Chapter - 1 INTRODUCTION OF RATIO ANALYSIS.

I) INTRODUCTION ABOUT RATIO ANALYSIS: Ratio analysis is the method or process by which the relationship of items or group of items in the financial statement are computed, determined and presented. Ratio analysis is an attempt to derive quantitative measures or guides concerning the financial health and profitability of a business enterprise. Ratio analysis can be used in both in trend and static analysis. The ratio analysis is the most powerful tool of financial analysis. Several ratios calculated from the accounting data can be grouped into various classes according to financial activity or function to be evaluated. II) DEFINITION: The indicate quotient of two mathematical expressions and as the relationship between two or more things. It evaluates the financial position and performance of the firm. As started in the beginning many diverse groups of people are interested in analyzing financial information to indicate the operating and financial efficiency and growth of firm. These people use ratios to determine those financial characteristics of firm in which they interested with the help of ratios one can determine. The ability of the firm to meet its current obligations.

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 The extent to which the firm has used its long-term solvency by borrowing funds. The efficiency with which the firm is utilizing its assets in generating the sales revenue. The overall operating efficiency and performance of firm. The information contained in these statements is used by management, creditors, investors and others to form judgment about the operating performance and financial position of firm. Uses of financial statement can get further insight about financial strength and weakness of the firm if they properly analyze information reported in these statements. Management should be particularly interested in knowing financial strength of the firm to make their best use and to be able to spot out financial weaknesses of the firm to take suitable corrective actions. The further plans firm should be laid down in new of the firms financial strength and weaknesses. Thus financial analysis is the starting point for making plans before using any sophisticated forecasting and planning procedures. Understanding the past is a prerequisite for anticipating the future.

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Chapter - 2 OBJECTIVES AND METHODOLOGY.

I) NEED OF THE STUDY: The prevalent educational system providing the placement training at an industry being a part of the curriculum has helped in comparison of theoretical knowledge with practical system. It has led to note the convergences and divergence between theory and practice. The study enables us to have access to various facts of the organization. It helps in understanding the needs for the importance and advantage of materials in the organization, the study also helps to exposure our minds to the integrated materials management the various procedures, methods and technique adopted by the organization. The study provides knowledge about how the theoretical aspects are put in the organization in terms of described below: To pay wages and salaries. For the purchase of raw materials, spares and components parts. To incur day-to-day expenses. To meet selling costs such as packing, advertising. To provide credit facilities to customers. To maintain inventories and raw materials, work-in-progress and finished stock.

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II) SCOPE OF THE STUDY: The scope of the study is limited to collecting financial data published in the annual reports of the company every year. The analysis is done to suggest the possible solutions. The study is carried out for 4 years (2009- 13). Using the ratio analysis, firms past, present and future performance can be analyzed and this study has been divided as short term analysis and long term analysis. The firm should generate enough profits not only to meet the expectations of owner, but also to expansion activities. III) OBJECTIVES OF STUDY: 1. To study and analyze the financial position of the Company through ratio analysis. 2. To suggest measures for improving the financial performance of organization. 3. To analyze the profitability position of the company. 4. To assess the return on investment. 5. To analyze the asset turnover ratio. 6. To determine the solvency position of company. 7. To suggest measures for effective and efficient usage of inventory.

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IV) REVIEW OF LITERATURE: A. FINANCIAL ANALYSIS: Financial analysis is the process of identifying the financial strengths and weakness of the firm. It is done by establishing relationships between the items of financial statements viz., balance sheet and profit and loss account. Financial analysis can be undertaken by management of the firm, viz., owners, creditors, investors and others. Objectives of the financial analysis: Analysis of financial statements may be made for a particular purpose in view. 1. To find out the financial stability and soundness of the business enterprise. 2. To assess and evaluate the earning capacity of the business. 3. To estimate and evaluate the fixed assets, stock etc., of the concern. 4. To estimate and determine the possibilities of future growth of business. 5. To assess and evaluate the firms capacity and ability to repay short and long term loans. Parties interested in financial analysis. The users of financial analysis can be divided into two broad groups. I. Internal users 1. Financial executives 2. Top management

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II.

