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Financial Analysis Of Wipro LTD

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Category: Business

Autor: antoni 08 March 2011

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A

Project Report

On

Financial Analysis

Of

Presented to

Prof. Kumar Mitra Dutta

Faculty Member

Calcutta Business School

On

December 23rd , 2010

In the partial fulfillment of the requirements for

Management Accounting Course in the Master of PGDM 2010-12

By:

Rajdeep Laha (Roll No.11)

Preface

As a part of our syllabus of MBA programme in Semester-I, we are assigned some practical and theoretical project work. In partial fulfillment of the Managerial Accounting-I, course we have prepared a comprehensive project report in Financial Analysis of the company.

Study of management will be immaterial if it is not coupled with study of financial aspect of the business. It gives the student an opportunity to learn the connection between comparison & execution to test & verify application of theories & help in the comparison of management theories and practice. The study gives a chance to know about the profitability and financial position of the firm.

We have chosen Wipro Limited which is a $3.5 Billion Global company in Information Technology Services ,R&D Services, Business Process Outsourcing.

This report contains the analysis of the 5 years data of the company. The Financial statements of the report are analyzed in three different ways such as

 Trend Analysis

 Horizontal Analysis

 Ratio Analysis

 Cashflow Analysis

The ratio analysis of the company has been derived for 23 ratios which help to determine the company's performance. In the Scenario Analysis of the company we have included the company's industrial GDP, its Market Share, Market Capitalization, Market Growth etc.

Date: 23th December ,2010 Rajdeep Laha (RollNo.11)

Place: Kolkata

Acknowledgement

With a sense of gratitude and respect, we would like to extend our heartiest thanks to all of those who provided help and guidance to make this project a big success. No Project is ever the outcome of single individual's talent or effort. This work is no exception. This project would not have been possible without the whole hearted encouragement, support and co-operation of our guide, friends and well-wishers. Although it is not possible for us to name and thank them all individually, we must make special mention of some of the personalities and acknowledge our sincere indebtness to them.

The successful completion of this project rests on the shoulder of many persons who have helped us directly or indirectly. We wish to take this opportunity to express to all those, without whose help, completion of this project would have been difficult. We are indebted and thankful to all the individuals who have guided, advised, inspired and supported us in making this project a success.

Our gratitude to our honorable guide Prof. Nikunj Patel for giving us the opportunity for developing the project and his able guidance, inestimable motivation and constant encouragement throughout our project. Without his help this project would never have been realized in its entirety.

We are especially thankful to our Head Of Department Prof. Bhavin Pandya for his valuable support in providing us the facilities and his valuable guidance for the development of this project.

Date: 20th December ,2008 Ashwin Chaudhary (Roll No.5)

Place: Kadi Priyanka Mehata (Roll No.)

Executive Summary

It is Summarize tin of all report in one or two pages so as to provide an overview of the company. it is also called synopsis or Abstract. As a partials fulfillment of the requirement for the Managerial Accounting Cource.We have completed a project report on financial Analysis of Wipro Ltd.

 Sales Figure is increasing at a handsome rate. it is at Rs. 58400.23 Million. in 2003-04 and it is increased to Rs. 141395.8 Million. So Sales is increased 75.05% because of aggressive Selling Policy.

 Profit after Tax is also increasing as compare to 2003-04 it is increasing 22514 Million at Rs 3408, 8747, 4388.6, 5970.4, respectivaly last four year. This is because company has increased it sales and doing good cost management

 Net worth of the company is increased in this year because of increase in Reserve & Surplus

 Current Ratio of Wipro limited is showing good position. It is 1.26 Times in 2003-04 then it is increased to 2.13 Times in 2007-08 this shows Company has achieved standard Ratio.

 The returns on the investment is some what decline in current year.

 The EPS of Share is increased Rs. 7.43 to Rs 20.62 in 2007-08 So Share holder are benefited.

 Company's Total Assets are increased and it trying to expand its business on the other hand debt are also increased it shows that company trying to Trading on Equity.

 After analyzing all aspect Company's performance is good.

CONTENT

Preface

Acknowledgement

Executive Summary

1. INTRODUCTION

1.1 Introduction to company

1.2 Group of companies

1.3 History

1.4 Company Profile

1.5 Registered office address

1.6 Board of director

1.7 Auditor

2. ANALYSIS OF BALANCE SHEET

2.1 Trend analysis of Balance sheet

2.1.1 Trend analysis of fixed assets

2.1.2 Trend analysis of total current assets

2.1.3 Trend analysis of share holders equity

2.1.4 Trend analysis of total current assets

2.1.5 Share holder's fund

2.1.6 Sources of fund

2.1.7 Investment

2.1.8 Application of funds

2.2 Horizontal analysis of Balance sheet

2.2.1 Sources of fund 2008

2.2.2 Application of fund 2008

2.2.3 Sources of fund for five years

2.2.4 Application of fund for five years

3. ANALYSIS OF P & L ACCOUNT

3.1 Trend analysis of P & L

3.1.1 Trend analysis of total income

3.1.2 Profit after tax

3.1.3 Transfer to general reserve

3.1.4 Net sales and services

3.2 Horizontal analysis of P & L

3.2.1 Comparison of PBT and Income with expenditure

4. CASH FLOW ANALYSIS

4.1 Introduction

4.2 Cash flow statement

4.3 Interpretation of Cash flow statement

5. RATIO ANALYSIS

5.1 Introduction of the ratio analysis

5.2 Liquidity ratio

5.2.1 Current ratio

5.2.2 Quick ratio

5.2.3 Net working capital

5.3 Profitability ratio

5.3.1 Gross profit

5.3.2 Operating ratio

5.3.3 Net profit ratio

5.3.4 Return on investment

5.3.5 Return on equity

5.4 Assets turnover ratio

5.4.1 total asset turn over ratio

5.4.2 net fixed asset turn over

5.4.3 inventory turn over ratio

5.4.4 average age of inventories

5.4.5 debtor turn over ratio

5.5 Finance structure ratio

5.5.1 debt ratio

5.5.2 debt equity

5.5.3 interest coverage ratio

5.6 Valuation ratio

5.6.1 earning per share

5.6.2 divident pay out ratio

5.6.3 P/E ratio

5.6.4 Profit margin ratio

5.7 Du-Pont chart

6. SCENARIO ANALYSIS

6.1 business unit performance

6.2 company analysis

6.2.1 Share holding pattern

6.2.2 Market capitalization

7 ANNEXURES

8 BIBLIOGRAPHY

Chapter 1.

Introduction

• Introduction to company

• Group Companies

• History

• Company Profile

• Registered Office Address

• Board of Directors

• Auditors

________________________________________

1. INTRODUCTION

1.1. Introduction of company

Wipro Limited (Wipro), together with its subsidiaries and associates (collectively, the company or the group) is a leading India based provider of IT Services and Products, including Business Process Outsourcing (BPO) Services, globally. Further,Wipro has other business such as India and AsiaPac IT Services and products and Consumer Care and Lighting. Wipro is headquartered in Bangalore, India.Wipro Technologies is a global services provider delivering technology-driven business solutions that meet the strategic objectives clients. Wipro has 40+ ‘Centers of Excellence' that create solutions around specific needs of industries. Wipro delivers unmatched business value to customers through a combination of process excellence, quality frameworks and service delivery innovation. Wipro is the World's first CMMi Level 5 certified software services company and the first outside USA to receive the IEEE Software Process Award.

