debtors turnover ratio is 6 times.

3) Fixed assets turnover ratio:-

The fixed asset turnover ratio is an efficiency ratio that measures how well a company uses its
fixed asstes to generate sales.

Fixed Assets Turnover Ratio:- Net Sales / Fixed Assets

49
 Table No. 8

Year Sales Fixed assets Ratio

2015-16 89496.32 72284.30 1.23

2016-17 119570.57 93176.66 1.28

1.29

1.28

1.27

1.26

1.25

1.24

1.23

1.22

1.21

1.2
2015 - 16 2016 - 17

Interpretation:-

Fixed assets turnover ratio is the relationship between sales or cost of goods sold and fixed
capital. In the year 2015 - 16 the ratio i. 1.23 shows the share market efficiency of assets in the
year 2016 – 17 the ratio arrived up to 1.28 show efficiency of the fixed assets.

4) Working capital turnover ratio:--

50
 Working capital turnover ratio shows the velocity of the utilization of net working capital.

Working Capital Turnover = Net Annual Sales / Average Working Capital

Table No. 9

Year Sales Average Working Capital Ratio

2015-16 89496.32 50850.18 1.76

2016-17 119570.57 88652.41 1.34

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2015 - 16 2016 - 17

Interpretation:-

Working capital ratio show the excess of capital & in the year 2015 – 16 working capital of
the company is good and decreasing in the year 2016 – 17 by 0.42 . Almost analyst consider
ideal working capital turnover ratio is 1.2 to 2 .

51
5) Average collection period:-

The average collection period represent the average no. of days for which a firm has to wait
before its receivable are converted into cash.

Average Collection. Period :- Average Debtors / Sales Per Day

Table No. 10

Year A.D. (In lakhs) Sales per day Ratio

2015-16 11950.63 248.60 90days

2016-17 15165.52 332.14 45 days

Collection Period ( In Days )

100
90
80
70
60
50
Collection Period ( In Days )
40
30
20
10
0
2015 - 16 2016 - 17

Interpretation:-

52
 Generally the shorter the period of average collection period the better is the quality of
debtors. On the year 2015 - 16 if it is very high in 90 days. it show the inefficient collection
performance. But it improve in the year 2016 – 17 up to 45 days.

53
 Profitability Ratio

1) Gross profit ratio:-

G.P. ratio measure the relationship of gross profit to net sales and is usually represented as a
percentage.

Gross Profit. ratio:-- Gross Profit /Net Sales(100)

Table No. 11

Year Gross Profit Net sales Ratio

2015-16 26807.01 89496.32 29.9 %

2016-17 38539.20 119570.57 32.2 %

54
 180000

160000

140000
32.2 %
120000

100000 29.9 %
Gross Profit
80000 Net sales

60000

40000

20000

0
2015 - 16 2016 - 17

Interpretation:--

The Gross Profit ratio shows the company is increasing year by year. It shows that change
may be the result of decrease in cost of good sold without increasing in sales revenues as change
in the method of valuation of closing stock. In the year 2015 – 16 Gross profit ratio is 29.9 % &
increased up to 32.2 % in the year 2016 - 17 .

2)Net Profit Ratio :-

Net profit ratio establishes a relationship between net profit (after taxes) and sales and
indicates the efficiency or the management in manufacturing selling administrative and other
activities of the firm. This ratio is the overall measure of firm’s profitability and is calculated as:-

Net Profit RATIO:- Net Profit After Tax / Net Sales (100)

Table No. 12
55
 Year Net Profit After Tax Net Sales Ratio

2015-16 16355.03 89496.32 18%

2016-17 23584.44 119570.57 19%

160000

140000
19 %
120000

100000
18 %
80000 Net Profit
Net Sales
60000

40000

20000

0
2015 - 16 2016 - 17

Interpretation:--

The high net profit margin would assure adequate return to the owners as well as enable to
with stand adverse. Condition when selling price is decline. In the year 2015-16 Net profit ratio
is 18 % it is increased up to 19 % in year 2016 – 17 . The ratio is margin improve in the year
2016 - 17 by 1%.

3) Return on equity :--

56
The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to
generate profits from its shareholders investments in the company. In other words, the return on
equity ratio shows how much profit each dollar of common stockholders’ equity generates

Return on Equity. = Profit After Tax/ Share Holders Funds(100)

Table No. 13

Year Profit After Tax Shareholders fund Ratio

2015-16 16355.03 132450.56 12.3%

2016-17 23584.44 168911.27 14%

Return On Equity
14.5

14

13.5
14 %
13

Return On Equity
12.5

12 12.3 %
11.5

11
2015 - 16 2016 - 17

Interpretation:--

This ratio is more meaningful to the equity shareholders who are interested to know profit
earned by the company and that profit which can be made available to pay dividend to them. The
57
ratio to increasing rate at 12.3 to 14% in the year 2016 - 17 it indicate that firm good return and
satisfactory to share holders.

CHAPTER- 5

CONCLUSION

CONCLUSION

58
1) Company has registered a turnover rupees 119570.57 lacs which shows an increase by
33.60% from the previous year.

1) Profit after tax increase rs. 21833.66 lacs during the previous to rs. 23584.44 lacs
represented an increase of 44.20%.

1) Company declare dividend at the rate of rs. 3 per share .

1) Earning per share of the company is rs. 1886 in 2010 which is greater than the previous
year from rs. 14.71.

1) In the year 2015 company redeem the preference share.

1) Cash position decrease in 2015 from rs. 142187.12 lacs to rs. 39322.89 lacs which may
turns into illiquidity.

1) In the year 2015 company investing rs. 68171.95 lacs incorporation in the previous year.