External users 1. Investors 2. Creditor. 3. Workers 4. Customers 5. Government 6. Public 7. Researchers

Significance of financial analysis: Financial analysis serves the following purpose: 1) To know the operational efficiency of the business: The financial analysis enables the management to find out the overall efficiency of the firm. This will enable the management to locate the weak Spots of the business and take necessary remedial action. 2) Helpful in measuring the solvency of the firm: The financial analysis helps the decision makers in taking appropriate decisions for strengthening the short-term as well as long-term solvency of the firm.

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3) Comparison of past and present results: Financial statements of the previous years can be compared and the trend regarding various expenses, purchases, sales, gross profit and net profit can be ascertained. 4) Helps in measuring the profitability: Financial statements show the gross profit, & net profit. 5) Inter-firm comparison: The financial analysis makes it easy to make inter-firm comparison. This comparison can also be made for various time periods. 6) Bankruptcy and Failure: Financial statement analysis is significant tool in predicting the bankruptcy and the failure of the business enterprise. Financial statement analysis accomplishes this through the evaluation of the solvency position. 7) Helps in forecasting: The financial analysis will help in assessing future development by making forecasts and preparing budgets. B. METHODS OF ANALYSIS: A financial analyst can adopt the following tools for analysis of the financial statements. These are also termed as methods of financial analysis.

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1. Comparative statement analysis 2. Common-size statement analysis 3. Trend analysis 4. Funds flow analysis 5. Ratio analysis C. NATURE OF RATIO ANALYSIS: Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as "the indicated quotient of mathematical expression" and as "the relationship between two or more things". A ratio is used as benchmark for evaluating the financial position and performance of the firm. The relationship between two accounting figures, expressed mathematically, is known as a financial ratio. Ratio helps to summarizes large quantities of financial data and to make qualitative judgment about the firm's financial performance. The persons interested in the analysis of financial statements can be grouped under three head owners (or) investors who are desired primarily a basis for estimating earning capacity. Creditors who are concerned primarily with Liquidity and ability to pay interest and redeem loan within a specified period. Management is interested in evolving analytical tools that will measure costs, efficiency, liquidity and profitability with a view to make intelligent decisions. D. STANDARDS OF COMPARISON The ratio analysis involves comparison for an useful interpretation of the financial statements. A single ratio in itself does not indicate favorable or
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unfavorable condition. It should be compared with some standard. Standards of comparison are: 1. Past Ratios 2. Competitor's Ratios 3. Industry Ratios 4. Projected Ratios Past Ratios: Ratios calculated from the past financial statements of the same firm. Competitor's Ratios: Ratios of some selected firms, especially the most progressive and successful competitor at the same point in time. Industry Ratios: Ratios of the industry to which the firm belongs. Projected Ratios: Ratios developed using the projected financial statements of the same firm. E. TYPES OF RATIOS: Management is interested in evaluating every aspect of firm's performance. In view of the requirement of the various users of ratios, we may classify them into following four important categories: 1. Liquidity Ratio 2. Leverage Ratio 3. Activity Ratio 4. Profitability Ratio
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V) RESEARCH METHODOLOGY: 1. Research Design: In view of the objects of the study listed above an exploratory research design has been adopted. Exploratory research is one which is largely interprets and already available information and it lays particular emphasis on analysis and interpretation of the existing and available information. To know the financial status of the company. To know the credit worthiness of the company. To offer suggestions based on research finding.

2. Data Collection Methods: A) Primary Data: Information collected from internal guide and finance manager. Primary data is first hand information. B) Secondary Data: Company balance sheet and profit and loss account. Secondary data is second hand information. Data Collection Tools: To analyze the data acquire from the secondary sources Ratio Analysis. The scope of the study is defined below in terms of concepts adopted and period under focus.
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First the study of Ratio Analysis is confined only to the Amarraja Batteries Limited. Secondly the study is based on the annual reports of the company for a period of 4 years from 2008-09 to 2012-13 the reason for restricting the study to this period is due time constraint. VI) LIMITATIONS: The study was limited to only four years Financial Data. The study is purely based on secondary data which were taken primarily from Published annual reports of Amararaja batteries Ltd., There is no set industry standard for comparison and hence the inference is made on general standards. The ratio is calculated from past financial statements and these are not indicators of future. The study is based on only on the past records. Non availability of required data to analysis the performance. The short span of the time provided also one of limitations.