Wipro is a $3.5 billion Global company in Information Technology Services, R&D

Services, Business process outsourcing. Team wipro is 75,000 Strong from 40 nationalities and growing. Wipro is present across 29 counries,36 Development canters, Investors across 24 countries.

 Largest third party R&D Service provider in the world.

 Largest Indian Technology Infrastructure management service provider.

 A vendor of choice in the middle east

 Among the top 3 Indian BPO Service provider by Revenue (* Nasscom)

 Among the top 2 Domestic IT Services companies in India (*IDC India)

1.2. Group Companies

 Wipro Infrastructure Engineering Ltd.

 Wipro Inc.

 cMango Pte Ltd.

 Wipro Japan KK

 Wipro Shanghai Ltd.

 Wipro Trademarks Holding Ltd.

 Wipro Travel Services Ltd.

 Wipro Cyprus Private Ltd.

 Wipro Consumer Care Ltd.

 Wipro Health Care Ltd.

 Wipro Chandrika Ltd.(a)

 Wipro Holdings (Mauritius) Ltd.

 Wipro Australia pty Ltd.

 WMNETSERV Ltd.(a)

 Quantech Global Service Ltd.

 3D Network Pte Ltd.

 Planet PSG Pte Ltd.

 Spectramind Inc.

1.3. History

Wipro started in 1945 with the setting up of an oil factory in Amalner a small town in Maharashtra in Jalgaon District. The product Sunflower Vanaspati and 787 laundry soap (largely made from a bi-product of Vanaspati operations) was sold primarily in Maharashtra and MP. The company was aptly named Western India Products Limited.

The Birth of the name Wipro - As the organization grew and diversified into operations of Hydraulic Cylinders and Infotech, the name of the organization did not adequately reflect its operations. Azim Premji himself in 1979 selected the name "Wipro" largely an acronym of Western India Products. Thus was born the Brand Wipro. The name Wipro was unique and gave the feel of an 'International" company. So much so that some dealers even sent their cheques favouring Wipro (India) Limited. Fortunately, the banks accepted them!!By the early 90s, Wipro had grown into various products and services. The Wipro product basket had soaps called Wipro Shikakai, Baby products under Wipro Baby Soft, Hydraulic Cylinders branded Wipro, PCs under the brand name Wipro, a joint venture company with GE named Wipro GE and software services branded Wipro. The Wipro logo was a 'W", but it was not consistently used in the products.It was clearly felt that the organization was not leveraging its brand name across the various businesses. The main issue remained whether a diverse organization such as Wipro could be branded under a uniform look and feel and could there be consistent communication about Wipro as an organization.

1.4. Company Profile

Business-Description

Wipro Limited is the first PCMM Level 5 and SEI CMM Level 5 certified IT Services Company globally. Wipro provides comprehensive IT solutions and services, including systems integration, Information Systems outsourcing, package implementation, software application development and maintenance, and research and development services to corporations globally.

The Group's principal activity is to offer information technology services. The services include integrated business, technology and process solutions including systems integration, package implementation, software application development and maintenance and transaction processing. These services also comprise of information technology consulting, personal computing and enterprise products, information technology infrastructure management and systems integration services. The Group also offers products related to personal care, baby care and wellness products. The operations of the Group are conducted in India, the United States of America and Other countries. During fiscal 2007, the Group acquired Wipro Cyprus Pvt Ltd, Retailbox Bv, Enabler Informatica SA, Enabler France SAS, Enabler Uk Ltd, Enabler Brazil Ltd, Enabler and Retail Consult GmbH, Cmango Inc, Cmango (India) Pvt Ltd, Saraware Oy, Quantech Global Services and Hydroauto Group AB

Global IT Services and Products

The Company's Global IT Services and Products segment provides IT services to customers in the Americas, Europe and Japan. The range of its services includes IT consulting, custom application design, development, re-engineering and maintenance, systems integration, package implementation, technology infrastructure outsourcing, BPO services and research and development services in the areas of hardware and software design. Its service offerings in BPO services include customer interaction

services, finance and accounting services and process improvement services for repetitive processes.

The Global IT Services and Products segment accounted for 74% of the Company's revenues and 89% of its operating income for the year ended March 31, 2007 (fiscal 2007). Of these percentages, the IT Services and Products segment accounted for 68% of its revenue, and the BPO Services segment accounted for 6% of its revenue during fiscal 2007.

Customized IT solutions

Wipro provides its clients customized IT solutions in the areas of enterprise IT services, technology infrastructure support services, and research and development services. The Company provides a range of enterprise solutions primarily to Fortune 1000 and Global 500 companies. Its services extend from enterprise application services to e-Business solutions. Its enterprise solutions have served clients from a range of industries, including energy and utilities, finance, telecom, and media and entertainment. The enterprise solutions division accounted for 63% of its IT Services and Products revenues for the fiscal 2007.

Technology Infrastructure Service

Wipro offers technology infrastructure support services, such as help desk management, systems management and migration, network management and messaging services. The Company provides its IT Services and Products clients with around-the-clock support services. The technology infrastructure support services division accounted for 11% of Wipro's IT Services and Products revenues in fiscal 2007.

Research and Development Services

Wipro's research and development services are organized into three areas of focus: telecommunications and inter-networking, embedded systems and Internet access devices, and telecommunications and service providers.The Company provides software and hardware design, development and implementation services in areas,

such as fiber optics communication networks, wireless networks, data networks, voice switching networks and networking protocols. Wipro's software solution for embedded systems and Internet access devices is programmed into the hardware integrated circuit (IC) or application-specific integrated circuit (ASIC) to eliminate the need for running the software through an external source. The technology is particularly important to portable computers, hand-held devices, consumer electronics, computer peripherals, automotive electronics and mobile phones, as well as other machines, such as process-controlled equipment. The Company provides software application integration, network integration and maintenance services to telecommunications service providers, Internet service providers, application service providers and Internet data centers.

Business Process Outsourcing Service

Wipro BPO's service offerings include customer interaction services, such as IT-enabled customer services, marketing services, technical support services and IT helpdesks; finance and accounting services, such as accounts payable and accounts receivable processing, and process improvement services for repetitive processes, such as claims processing, mortgage processing and document management. For BPO projects, the Company has a defined framework to manage the complete BPO process migration and transition. The Company competes with Accenture, EDS, IBM Global Services, Cognizant, Infosys, Satyam and Tata Consultancy Services.India and AsiaPac IT Services and Products

The Company's India and AsiaPac IT Services and Products business segment, which is referred to as Wipro Infotech, is focused on the Indian, Asia-Pacific and Middle-East markets, and provides enterprise clients with IT solutions. The India and AsiaPac IT Services and Products segment accounted for 16% of Wipro's revenue in fiscal 2007. The Company's suite of services and products consists of technology products; technology integration, IT management and infrastructure outsourcing services; custom application development, application integration, package implementation and maintenance, and consulting

Wipro's system integration services

Include integration of computing platforms, networks, storage, data center and enterprise management software. These services are typically bundled with sales of the Company's technology products. Wipro's infrastructure management and total outsourcing services include management and operations of customer's IT infrastructure on a day-to-day basis. The Company's technology support services include upgrades, system migrations, messaging, network audits and new system implementation. Wipro designs, develops and implements enterprise applications for corporate customers. The Company's solutions include custom application development, package implementation, sustenance of enterprise applications, including industry-specific applications, and enterprise application integration. Wipro also provides consulting services in the areas of business continuity and risk management, technology, process and strategy.