FINDINGS

1. The liquidity position of the firm is not sound as compared to year2015 – 16 .

2. The solvency position of the firm is satisfactory.

3. The company has raised less debt as compared to year 2015 – 16 .

4. The stocks are used efficiently.

5. The working capital usage has also improved this year 2016 – 17 .

6. The debtor management system is inefficient.

7. The fixed Assets are also not utilized.

59
 8. The gross profit is increasing due to decrease in cost of goods sold.

9. The net profits of the company have increased by 1%.

CHAPTER- 6

RECOMMENDATION

 6.1 : SUGGESTIONS

According to my research, there are some suggestion for the

company to improve their performance :

60
  The company should raise its current assets.

 The company should look for sources of working capital

 Cash inflow management system should be fast.

 Company should increase its own funds by creating reserves.

 The company should have a proper dividend policy.

 6.2 : BIBLIOGRAPHY

Books Referred :

1. Peter D. Easton (2015) - Financial Statement Analysis & Fourth Edition, Published by
Cambridge Business Publishers.

2. Sharma, R. (2012) - “Comparing and Analyzing Financial Statements to Make an

Investment Decision: Case Study of Automotive Industry”.

3. Khan M.Y. &Jain P.K, FinancialManagement, KalyaniPublisher, New Delhi .

4. S.N.Maheswari, (2000) - Management Accounting and Financial Control, Sultan Chand

& Sons, New Delhi.

INFORMATION FROM THE WEBSITES-

1. www.google.com

61
STATEMENTS OF BOANG TECHNOLOGY PRIVATE LIMITED

1. BALANCE SHEET

2. STATEMENT OF PROFIT & LOSS

3. CASH FLOW STATEMENT

 6.3 : Annexure

Profit & loss a/c for the year ended 31stMarch 2017

( Rs. In lakhs)

Particulars Scedule 31st March 31stMarch

2017 2016

Income:--

Sales:- other income 119570.57 89496.32

Expenditure:-

Material manufacturing exp. 9 70958.34 54453.48

Personal exp. 10 5205.15 4188.30

Administration selling exp. 11 2389.08 2021.84

Financial exp. 2478.80 2025.37

Total 81031.37 62688.94

Profit before dep. 38539.20 26807.33

62
Dep. 6333.92 4973.67

Profit before tax 32205.28 21833.66

Provision for taxation

Current tax 3626.92 1817.76

Deffered tax 4993.92 3660.87

Profit after tax 23584.44 16355.03

Add: accumulated profit 3863.16 38.75

Balance available for app. 27447.60 16393.78

Approprication:--
10000.00 9600.00
Transfer to general reserve
300.37 0.00
Tra. to sinking fund
0.00 130.75
Tra. to prefer share red.reserve a/c
3923.71 2447.62
Tra. to equity share
41.27 0.00
Tra. to tax for previous year
5.62 7.87
Dividend on preference share
667.87 344.38

Provision for dividend tax

12508.76 3863.16
Surplus carried to b/s
18.86 14.71

Cash flows statement for the year ended 31st March 2017

(Rs. In lakh)
63
Particulars 31st March2017 31stMarch2016

(a) cash flow from operating

Activities

Net profit before tax &extraordinaries 32205 21833.66

items

Add:- dep.
6333.92 4973.67
Less:- gain on sale of fixed
(170.04) ----
Assets

Dividend income
(566.78) (241.57)
Interest received &
(8422.39) (1854.04)
Other income

Preliminary exp. w/o

214.11 216.71

29594.10 24928.43

Increase /decrease in stock

(1761.51) (2204.88)
Increase / decrease in other
(250.73) (199.45)
Receivable

Increase/decrease in s. drs.
(3214.89) (1559.13)
Increase/decrease in loan &
(3910.73) (28952.74)
Advance

64
Increase/decrease in c.liab. (1993.92) 1900.30)

Cash generation by operation 18963.78 6087.47

Interest received 8422.39 1854.04

Dividend received 566.78 241.57

Net cash from operating activities 27952.95 (3991.86)

(b) cash flow from investing (110953.63) (18085.49)

Activities 897.38 -----

Addition to fixed assets 1467.50 (22331.31)

sale of fixed assets

(108588.75) (40416.80)
purchase of investment

(c) cash flow from financing

17514.74 11100.00

Activities
---- 117955.16
Proceed from share

Proceed from new borr-

(36902.48) (4884.87)
Owing
(2840.69) (1702.11)
Repayment of borrowing
(22228.43) 122468.18

65
 Dividend & dividend tax

Net cash from financing activities

Net cash flow during the year (102864.23) 78059.52

Cash & cash equilent (o/b) 142187.12 64127.60

Cash & cash equilent (c/b) 39322.89 142187.12

Balance Sheet As On 31st March 2017

( In Lakhs )

Particulars Shedule 31thMarch20 31thMarch201

17 6

1) sources of funds

(a) share capital 1 2615.81 2578.37

(b) reserves surplus 2 166295.46 129872.19

2) loan funds

(a) secured 3 10202.70 13472.36

(b) unsecured 117151.16 150783.98

Total 296265.13 296706.90

(1) application of funds:-

Fixed assets

66
 Gran block 4 203469.29 93278.59

Less:- dep. 27292.63 20994.29

Net block 176176.66 72284.30

(2) investment 5 31010.35 32477.85

(3) current assets: loan & 6

Advance

a) current assets

interest rec. 8.87 259.60

stock 15771.39 14009.88

debtors 15165.52 11950.63

cash , bank 39322.89 142187.12

b) loan & advance 44270.79 208767.29

less:- current liab. & provision 7

current liab.

Provision 17669.60 12851.84

Total current liab. & provision 8217.45 4610.52

net current assets 25887.05 17462.36

4) miscellaneous exp.
88652.41 191304.93
total
425.71 639.82

296265.13 296706.90

67
68