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Chapter - 3 COMPANY PROFILE

Amara Raja Batteries Limited (ARBL) incorporated under the companies Act, 1956 in 13th February 1985, and converted into public Limited Company on 6th September 1990. The chairman and Managing Director of the company is Sri Gala Ramachandra Naidu, ARBL is a first company in India, which manufactures Values regulated Lead Acid (VRLA) Batteries. The main objectives of the company are a manufacturing of good quality of Sealed Maintenance Free (SMF) acid batteries. The company is setting up to Rs.1, 920 lakhs plant is in 185 acres in Karakambadi village, Renigunta Mandal. The project site is notified under B category. The company has the clear-cut policy of direct selling without any intermediate. So they have set up six branches and are operated by corporate operations office located in Chennai. The company has virtual monopoly in higher A.H.(Amp Hour) rating Market its product VRLA . It is also having the facility for industrial and automotive batteries. Amara Raja is 5 S Company and its aim are to improve the work place environment by using 5S techniques which is A systematic and rational approach to workplace organization and methodical house keeping with a sense of purpose, consisting of the following five elements.

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CULTURE AND ENVIRONMENT: Amara Raja is putting a number of HRD initiatives to foster a spirit of togetherness and a culture of meritocracy. Involving employees at all levels in building organizational support plans and in evolving our vision for the organization. ARBL encourages initiative and growth of young talent allows the organization to develop innovation solution and ideas. Benchmark pollution control measures, energy conversation measures, waste reduction schemes, massive green belt development programs, employee health monitoring and industrial safety programs have helped ARBL to take further environment management program. Amara Raja has now targeted to secure the ISO 14001 certification. QUALITY POLICY: ARBLs main aim is to achieve customer satisfaction through the collective commitment of employees in design; manufacture and marketing of reliable power systems, batteries, allied products and services. AMARA RAJA GROUP OF COMPANIES: AMARA RAJA POWER SYSTEMS PRIVATE Ltd. (ARPSL), Karakambadi, Tirupati. MANGAL PRECISION PRODUCTS PRIVATE Ltd1. (MPPL1), Karakambadi, Tirupati.

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 MANGAL PRECISION PRODUCTS PRIVATE Ltd2. (MPPL2), Petamitta, Chittoor. AMARA RAJA ELECTRONICS PRIVATE LIMITED (AREPL), Dighavamgham, Chittoor. GALLA FOODS PRIVATE LIMITED (GFPL), Puthalapattu Mandal, Chittoor. INDUSTRIAL BATTERY DIVISION (IBD): Amara Raja has become the benchmark in the manufacturer of industrial batteries. India is one of the largest and fastest growth markets for industrial batteries in the world. Amara Raja is leading in the front, with an 80% market share is stand by VRAL batteries point of view. It is also having the facility for production plastic components. ARBL is the first company in India to manufacture VRLA (SMF) Batteries. The initial investment of the company has Rs.1920 lakhs; the total land is around 18 acres in Karambadi village, Renigunta Mandal. The project site is notified under B category. Products Amara Raja being the first entrant in this industry and has the privilege of pioneering VRLA technology in India. Amara Raja has established itself as a reliable supplier of high quality products to major segments like Telecom, Railways and power.

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Competitors The Major competitors for Amara Raja Batteries are Exude industries Ltd, and GNB. Customers ARBL has prestigious OEM (Original Equipment Manufacturer) clients like FORD, GENERAL MOTORS, DAEWOO MOTORS, MERCEDES BENZ, DAIMLER CHRYSLER, MARUTI UDYOG LTD., Premier Auto Ltd., and recent acquired a preference supplier alliance with ASHOK LEYLAND, HINDUSTAN MOTORS, TELCO, MAHINDRA & MAHINDRA and SWARAJ MAZDA.

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Chapter - 4 DATA ANALYSIS & INTERPRETATION I. BALANCE SHEET RATIO:

1) Current Ratio: Current ratio is an acceptable measure of firms short-term solvency Current assets includes cash within a year, such as marketable securities, debtors and inventors. Prepaid expenses are also included in current assets as they represent the payments that will not made by the firm in future. All obligations maturing within a year are included in current liabilities. These include creditors, bills payable, accrued expenses, short-term bank loan, income-tax liability in the current year. Current ratio is calculated by dividing current assets and current liabilities. Current Assets Current Liabilities

Current Ratio =

The current ratio is a measure of the firm's short term solvency. It indicated the availability of current assets in rupees for every one rupee of current liability. A current ratio of 2:1 is considered satisfactory. The higher the current ratio, the greater the margin of safety; the larger the amount of current assets in relation to current liabilities, the more the firm's ability to meet its obligations. It is a cured and -quick measure of the firm's liquidity.