Consumer Care and Lighting

Wipro's Consumer Care and Lighting business segment accounted for 5% of its revenue in fiscal 2007. The Company's product lines include hydrogenated cooking oil, soaps and toiletries, wellness products, light bulbs and fluorescent tubes, and lighting accessories. Its product lines include soaps and toiletries, as well as baby products, using ethnic ingredients. Brands include Santoor, Chandrika and Wipro Active. The Wipro Baby Soft line of infant and child care products includes soap, talcum powder, oil, diapers and feeding bottles and Wipro Sanjeevani line of wellness products.

The Company's product line includes incandescent light bulbs, compact fluorescent lamps and luminaries. It operates both in commercial and retail markets. The Company has also developed commercial lighting solutions for pharmaceutical production centers, retail stores, software development centers and other industries. Its product line consists of hydrogenated cooking oils, a cooking medium used in homes, and bulk consumption points like bakeries and restaurants. It sells this product under the brand name Wipro Sunflower.

1.5. Registered Office Address

WIPRO LIMITED

Doddakannelli, Sarjapur Road,

Bangalore – 560 035, India.

Tel : +91-80-28440011

Fax : +91-80-2844054

1.6. Board of Directors

• Azim H . Premji Chairman

• Dr Ashok S Ganguly Former Chief Ex.Officer Nortel

• B .C. Prabhakar Practitioner of Law

• Dr. Jagdish N. Sheth Professor Of Marketing-Emory Uni.Usa.

• N.Vagual Chairman-ICICI Bank Ltd

• Bill Owens Former Chief Ex.Officer,Nortel

• P. M. Sinba Former Chairman Pepsico India Holdings

1.7. Auditors

• KPMG

• BSR & Co.

Audit committee

N Vaghul - Chairman

P M Sinha - Member

B C Prabhakar - Member

Board Governance and Compensation Committee

Ashok S Ganguly - Chairman

N Vaghul - Member

P M Sinha - Member

Shareholders' Grievance and Administrative Committee

B C Prabhakar - Chairman

Azim H Premji - Member

Chapter 2.

Analysis of Balance Sheet

• Trend Analysis of Balance Sheet

• Horizontal Analysis of Balance Sheet

________________________________________

2. ANALYSIS OF BALANCE SHEET

________________________________________

2.1. Trend Analysis of Balance Sheet

Trend Analysis of Balance Sheet involves calculation of percentage changes in the Balance Sheet items for a no. of successive years. This is carried out by taking the items of the past financial year used as base year and items of other years are expressed as percentage of the base year. Here 2003-04 is taken as base year

Perticular 2003-04 2004-05 2005-06 2006-07 2007-08

SOURCES OF FUNDS

Share Holder's Funds

Share Capital 100 302.27 202.68 207.37 100.171

Share application money pending allotment 100 622.41 290.456 114.286

Reserves & Surplus 100 138.62 122.94 180.99 122.516

Share holder's Equity 100 140.68 125.18 181.718 121.833

Loan Funds 100

Secured 100 22.786 208.9 689.7 139.154

Unsecured 100 382.54 75.796 577.241 1829.68

Total Loan Funds 100 58.947 122.08 616.343 1171.94

Minority Interest 100 161.94 - 10.929 400

Total Sources of Funds 100 138.55 124.53 149.283 162.162

APPLICATION OF FUNDS

Fixed assets

Goodwill 100 107.82 62.297 268.622 445.384

Gross Block 100 133.91 118.74 142.195 159.492

Less:

Accumulated Depreciation 100 130.95 129.74 147.107 147.775

Net Block 100 136.72 108.75 153.667 154.22

Capital work in progress and advances 100 182.43 240.03 163.056 131.194

Total Fixed Assets 100 130.83 112.84 175.077 220.726

Investments 100 123.33 131.09 107.909 48.1879

Deferred Tax Assets(Net) 100 101.79 120 99.3266 89.661

Current Assets, Loans & Advances

Inventories 100 135.23 118.19 200.969 160.578

Sundry Debtors 100 130.78 137.08 138.168 137.637

Cash & Bank Balances 100 176.2 155.03 223.775 198.113

Loan & Advances 100 97.872 230.42 127.844 180.692

Total Current Assets 100 129.24 157.71 154.955 166.304

Less:

Current Liabilities & Provisions

Current Liabilities 100 143.26 145.4 181.719 118.484

Provisions 100 61.257 239.3 63.3118 180.879

Total Liabilities 100 102.82 172.99 133.59 130.504

Net Current Assets 100 231.52 131.44 203.29 219.526

Total Application of Funds 100 138.55 124.53 149.283 162.162

Table 2.1.1 Trend Analysis of Balance Sheet

2.1.1 Trend Analysis of Fixed assets

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Fixed Assets 100 130.827 112.844 175.077 220.726

Table 2.1.2 Trend Analysis of Fixed assets

Figure 2.1.1 Trend Analysis of total fixed assets

Interpretation

 The fixed assets are increase in current year is good for the company.

 Hear fixed assets are increasing as a increasing rate it means the company has expand it's business.

 Fixed Assets are continuously increasing year by year.

 It seems that the company has good future plans and they want to expand their business so they have invested more and more funds in fixed assets.

 Fixed assets are efficiently utilized by the company due to which the profit of the company is increasing every year.

 In 2006-07and 2007-08 Company has huge increase its land, patents, trade marks and rights.

2.1.2 Trend Analysis of total current assets

Table 2.1.3 Trend Analysis of total current assets

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Current Assets 100 129.242 157.708 154.955 166.304

Figure 2.1.2 Trend Analysis of total current assets

Interpretation

 The current assets is shows the cash liquidity of the company.

 Hear it is increase it year by year it means the company has sufficient liquidity for generating the business.

2.1.2 Trend Analysis of total current assets

Table 2.1.4 Trend Analysis of total Liabilities

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Liabilities 100 102.817 172.991 133.59 130.504

Figure 2.1.3 Trend Analysis of total Liabilities

Interpretation

 The total liabilities is highest in 2005-06.

 Liabilities is incressing rate it mean company has to developed business. And purchase raw material on credit basis.

2.1.3 Trend Analysis of share holder's equity.

Table 2.1.5 Trend Analysis of share holder's equity.

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Share holder's Equity 100 140.684 125.181 181.718 121.833

Figure 2. 4 Trend Analysis of share holder's equity.

Interpretation

 Share holder equity is increase high in 2006-07 because the company has allocated new share.

 Share holder equity is showing high fluctuation.