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S.No 1.

Year 2009-10 2010-11

CURRENT ASSETS 1,612,642,497 2,280,704,176 3,500,193,294 5,975,961,025

CURRENT LIABILITIES 638,958,266 1,181,003,846 1,312,272,610 2,020,744,952

CURRENT RATIO 2.52 1.93 2.67 2.96

2. 2011-12 3. 2012-13 4.

Interpretation: The standard norm for current ratio is 2:1. During the year 2009 the ratio is 2.52 and it has decreased to 1.93 during the year 2010 and increased to 2.67 in 2011 and it is increased to 2.67 in the year 2012 and it has increased to 2.96 in the year 2013. The ratio above was standard except in the year 2011. So the ratio was satisfactory. 2) Quick Ratio: Quick Ratio establishes a relationship between quick or liquid assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Cash is the most liquid asset, other assets that are considered to be relatively liquid asset and included in quick assets are debtors and bills receivables and marketable securities (temporary quoted investments). Inventories are converted to be liquid. Inventories normally require some time for realizing into cash; their value also has a tendency to fluctuate. The quick ratio is found out by dividing quick assets by current liabilities.
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Quick Ratio =

Quick Assets Quick Liabilities

Generally, a quick ratio of 1:1 is considered to represent a satisfactory current financial condition. Quick ratio is a more penetrating test of liquidity than the current ratio, yet it should be used cautiously. A company with a high value of quick ratio can suffer from the shortage of funds if it has slow- paying, doubtful and long duration outstanding debtors. A low quick ratio may really be prospering and paying its current obligation in time. S.NO 1 2 3 4. Year 2009-10 2010-11 2011-12 2012-13 Interpretation: The standard norm for the quick ratio is 1:1. Quick ratio is decreased in the year 2010 to 1.83 from 2.45. Then, it decreased to 1.45 in the year 2011. And it has increased to 1.96 in the year 2012 and then it increased to 1.99 in the year 2013.However the ratio was above the standard norm so the ratio was satisfactory. 3) Debt equity ratio: It indicates the relationship describing the lenders contribution for each rupee of the owner's contribution is called debt-equity ratio. Debt equity ratio is directly computed by dividing total debt by net worth. Lower the debt-equity
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QUICK ASSETS 1,171,683,584 1,708,741,955 2,578,479,879 4,032,625,321

QUICK LIABILITIES 638,958,266 1,181,003,846 1,312,272,610 2,020,744,952

QUICK RATIO 1.83 1.45 1.96 1.99

ratio, higher the degree of protection. A debt-equity ratio of 2:1 is considered ideal. The debt consists of all short term as well as long-term and equity consists of net worth plus preference capital plus Deferred Tax Liability. Long term Debts Share holder funds (Equities)

Debt Equity Ratio =

S..No

Year 2009-10

TOTAL DEBT 233,058,880 378,672,427 1,407,083,880 3,162,620,560

NET WORTH D.E.RATIO 1,806,848,671 2,012,852,920 2,436,657,677 3,331,014,470 0.13 0.19 0.58 0.95

1. 2010-11 2. 2011-12 3. 2012-13 4.

Interpretation: The ratio gives results relating to the capital structure of a firm. Debt equity ratio is 0.09 in the year 2009 and it increased to 0.13 & 0.19 in the year 2010 and 2011. In the year 2012 & 2013 the ratio has increased to 0.58 & 0.95. We can conclude that the company depends on the debt fund is increasing. 4) Interest Coverage Ratio: The interest coverage ratio or the time interest earned is used to test the firms debt servicing capacity. The interest coverage ratio is computed by dividing earnings before interest and taxes by interest charges. The interest coverage ratio shows the number of times the interest charges are covered by
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funds that are ordinarily available for their payment. We can calculate the interest average ratio as earnings before depreciation, interest and taxes divided by interest. EBIT Interest

Interest Coverage ratio =

S.NO 1 2 3 4

Year 2009-10 2010-11 2011-12 2012-13

EBIT 137,259,583 386,899,738 742,908,741 1,588,690,299

INTEREST 1,448,427 13,435,515 30,924,293 129,308,874

I.C.RATIO 94.76 28.80 24.02 12.29

Interpretation: Interest coverage ratio is 07.56 in the year 2009. It is increased automatically to 94.76 in the year 2010. But, it is decreased to 28.80 in the year 2011 and decreased to 24.02 in the year 2012 and it again decreased to 12.29 in the year 2013. In this position outside investors is interested to invest the money in this company. 5) Total Assets turnover ratio: This ratio expresses relationship between the amounts invested in this assets and the resulting in terms of sales. This is calculated by dividing the net sales by total assets. The higher ratio means better utilization and vice-versa.
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This ratio shows the firm's ability in generating sales from all financial resources committed to total assets. Total assets turnover ratio = Sales Total Assets

S.NO 1 2 3 4

Year 2009-10 2010-11 2011-12 2012-13

SALES 2,685,436,096 4,458,295,779 7,451,032,998 13,499,867,499

TOTAL ASSETS 2,809,793,132 3,692,541,508 5,292,107,128 8,683,886,037

T.A.T. RATIO 0.96 1.21 1.41 1.55

Interpretation: Total assets ratio is 0.83 in the year 2009 and it gradually increased year by year and reached to 1.55 in the year 2010. It means Total Assets is increased in every year. 6) Working capital turnover ratio: A firm may also like to relate net current assets or net working capital to sales. Working capital turnover indicates for one rupee of sales the company needs how many net current assets. This ratio indicates whether or not working capital has been effectively utilized market sales. Sales Working Capital

Working capital turnover ratio =

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S.NO 1 2 3 4

Year 2009-10 2010-11 2011-12 2012-13

SALES 2,685,436,096 4,458,295,779 7,451,032,998 13,499,867,499

WORKING CAPITAL 973,684,231 1,099,700,330 2,187,920,684 3,955,216,073

W.C.T. RATIO 2.76 4.05 3.41 3.41

Interpretation: Working capital turnover ratio is 2.41 in the year 2009 and it is increased to 2.76 in the year 2010. In the year 2011 increased to 4.05. Again it decreased to 3.41 in the year 2012 & 2013. The higher the working capital turnover the more favorable for the company. II. PROFIT AND LOSS ACCOUNT RATIO:

1) Gross profit ratio: First profitability ratio in relation to sales is the gross profit margin the gross profit margin reflects the efficiency with which management produces each unit of product. This ratio indicates the average spread between the cost of goods sold and the sales revenue. A high gross profit margin is a sign of good management. A gross margin ratio may increase due to any of following factors: higher sales prices cost of goods sold remaining constant, lower cost of goods sold, sales prices remaining constant. A low gross profit margin may reflect higher cost of goods sold due to firm's inability to purchase raw materials at

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favorable terms, inefficient utilization of plant and machinery resulting in higher cost of production or due to fall in prices in market. Gross Profit Net Sales

Gross profit ratio =

x 100

Gross profit = Net sales-Cost of goods sold Cost of goods sold = Opening stock + material consumed + manufacturing expenses - closing stock. S.NO Year GROSS PROFIT 1 2 3 4 2009-10 2010-11 2011-12 2012-13 456,886,268 958,490,549 2,126,367,806 3,717,403,516 SALES 2,685,436,096 4,458,295,779 7,451,032,998 13,499,867,499 G.P. RATIO (%) 17 21.5 28.5 27.5

Interpretation: From the above we can say that gross profit ratio is 16.2% in the year 2009 but it increased to 17 % & 21.5% in 2010 & 2011 and again it increased to 28.5% in the year 2012 and it is decreased to 27.5% in the year 2013. The company is maintaining proper control on trade activities. 2) Net profit ratio: Net profit is obtained when operating expenses, interest and taxes are subtracted from the gross profit. Net profit margin ratio established a relationship
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between net profit and sales and indicates management's efficiency in manufacturing, administering and selling products. This ratio also indicates the firm's capacity to withstand adverse economic conditions. A firm with a high net margin ratio would be in an advantageous position to survive in the face of falling selling prices, rising costs of production or declining demand for product. This ratio shows the earning left for share holders as a percentage of net sales. It measures overall efficiency of production, administration, selling, financing. Pricing and tax management. Jointly considered, the gross and net profit margin ratios provide a valuable understanding of the cost and profit structure of the firm and enable the analyst to identify the sources of business efficiency / inefficiency. Net Profit Net Sales