2.1.4 Trend Analysis of total loan fund.

Table 2.1.6 Trend Analysis of total loan fund.

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Loan Funds 100 58.9472 122.076 616.343 1171.94

Figure 2.1.5 Trend Analysis of total loan funds

Interpretation

 The total trend line is slowly increase up to 2005-06. And after that it is increase at a high rate.

 From 2006-07 onward the loan fund is increase because the company has expanse its business.

 The company has been able to raise its secured loan without shortage of funds.

 Increase in secured loan shows that company has very good prestige in Financial market.

 Company increasing loan funds because company want to increase its trading on equity.

2.1.5 Share Holder's Funds

Share Holder's Funds

Year 2003-04 2004-05 2005-06 2006-07 2007-08

share capital 100 302.273 202.68 207.37 100.171

Share application money pending allotment 100 622.406 290.456 114.286

Reserves and Surplus 100 138.625 122.944 180.99 122.516

Total 100 140.684 125.181 181.718 121.833

Table 2.1.7 Trend Analysis of Share Holder's Funds

Figure 2.1.6 Trend Analysis of Share Holder's Funds

Interpretation

 There is increase in share capital more than two times in 2005-06 and 2006-07 and it increase three time in 2004-05 compare to base year 2003-04.In 2007-08 there is not big increase in share capital compare to 2005-06.

 There is highest share capital in 2004-05.

 The company has issued new shares in the 2005-06.

 As a result no. of shares is increased and these funds are implemented for future plans of the company.

 Reserves & surplus shows a remarkable increase in 2004-05, 2005-06 and 2006-07 and it slowly decrease in 2008. respectively with respect to the base year, this shows the company has future vision and it would like to expand its business.

 Increase in Reserve & surplus shows because of increase in profit every year.

 Has a hole we can say that the company is target oriented and its sticking to its policies as a result share holder's funds is increasing year by year.

2.1.6 Source of Funds

Source Of Funds

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Share holder's Equity 100 140.6845 125.181 181.718 121.833

Minority Interest 100 161.9446 - 10.929 400

Total Loan Funds 100 58.94717 122.076 616.343 1171.94

Total Sources of Funds 100 138.5534 124.52769 149.283 162.162

Table 2.1.8 Trend Analysis of Source Of Funds

Figure 2.1.7 Trend Analysis of Sources of Funds

Interpretation

 The loan fund is increases six and twelve time in year 2007, 2008 respectively compare to 2003-04.

 The company has observed an increase in loan funds as compared to the base year which indicates its growing reputation in the financial market.

 Hence the overall sources of funds have shown big increase with respect to the base year

2.1.7 Investment

Investment

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Investments 100 123.3283 131.087 107.909 48.1879

Table 2.1.9 Trend Analysis of Investment

Figure 2.1.8 Trend Analysis of Investment

Interpretation

 Investment figure shows healthy progress of the company.

 Investment has increased in 2005, 2006 and after that it has strated decrease in 2007, 2008 which shows not good growth compared to base year.

 As they have invested most of their funds in Indian money market mutual funds.

 Shows that the company has not take risk but the company has invested money for developed it's own business.

2.1.8 Application Of Funds

Application of funds

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Fixed Assets 100 130.8267 112.844 175.077 220.726

Investments 100 123.3283 131.087 107.909 48.1879

Deferred Tax Assets(Net) 100 101.789 120 99.3266 89.661

Net Current Assets 100 231.5197 131.437 203.29 219.526

Table 2. 10 Trend Analysis of Application Of Funds

Figure 2.1.9 Trend Analysis of Application Of Funds

Interpretation

 Graph shows that in 2007-08 Company invested more fund in fixed Assets.

 Company has enough cash in hand so that in any condition company can take

Any Financial decision easily.

2.2 Horizontal Analysis of Balance Sheet

Financial Statement present information for the last five year. Horizontal analysis of Balance Sheet deals with the amount changes and the percentage changes of the items of the Balance Sheet.

Financial Statement present comparative information for the current year and the previous year. Horizontal analysis of Balance Sheet deals with the amount changes and the percentage changes of the items of the Balance Sheet.

YEAR 2007-08 2006-07 2005--06 2004-05 2003-04

SOURCES OF FUNDS

Share Capital 1.35 2.06 2.91 1.96 0.83

Share application money pending allotment 0.02 0.02 0.08 0.02 0.00

Reserves & Surplus 52.69 65.73 64.42 71.64 65.85

Secured 0.96 1.05 0.46 0.30 1.68

Unsecured 19.77 1.65 0.31 0.56 0.19

Minority Interest 0.05 0.02 0.37 0.29

Current Liabilities 18.44 23.78 18.89 17.76 15.79

Provisions 6.72 5.67 12.93 7.39 15.37

TOTAL 100 100.00 100.00 100.00 100.00

APPLICATION OF FUNDS

Total Fixed Assets 38.73 26.82 22.10 26.78 26.08

Investments 7.41 23.49 31.41 32.76 33.84

Deferred Tax Assets(Net) 0.24 0.42 0.61 0.69 0.86

Current Assets, Loans & Advances 0.00 0.00 0.00 0.00 0.00

Inventories 3.08 2.93 2.10 2.43 2.29

Sundry Debtors 18.70 20.76 21.68 21.63 21.07

Cash & Bank Balances 18.15 14.00 9.03 7.96 5.76

Loan & Advances 13.69 11.58 13.07 7.75 10.09

TOTAL 100 100 100 100 100

Table 2.2.1 Horizontal Analysis of Balance Sheet

2.2.1 analysis of sources of funds 2008

Share Capital 1.35

Share application money pending allotment 0.02

Reserves & Surplus 52.69

Secured 0.96

Unsecured 19.77

Minority Interest 0.05

Current Liabilities 18.44

Provisions 6.72

Table 2.2.2 Horizontal Analysis of sources of funds

Figure: 2.2.1 Horizontal analysis Sources of funds

Interpretation

 Graph shows that in 2007-08 unseured loan is 19.77% it means that company has more taken short term borrowings for expantion of business.

 In this graph revenue is more then 50% compare to other source so it is good for company.

2.2.2 analysis of application of funds 2008

Total Fixed Assets 38.73

Investments 7.41

Deferred Tax Assets(Net) 0.24

Current Assets, Loans & Advances 0.00

Inventories 3.08

Sundry Debtors 18.70

Cash & Bank Balances 18.15

Loan & Advances 13.69

Table 2.2.3 Analysis of application of funds in 2008

Figure: 2.2.2 analysis of application of funds

Interpretation

 Graph shows that in 2007-08 the current assets loan is increase

 Sondory debtors is 13.69 so company has to recover it.

2.2.3 Sources of Funds

Sources of Funds

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Share holder's Equity 97% 98% 99% 96% 72%

Total Loan Funds 3% 1% 1% 4% 28%

Total Sources of Funds 100% 100% 100% 100% 100%

Table 2.2.4 Horizontal Analysis of Sources of Funds

Figure 2.2.3 Horizontal Analyses of Sources of Funds

Interpretation

 Company has raised Share Capital during 2003-04 to 2006-07 and after that it was reduced at 24% this step has been taken in order to promote expansion of their business.