Net Profit Ratio =

x 100

S.NO 1 2 3 4

Year 2009-10 2010-11 2011-12 2012-13

PROFIT AFTER TAX 86,900,563 238,465,730 470,434,575 9,436,315,11

SALES 2,685,436,096 4,458,295,779 7,451,032,998 13,499,867,499

NET PROFIT MARGIN (%) 3.2 5.3 6.3 6.99

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Interpretation: During the year 2009 the net profit margin is 0.7 it suddenly increased to 3.2% in the year 2010 because of decreased in administration and selling expenses. In the next year, it again increased to 5.3 in the year 2011 and it again increased to 6.3 in 2012 and to 6.99 in the year 2013. 3) Return on investment: This is one of the most important profitability ratios. It indicates the relation of net profit with capital employed in business. Net profit for calculating return of investment will mean the net profit before interest, tax, and dividend. Capital employed means long term funds. E.B.I.T Capital Employed

Return on investment =

x 100

S.NO 1 2 3 4

Year 2009-10 2010-11 2011-12 2012-13

EBIT 137,259,583 386,899,738 742,908,741 1,588,690,299

CAPITAL EMPLOYED 2,170,834,866 2,511,537,662 3,979,834,518 6,663,141,085

R.O.I. RATIO 0.06 0.15 0.19 0.24

Interpretation: Return on Investment is very low in all years. But, in the year 2009, it reached to 6.51 due to less earnings.

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4) Stock turnover ratio: Stock turnover ratio indicates the efficiency of firm in producing and selling its product. It is calculated by dividing the cost of goods sold by the average stock. It measures how fast the inventory is moving through the firm and generating sales. The stock turnover ratio reflects the efficiency of inventory management. The higher the ratio, the more efficient the management of inventories and vice versa .However, this may not always be true. A high inventory turnover may be caused by a low level of inventory which may result if frequent stock outs and loss of sales and customer goodwill. Cost of goods sold Average stock Cost of goods sold = Raw materials consumed + payments & benefits to Stock turnover ratio = employees + manufacturing, selling & admin expenses + duties & taxes. Opening stock + Closing stock 2

Average stock =

S.NO

Year

COST OF GOODS AVERAGE SOLD STOCK 2,228,549,828 3,499,805,230 5,324,665,192 9,782,463,974 374,102,223 506,460,567 746,837,818 1,432,524,559

STOCK TURNOVER RATIO 5.96 6.91 7.13 6.83

1 2 3
O

2009-10 2010-11 2011-12 2012-13

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Interpretation: Inventory turnover ratio is 5.57 times in the year 2009. But, it is increased to 5.96 in the year 2010. Then, it is increased to 6.91in the year 2011 and again increased to 7.13 in the year 2012. But, it is decreased to 6.83 in the year 2013. Inventory turn over ratio increased for year by year that is company production is also increased. Subsequently sales are also increased. 5) Operating expenses ratio: The Operating expenses ratio explains the changes in the profit margin ratio. A higher operating expense is unfavorable since it will leave a small amount of operating income to meet interest, dividends. Operating expenses Net Sales

Operating expenses ratio =

x 100

S.NO

Year 2009-10 2010-11 2011-12

OPERATING EXPENSES 376,620,609 550,626,756 767,790,197 1,388,735,777

SALES 2,685,436,096 4,458,295,779 7,451,032,998 13,499,867,499

O.E. RATIO 14.02 12.35 10.30 10.30

1 I 2 3 4

2012-13

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Interpretation: Operating expenses ratio is 17.86% of sales in the year 2009 it decreased to 14.02% in the year 2010 and decreased in 2011 to12.35% and again it decreased in the next year 2012 to 10.30% and continued the same way. Then, it reached 10.30% in the year 2013. 6) Manufacturing, Selling and Admin expenses ratio: This ratio explains the changes in the profit margin ratio. A higher operating expense is unfavorable since it will leave a small amount of operating income to meet interest, dividends. Expenses Net Sales