 Company strive enhancement of share holder's value through sound business decision, prudent financial management and high standard of ethics through the organizations. Reserves and surplus has been retained for future expansion of the business.

 In the base year 2003-04 total loan funds is normally up to 2006 and after that it was increase up to 25%, so it means that company has expand the business.

2.2.4 Application of funds

Application of Funds

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Fixed Assets 38% 36% 32% 38% 52%

Investments 49% 44% 46% 33% 10%

Deferred Tax Assets(Net) 1% 1% 1% 1% 0%

Net Current Assets 12% 20% 21% 28% 38%

Total Application of Funds 100% 100% 100% 100% 100%

Table 2.2.5 Horizontal Analysis of Application of Funds

Figure 2.2.4 Horizontal Analysis of Application of Funds

Interpretation

 The total fixed assets are 38% in 2004 and after that it was decrease up to 4% in 2006 and after that it was increase 10% so it means the company has bought the assets for expansion of business.

 The investment is decline slowly and gradually.

 The net current assets are increase at increasing rate so that company has a good liquidity.

 The company's future plans for expansion seem clear due to increased investment in Fixed Assets .Efficient use of these Assets has enabled the company to observe an increased profit.

Chapter 3.

Analysis of Profit & Loss Account

• Trend Analysis of Profit & Loss Account

• Horizontal Analysis of Profit & Loss Account

________________________________________

3. ANALYSIS OF PROFIT & LOSS ACCOUNT

________________________________________

3.1. Trend Analysis of Profit & Loss Account

Trend Analysis of Profit & Loss Account involves calculation of percentage changes in the P & L Account items for a no. of successive years. This is carried out by taking the items of the past financial year used as base year and items of other years are expressed as percentage of the base year. Here 2004-05 is taken as base year

2003-04 2004-05 2005-06 2006-07 2007-08

Income

Gross Sales and Services 100 139.16 129.73 142 133.12

Less: Excise Duty 100 95.25 106.94 174 122.77

Net Sales and Services 100 139.74 129.93 141 133.21

Other Income 100 71.79 162.58 193 140.87

Total Income 100 138.24 130.3 142 133.36

Expenditure

Cost of Sales and Services 100 138.14 132.18 143 136.91

Selling and marketing expenses 100 104.38 124.21 136 148.91

General and administrative expenses 100 1.812 62.37 354 8669.4

Interest 100 109.12 137.58 149 21.48

Total Expenditure 100 133.38 131.74 143 139.13

PROFIT BEFORE TAXATION 100 157.48 125.5 139 112.37

Provision for taxation including FBT 100 163.61 123.33 114 117.63

PROFIT BEFORE MINORITY INTEREST /SHARE IN EARNING OF ASSOCIATES 100 156.49 125.87 143 111.68

Minority interest 100 -148.9 -1.13 -600 -400

Share in earning of Associates 100 764.97 164.26 102 112.88

PROFIT FOR THE PERIOD 100 157.88 126.95 142 111.58

Appropriations

Interim dividend 100 40.33

Proposed dividend 100 373.65 204.92 20 400.69

Tax on dividend 100 57.05 202.68 127 117.43

TRANSFERTO GENERAL RESERVE 100 456.02 101.88 155 116.03

EARNINGS PER SHARE-EPS

Equity shares of par value Rs.2/- each

Basic (in Rs.) 100 78.68 125.64 140 109.70

Diluted (in Rs.) 100 78.11 124.83 141 110.29

Number of Shares for calculating EPS 100

Basic (in Rs.) 100 200.55 101.07 101 101.69

Diluted (in Rs.) 100 202.19 101.68 101 101.69

Table 3.1.1 Trend Analysis of Profit & Loss Account

3.1.1 Trend Analysis of Total Income and Total Expenditure

Table 3.1.2 Trend Analysis of Total Income and Total Expenditure

Trend analysis of total income & expenditure

2003-04 2004-05 2005-06 2006-07 2007-08

Total Income 100 138.238 130.304 142 133.36

Total Expenditure 100 133.382 131.735 143 139.13

Figure 3.1.1 Trend Analysis of Total Income and Total Expenditure

Interpretation

 Though the sales has been continuously increased from past 3 years but the proportionate expenditure is also rising so overall not making any huge effect on net profit of this company.

 In 2006-07 Income from mutual fund dividend increased by 93.57 % and Interest on debt instrument 567 % increased in 2005-06 compare to previous year.

 Percentage Expenditures increasing year by year little more than Income increased, so that Profit margin Decrease year by year.

3.1.2 Profit After Tax

Profit after tax

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Profit after tax 100 157.481 125.497 139 112.37

Table 3.1.3Trend Analysis of Profit After Tax

Figure 3.1.2 Trend Analysis of Profit After Tax

'

Interpretation

 PAT has been rising over the years when we compare with the expenditure which has been incurred to earn this profit is also rising

 PAT has been increased all the years because of increasing in sales.

3.1.3 Trend Analysis of Profit trancfer to genral resrve

Year 2003-04 2004-05 2005-06 2006-07 2007-08

TRANSFERTO GENERAL RESERVE 100 456.022 101.883 155 116.03

Table 3.1.4 Trend Analysis of Profit trancfer to genral resrve

Figure 3.1.3 Trend Analysis of Profit trancfer to genral resrve

Interpretation

 The graph is showing that in year 2004-05 the company has transferred big portion of net profit to genral reserve.

 Hear the in 2005 company has reinvest profit for business expansion it is good shine for the company.

3.1.4 Trend Analysis of net sales and services

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Net Sales and Services 100 139.735 129.93 141 133.21

Table 3.1.5 Trend Analysis of net sales and services

Figure 3.1.4 Trend Analysis of net sales and services

Interpretation

 Net sales and services are incresing from 2004 to 2005.

 From 2005 onward the net sales incresing at a stret line so hear company should tray to increse net sales.

3.2. Horizontal Analysis of Profit & Loss Account

Financial Statement present comparison or every year what portion the rest of particular is having compare to the total income. Hear we assume that the total income is 100 then what is the of particular compare to total income. Horizontal analysis of Profit & Loss Account deals with the amount changes and the percentage changes of the items of the Profit & Loss Account in every year individually.

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Income

Gross Sales and Services 99.07% 99.73% 99.29% 98.94% 98.77%

Less: Excise Duty 1.27% 0.88% 0.72% 0.88% 0.81%

Net Sales and Services 97.80% 98.86% 98.57% 98.06% 97.95%

Other Income 2.20% 1.14% 1.43% 1.94% 2.05%

Total Income 100.00% 100.00% 100.00% 100.00% 100.00%

Expenditure

Cost of Sales and Services 65.56% 65.51% 85.32% 66.97% 68.75%

Selling and marketing expenses 9.05% 6.83% 6.51% 6.24% 6.97%

General and administrative expenses 5.19% 0.07% 0.03% 0.08% 5.27%

Interest 0.06% 4.64% 4.89% 5.14% 0.83%

Total Expenditure 79.85% 77.05% 77.89% 78.43% 81.83%

PROFIT BEFORE TAXATION 20.15% 22.95% 22.11% 21.57% 18.17%

Provision for taxation including FBT 2.81% 3.33% 3.15% 2.53% 2.23%

PROFIT BEFORE MINORITY INTEREST /SHARE IN EARNING OF ASSOCIATES 17.33% 19.62% 18.95% 19.04% 15.94%

Minority interest -0.10% 0.11% 0.00% 0.00% -0.01%

Share in earning of Associates 0.04% 0.21% 0.27% 0.19% 0.16%

PROFIT FOR THE PERIOD 17.27% 19.73% 19.22% 19.24% 16.10%

Appropriations

Interim dividend 9.74% 4.73% 1.43%

Proposed dividend 1.56% 4.21% 6.63% 0.95% 2.87%

Tax on dividend 1.45% 0.60% 0.93% 0.83% 0.73%

TRANSFERTO GENERAL RESERVE 4.52% 14.92% 11.66% 12.72% 11.07%

Table 3.2.1 Horizontal Analysis of Profit & Loss Account

3.2.1 Comparition of PBT and Expenduture with total income

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Income 100.00% 100.00% 100.00% 100.00% 100.00%

Total Expenditure 79.85% 77.05% 77.89% 78.43% 81.83%

PROFIT BEFORE TAXATION 20.15% 22.95% 22.11% 21.57% 18.17%

Table 3.2.2 Comparition of PBT and Expenduture with total income

Figure 3.1.1 Comparition of PBT and Expenduture with total income

Interpretation

 The total expenditure is near by 80% of total income in every year.

 Every year PBT is near by 20% of total income.

Chapter 4.

Analysis of Cash Flow Statement

• Introduction

• Cash Flow statement

• Interpretation of Cash Flow Statement

________________________________________

4. ANALYSIS OF CASHFLOW STATEMENT

________________________________________

4.1. Introduction

• Cash flow statement [CFS] provides information about the historical changes in cash by classifying cash flows during the period from operating activities, financial activities and investing activities of a concern. It shows the summary of cash flow on account of these activities.

• Operating activities as the principal revenue-production activities of the enterprise These activities determines the net profit or loss of a concern. Operating Activities refer to the operations of a business of purchasing, sales etc. Sales generate cash; purchase and expense use up the cash. Net profit leads to net increase in cash.Net increase in cash from operating activities is the main source of cash inflow.

• Investing activities as the acquisition and disposal of long tern assets and investments. Acquiring and selling of a subsidiary or other concerns should be shown as Investing Activity. Investing Activities of acquisition of fixed assets, long term investing reduces the cash and indicate cash outflow. Investing activities of disposal of fixed assets etc increase the cash inflow.

• Financial activities as the activities resulting in the changes in the size and composition of the owner's capital and borrowing of the enterprise. Owner's capital includes preference capital in case of a company. Financial Activities such as issue of shares, taking a loan from Bank, sale of fixed assets etc. increase the amount of cash available and form the source of cash inflow. Financial activities such as repayment of preference capital or repayment of loan reduce the amount of cash and indicates cash outflow.

4.2 Cash Flow Statement

Year ended March 31, (Ra. In Million)

Table 4. 1 Cash Flow Statement

2008 2007 2006 2005 2004

A. Cash Flow from Operating Activities

Adjustments for :

Depreciation and amortizations 5359 3,978 3,096 2,456.24 1971.85

Amortizations of stock compensation 1166 1,078 688 342.62

Unrealized foreign exchange Net -595 457 65 92.45 -132.77

Interest on borrowings 1690 125 35 56.12

Dividend/interest – Net -2802 -2,118 -1,069 715.15 -762.41

(Profit)/Loss on sale of investments -771 -588 -238 35.59

Gain on sale of fixed assets -174 -10 -8 109.8 -107

Working Capital Changes :

Trade and other receivable -11885 -7,633 -6,991 4,433.69 -3670.41

Loans and advances -5157 -299 -1,033 311.74 -359.89

Inventories -1565 -1,120 -317 455.23 -281.5

Trade and other payables 6182 5,445 6,150 4,180.42 2748.13

Net cash generated from operations 28518 32,303 24,102 20,456.00 -594

Direct taxes paid -5459 -4,252 -4,543 2,354.70 -1568.36

Net cash generated by operating activities 23059 28,051 19,559 18,101.30 -2162.36

B. Cash flows from investing activities:

Acquisition of property, fixed assets

Plant and equipment(Inc. advances) -14226 -13,005 -7927 6,465.43 -4100.97

Proceeds from sale of fixed assets 479 149 113 168.98 121.86

Purchase of investments -231684 -123,579 -59,047 70,145.11 -10706.5

Proceeds on sale/from maturities on Investments 250013 122042 52,043 66,383.54 48.06

Inter-corporate depo sit 150 -650 - 285.3

Net payment for acquisition of Business -32790 -6608 -2,777 617.99 -465.27

Dividend/interest income received 2490 2,118 923 254.15 777.85

Net cash generated by/(used in) Investing -25568 -19533 -16672 144035.2 -14039.7

C. Cash flows from financing activities:

Proceeds from exercise of Employee Stock Option 541 9,458 4,704 2,576.58 238.6

Share application money pending allotment 40 35 63 12.05

Interest paid on borrowings -1690 -125 -35 56.12

Dividends paid (including distribution tax -12632 -8,875 -3,998 7,575.76 -262.36

Proceeds/(repayment) of long term -74970 142 -268 - 463.02

Proceeds/(repayment) of short term 110641 1825 -200 432.43

Proceeds from issuance of shares by Subsidery 55 35 266.19 147.53

Net cash generated by financing Activities 21985 2495 266 -5209 -12954.5

Net increase in cash and cash equivalents During the period 19476 11013 3154 2469.95 -958.77

Cash and cash equivalents at the Beginning of the period 19822 8858 5714 3242.7 4210.08

Effect of translation of cash balance -28 -49 -10 0.92 -8.61

Cash and cash equivalents at the end of Period * 39270 19822 8858 5713.57 3242.7

*includes Rs. 7,278 Million in a restricted designated bank account for payment of interim dividend

4.2. Interpretation of Cash Flow Statement

Overall Cash flow Statement shows that cash has been generated through Operating activity is Rs 23059 , 28051 , 19559, 18101, -2162.36 and in the years 2007-08, 2006-07, 2005-06, 2004-05 and 2003-04 respectively. So major part of cash inflowing is Operating department. Investment Activity Shows Cash Outflow and borrowing activities takes a little part in increasing cash.

 Operating Activities : Profit before tax is increased by Rs. 25038.17 Million and Net Cash generated by Operating activity is increased by Rs. 25221.36 Million because,

 Depreciation and amortizations are increased by Rs. 3387.15 Million in between four year.

 Trade and other receivable are also increased by Rs. 8214.59 Million in between four year.

 Investing Activities : Net Cash outflow from investing activities is Rs. 11528 Million because,

 Company has increased its plan and equipment worth Rs.10625 Million in between four year.

 Investment is also increase worth Rs. 220977 Million in between four year.

 From this inference that these investments has been met out of the cash from Operations or borrowings.