Manufacturing, Selling and Admin expenses ratio =

100

S.NO

Year 2009-10 2010-11 2011-12

OPERATING EXPENSES 479,509,880 750,424,656 1,093,657,443 1,579,591,221

SALES 2,685,436,096 4,458,295,779 7,451,032,998 13,499,867,499

Exp. RATIO 17.86 16.83 14.67 11.70

1 I 2 3 4

2012-13

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Interpretation: Manufacturing, Selling and Admin expenses ratio is 19.80% of sales in the year 2009 it decreased to 17.86% in the year 2010 and decreased in 2011 to 16.83% and again it decreased in the next year 2012 to 14.67% and continued the same way. Then, it reached 11.70% in the year 2013. III. COMPOSITE RATIO:

1) Return on equity share holders fund: The return on equity share holders fund explains about the return of share holders with they get on their investment. Profit Available to Equity Shareholders Equity share holders fund

Return on equity share holders fund =

S.NO 1 2 3 4

Year Profit Available to Equity shareholders Equity Shareholders fund Shareholders 2009-10 2010-11 2011-12 2012-13 86,900,563 238,465,730 470,434,575 943,631,511 1,806,848,671 2,012,852,920 2,436,657,677 3,331,014,470

R.O.E.RATIO (%) 4.8 11.8 19.3 28.33

Interpretation: Return on equity in the year 2009 is 0.8 and it increased suddenly to 4.8 in the year 2010 and again it increased to 11.8 in the year 2011. Return on Equity of

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the company is at satisfactory level and then it increased to 19.3 in 2012 and again increased to 28.33 in 2013. 2) Debtors turnover ratio: It is found out by dividing the credit sales by average debtors Debtors turnover indicates the number of times debtors turnover each year. Sales Average Debtors

Debtors turnover ratio =

S.NO

Year SALES 2,685,436,096 4,458,295,779 7,451,032,998 13,499,867,499

AVERAGE DEBTORS 560,689,881 753,113,338 1,158,032,767 1,862,113,498

D.T.RATIO 4.79 5.92 6.43 7.25

1 2 3
4

2009-10 2010-11 2011-12 2012-13

Interpretation: Debtors turnover ratio is 4.31 times in the year 2009 and it is increased to 4.79 times in the year 2010 and increased to 5.92 times in the year 2011 and it increased to 6.43 times &7.25 times in the years 2012 & 2013. 3) Creditors turnover ratio: The ratio obtained by dividing the annual credit purchases with average accounts payable.

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Creditors turnover ratio =

Purchases Average Creditors

S.NO 1 2 3 4

Year 2009-10 2010-11 2011-12 2012-13

PURCHASES 1,422,358,585 2,244,170,172 4,086,818,721 8,125,662,265

AVERAGE CREDITORS 192,242,196 441,904,975 591,059,052 7,081,427,12

C.T. RATIO 7.4 5.1 6.9 11.47

Interpretation: Creditors turnover ratio is 6.1 in the year 2009. It is increased to 7.4 in the year 2010 and it is suddenly decreased to 5.1 in the year 2011 and it suddenly increased to 6.9 in the year 2012 but increased in the next year 2013 to 11.47. 4) Return on Investment: The conventional approach of calculated ROI is to divide PAT by investment. EBIT Capital Employed

Return on investment(ROI) =

S.NO 1 2 3 4

Year 2009-10 2010-11 2011-12 2012-13

EBIT 137,259,583 386,899,738 742,908,741 1,588,690,299

CAPITAL EMPLOYED 2,170,834,866 2,511,537,662 3,979,834,518 6,663,141,085

R.O.I. RATIO 0.06 0.15 0.19 0.24

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Interpretation: Return on Investment is very low in all years. But, in the year 2009, it reached to 6.51 due to less earnings. 5) NET WORKING CAPITAL RATIO: The difference between current assetsand current liabilities excluding

short-term bank borrowing is called net working capital or net current assets. Net working capital Net assets

Net working capital ratio =

S.NO 1 2 3 4

Year 2009-10 2010-11 2011-12 2012-13

NET WORKING NET WORKING NET ASSETS CAPITAL RATIO CAPITAL 973,684,231 1,099,700,330 2,187,920,684 3,955,216,073 1,935,207,714 2,191,397,006 3,817,892,862 6,501,134,460 0.50 0.50 0.57 0.61

Interpretation: Net Working Capital ratio is 0.45 in 2009 but increased to 0.50 in the next year i.e., 2010. From that year the ratio increased to 0.50 in 2011 and followed in 2012 also and increased to 0.61 in 2013 but condition of business working capital is not shortage.