 Investments in Fixed Assets could be part of Company's plan of expansion or modernization.

 Financial Activities : From the section on cash flow from Financial Activities company think to proceeds in both short term and long term borrowings with proceeds from exercise of employee stock option.

Chapter 5.

Ratio Analysis

• Introduction To The Ratio Analysis

• Liquidity Ratios

• Profitability Ratios

• Finance Structure Ratios

• Valuation Ratios

• The Du-Pont Chart

________________________________________

5. RATIO ANALYSIS

________________________________________

5.1. Introduction Of The Ratio Analysis

Ratio analysis involves establishing a comparative relationship between the components of financial statements. It presents the financial statements into various functional areas, which highlight various aspects of the business like liquidity, profitability and assets turnover, financial structure. It is a powerful tool of financial analysis, which recognizes a company's strengths as well as its potential trouble spots.

It can be further classified as in different categories of Ratio.

• Liquidity Ratios

• Profitability Ratios

• Asset Turnover Ratios

• Finance Structure Ratios

• Valuation Ratios

5.2. Liquidity Ratio

Liquidity refers to the existence of the assets in the cash or near cash form. This ratio indicates the ability of the company to discharge the liabilities as and when they mature. The financial resources contributed by owners or supplemented by outside debt primarily come in the cash form as under in the balance sheet form.

The following Liquidity Ratios are calculated for the company.

• Current Ratio

• Quick Ratio

• Net Working Capital

5.2.1. Current Ratio

This ratio shows the proportion of Current Assets to Current Liabilities. It is also known as "Working Capital Ratio" as it is a measure of working capital available at a particular time. It's a measure of short term financial strength of the business. The ideal current ratio is 2:1 i.e. Current Assets should be equal to Current Liabilities.

Current Ratio = Current Assets

Current Liabilities

Current Ratio

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Ratios 1.26 1.58 1.44 1.67 2.13

Table 5. 1 Current Ratio Analysis

Figure 5. 1 Current Ratio Analysis

Interpretation

 Current ratio is always 2:1 it means the current assets two time of current liability.

 After observing the figure the current ratio is fluctuating.

 In the year 2008 ratio is showing good shine.

 Hear ratio is increase as a increasing rate from 2004 to 2008.

 Company is no where near the ideal ratio in every year but every company can not achieve this ratio.

 Current ratio is increased in 2007-08 as compared to 2003-04 because of increase in Inventories 100.96% and 123.77 % increased in Cash and Bank balance.

 Current ratio is decreased in 2005-06 as compared to the last year because of increase in liabilities by 45.39% and 93.19% in increasing in Provision.

5.2.2 Quick Ratio

This ratio is designed to show the amount of cash available to meet immediate payments. It is obtained by dividing the quick assets by quick liabilities. Quick Assets are obtained by deducting stocks from current assets. Quick liabilities are obtained by deducting bank over draft from current liabilities.

Quick Ratio = Quick Assets

Current Liabilities

Quick Ratio

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Ratios 1.2 1.5 1.4 1.6 2.0

Table 5. 2 Quick Ratio Analysis

Figure 5. 2 Quick Ratio Analysis

Interpretation

 Standard Ratio is 1:1

 Company's Quick Assets is more than Quick Liabilities for all these 5 years.

 In 2007-08 the ratio is increasing because of increase in bank and cash balance.

 So all the years has quick ratio exceeding 1, the firm is in position to meet its immediate obligation in all the years.

 In 2005-06 quick ratio is decreased because the increase in quick assets is less proportionate to the increased quick liabilities.

 The Quick ratio was at its peak in 2007-08, while was lowest in the 2004-05.

5.2.3 Networking Captial

Networking capital = Current Assets – Current Liabilities

Net working capital

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Trend 4534.3 10497.8 13798.0 28050.0 61577.0

Table 5.3 Networking Capital

Figure 5.3 Networking capital

Interpretation

 This ratio represents that part of the long term funds represented by the net worth and long term debt, which are permanently blocked in the current assets.

 It is Increasing Double than year by year because of assets increasing fast than liabilities.

5.3 Profitability Ratios

A company should earn profits to survive and grow over a long period of time. It would be wrong to assume that every action initiated by management of company should be aimed at maximizing profits, irrespective of social as well as economical consequences. It is a fact that sufficient must be earned to sustain the operation of the business to be able to obtain funds from investors for expansion and growth and to contribute towards the responsibility for the welfare of the society in business environment and globalization.

The profitability ratios are calculated to measure the operating efficiency of the company.

The following Profitability Ratios are calculated for the company.

• Gross Profit Ratio

• Operating Profit Ratio

• Net Profit Ratio

• Rate Of Return On Investment

• Rate Of Return On Equity

5.3.1 Gross Profit Ratio

This is the ratio expressing relationship between gross profit earned to net sales. It is a useful indication of the profitability of business. This ratio is usually expressed as percentage. The ratio shows whether the mark-up obtained on cost of production is sufficient however it must cover its operating expenses.

Gross Profit Ratio = Gross Profit X 100

Sales

Gross profit ratio analysis

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Trend 29.8 31.7 32.6 33.7 33.0

Table 5.4 Gross Profit Ratio Analysis

Figure 5.4 Gross Profit Ratio Analysis

Interpretation

 GP Ratio shows how much efficient company is in Production.

 GP is decreasing 2007-08 due to higher production cost.

 Gross sales and services are increasing year by year so in effect Gross profit ratio is icreasing year by year up to 2007.

5.3.2 Operating Profit Ratio

This ratio shows the relation between Cost of Goods Sold + Operating Expenses and Net Sales. It shows the efficiency of the company in managing the operating costs base with respect to Sales. The higher the ratio, the less will be the margin available to proprietors.

Operating Profit Ratio = COGS+Operating expences X 100

Sales

Operating ratio

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Trend 83.5 80.0 79.0 77.9 81.7

Table 5.5 Operating Profit Ratio Analysis

Figure 5.5 Operating Profit Ratio Analysis

Interpretation

 Operating ratio is lowest during current 2007.

 This shows that the expenses incurred to earn profit were less compared to the previous two years.

 Operating ratio is decreses feom 2004 to anward decreasing rate.

 From the graph conclusion is made that company is not on the right track by efficiently cutting down manufacturing, administrative and selling distribution expenses.

5.3.3 Net Profit Ratio

= Net profit x 100

Net sales

Net profit ratio

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Trend 16.3 19.4 19.2 19.8 17.7

Table 5.6 Net Profit Ratio Analysis

Figure 5.6 Net Profit Ratio Analysis

Interpretation

 After observing the figure the ratio is fluctuating.

 Company has rise in its net profit in 2006-07 as compared to the previous year because the company has increased its sales 41.45% .

 Though the company's sale is continuously rising but the net profit is not so much increased so management should take some steps to decrease its expenses.

 Sales is decrease in 2008 compare to 2007

 The overall ratio is showing good position of the company.

5.3.4 Return On Investment

Rate of Return on Investment indicates the profitability of business and is very much in use among financial analysts.

ROI= EBIT X 100

Total Assets

Return On Investment

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Trend 32.7 39.7 35.7 30.6 18.6

Table 5.7 Rate of Return on Investment Ratio Analysis

Figure 5.7 Rate of Return on Investment Ratio Analysis

Interpretation

 From the above observation it can be seen that ratio is fluctuating.

 In the year 2005-06 Rate of Return on Investment is slightly increase as compared to previous year

 Ratio is decreasing after 2005 at adecreasing rate because of asseets increase compare to sales.

 The company's Total Assets is increased to 86.51%, so ROI is decreased so conclusion made that company is not utilizing its assets and investment efficiently.

5.3.5 Rate of Return on Equity

Rate of Return on Equity shows what percentage of profit is earned on the capital invested by ordinary share holders.

Rate of Return on Equity = Profit for the Equity

Net worth

Rate of return on equoty

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Trend % 22.2 11.5 7.1 10.0 5.5

Table 5.8 Rate of Return on Equity Ratio Analysis

Figure 5.8 Rate of Return on Equity Analysis

Interpretation

 ROE is remaining almost same Between 2005 to 2007, but it is decrease in2008 because the the company has increase share capital but profit not getting that much increase.

 Company is getting same return on equity.

 As a result the share holders are getting higher return every year and investment portfolio scheme selection was a judicious decision taken by the company.

 This happens because Profit and Share Capital both increasing same way.

5.4 Asset Turnover Ratios

Asset Turnover Ratio are basically productivity ratios which measure the output produced from the given input deployed. This relationship is shown as under

Productivity = Output

Input

Assets are inputs which are deployed to generate production (or sales). The same set of assets when used intensively produces more output or sales. If the asset turnover is high, it shows efficient or productive use of input.

The following Assets Turnover Ratios are calculated for the company.

• Total Assets Turnover

• Net Fixed Assets Turnover

• Net Working Capital Turnover

• Inventory Turnover Ratio

• Debtor Turnover (in times)

5.4.1 Total Asset Turnover Ratio

The amounts invested in business are invested in all assets jointly and sales are affected through them to earn profits. Thus it is the ratio of Sales to Total Assets. .It is the ratio which measures the efficiency with which assets were turned over a period.

Total Asset Turnover Ratio = Sales

Total Assets

Total assets turnover ratio

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Trend 1.5 1.5 1.6 1.5 1.2

Table 5.9 Total Asset Turnover Ratio Analysis

Figure 5.9 Total Asset Turnover Ratio Analysis

Interpretation

 The total assets turnover ratio is almost same in all years.

 The Assets turnover Ratio is near by 1.5 in all 5 years which shows effective utilization of assets from the company's view point.

 In the year 2005-06 ratio is increased because of company's total assets is increased by 24.52%, but sales is increased by 29.92%.So the ratio is increased but in current year it is decreased because sale increasing by 41.45% and Assets increasing by 49.28%.

5.4.2 Net Fixed Assets Turnover

To ascertain the efficiency & profitability of business the total fixed assets are compared to sales. The more the sales in relation to the amount invested in fixed assets, the more efficient is the use of fixed assets. It indicates higher efficiency. If the sales are less as compared to investment in fixed assets it means that fixed assets are not adequately utilized in business. Of course excessive sale is an indication of over trading and is dangerous.

Net Fixed Assets Turnover Ratio = Sales

Net Fixed Assets

Total fixed assets turnover ratio

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Time 4.0 4.2 4.9 4.0 2.4

Table 5.10 Net Fixed Asset Turnover Ratio Analysis

Figure 5.10 Net Fixed Assets Turnover Ratio Analysis

Interpretation

 Here the ratio of Net Fixed Asset Turnover is continuously increasing up to 2006 and after that it has strated decline.Because sales as wellas assets boths are equally increase.

 Net Fixed Assets Turnover Ratio is increasing year by year because of Sale is increasing continuously.

 It indicates that the company maximizes the use of its fixed assets to earn profit in the business so that whatever amount is invested by company in fixed asset, gives maximum productivity which helps to increase sales as well as profit.

5.4.3 Inventory Turnover Ratio

Inventory Turnover Ratio: The no. of times the average stock is turned over during the year is known as stock turnover ratio.

Inventory Turnover Ratio = COGS

Average stock

Total Inventory turnover ratio

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Time 30.3 22.6 24.3 19.8 16.0

Table 5. 11 Inventory Turnover Ratio Analysis

Figure 5. 11 Inventory Turnover Ratio Analysis

Interpretation

 From the above calculation we can say that the ratio is decreasing. It mens inventory is not spdly convert in to sales. So that it is bad for the company.

 In 2003-04 ratio is increased as compared to after that all year so management should take care about good efficiency of stock management.

 But in 2006 onward ratio is decreasing because of increase in COGS. So company should devise a systematic operational plan for inventory control.

5.4.4 Average age of Inventories

This ratio indicates the waiting period of the investments in inventories and is measured in days, weeks or months. Inventory turnover and average age of inventories are inversely related.

Average age of Inventories Ratio = 360 days

Inventory Turnover

Average age of Inventories

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Days 11.9 15.9 14.8 18.2 22.4

Table 5. 12 Average age of Inventories Ratio Analysis

Figure 5. 12 Average age of Inventories Ratio Analysis

Interpretation

 This graph shows that inventory convert into cash in short time period.

 Inventory turnover ratio is low in 2003-04 So In this year inventory is converted in cash 11.9 days.

 The inventory conversation in to cash time duration is increases from 2004 to every year so the management should tray to efficient inventory conversation,so it will It shows that company effectiveness utilizing its Inventories in quickly.

5.4.5 Debtor Turnover Ratio

Debtor turnover ratio: The debtor turnovers suggest the no. of times the amount of credit sale is collected during the year.

Debtor's Turnover Ratio = Sales

Average Debtors

Debtors turn over in (times)

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Time 4.9 3.8 3.7 3.7 1.5

Table 5. 13 Debtor Turnover Ratio Analysis

Figure 5.13 Debtor Turnover Ratio Analysis

Interpretation

 Debtor turnover indicates how quickly the company can collect its credit sales revenue.

 Here the ratio is continuously decreasing, so that the company's collection of credit sales is efficient management is improved its collection period every year so it shows that the management have an ability to collect its money from his debtors. So they can invest that money on Assets, HRD and other investments.

5.5 Finance Structure Ratios

Finance Structure Ratios indicate the relative mix or blending of owner's funds and outsiders' debt funds in the total capital employed in the business. It should be noted that equity funds are the prime fund which increase progressively through reinvestment of profits, while outside debt funds are supplementary funds and are added at the discretion of the management.

The following Finance Ratios are calculated for the company.

• Debt Ratio

• Debt-Equity Ratio

• Interest Coverage Ratio

5.5.1 Debt Ratio

Debt ratio indicates the long term debt out of the total capital employed.

Debt Ratio = Long Term Debt

Total Capital Employed

Table 5. 14 Debt Ratio Analysis

Debt Ratio

2003-04 2004-05 2005-06 2006-07 2007-08

Trend 0.0284 0.0165 0.0114 0.0383 0.384

Figure 5. 14 Debt Ratio Analysis

Interpretation

 From the above calculation it seems that the ratio is fluctuating.

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