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6) Fixed asset turnover ratio: The ratio is supposed to measure the efficiency with which fixed assets are employed a high ratio indicates a high degree of efficiency in asset utilization and a low ratio reflects inefficient use of assets. However, in interpreting this ratio, one caution should be borne in mind. When the fixed assets of the firm are old and substantially depreciated, the fixed assets turnover ratio tends to be high because the denominator of the ratio is very low. Net Sales Net Fixed Assets

Fixed assets turnover ratio =

S.NO 1 2 3 4

Year 2009-10 2010-11 2011-12 2012-13

SALES 2,685,436,096 4,458,295,779 7,451,032,998 13,499,867,499

NET FIXED ASSETS 948,631,374 1,043,547,559 1,568,304,581 1,888,508,475

F.A.T.RATIO 2.83 4.27 4.75 7.15

Interpretation: Fixed assets turn over ratio is 2.01 in the year 2009 and it is increased to 2.83 in the year 2010. In the year 2011 the ratio is 4.27 and it continued up to 4.75 and to 7.15 in the years 2012 & 2013.

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Chapter - 5 FINDINGS & SUGGESTIONS

1) FINDINGS: Except in the year 2011, the company is maintaining current ratio as 2 and more, standard which indicates the ability of the firm to meet its current obligations is more. It shows that the company is strong in working funds management. The company is maintaining of quick assets more than quick ratio. As the company having high value of quick ratio. Quick assets would meet all its quick liabilities with out any difficulty. The company is failed in keeping sufficient cash & bank balances and marketable securities. In the year 2009 debt equity ratio is 0.08 (8%) but it is increased to 0.11 (11%) & 0.16 (16%) in 2010 and 2011 increased every year. It shows that the company is losing its condition. Net working capital ratio is 0.45 in 2009 but also 0.50 in 2010. It is increased very high but condition of business working capital is not shortage. Debt Equity ratio is increasing every year. It indicates the company depends on the debt fund increasing. In the year 2009, the interest coverage ratio 7.56 which increased to 94.76 in the year 2010 and high fluctuations in the followed years. In this position, outside investors are interested to invest their money in this company.
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 Inventory turnover also increased for year by year that is company production is also increased. Subsequently sales are also increased. The net profit ratio of the company increasing over the study period. Hence the organization having the good control over the operating expenses. 2) SUGGESTIONS: The company has to increase the profit maximization and has to decrease the operating expenses. By considering the profit maximization in the company the earning per share, investment and working capital also increases. Hence, the outsiders are also interested to invest. The company should maintain sufficient cash and bank balances; they should invest the idle cash in marketable securities or short term investments in shares, debentures, bonds and other securities. The company must reduce its debtors collection period from 83 & 84 days to 40 days be adopting credit policy by providing discounts to the debtors. Return on investment is fluctuates every year. The company has to make efforts in increasing return on investments by reducing its administration, selling and other expenses. The company should increase its interest coverage ratio to serve long term debts. The net profit of the company is increasing over the study period. Hence the organization maintaining good control on all expenses.

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 The dividend per share has observed as raising trend over the study period, hence it may be suggested Amara Raja Batteries Limited should take key interest to maximize the share holder wealth by increasing dividend pay out. 3) CONCLUSION: Liquidity ratios, both current ratio and quick ratio are showing effectiveness in liquidity as in all the years current ratio is greater than the standard 2:1 and quick ratio is greater than the standard 1:1 ratio. The firm is maintaining a low cash balance and marketable securities which means they done cash payments. Debt equity ratio, solvency ratio and interest coverage ratio are showing an average increase in the long term solvency of the firm. The proprietary ratio is showing an average increase which means, the shareholders have contribute more funds to the total assets. Average payment period of the firm is showing the credit worthiness of the firm to its suppliers. Fixed assets turnover ratio is showing that the firm needs lesser investment in fixed assets to generate sales. The increasing trend of current assets turnover ratio indicates that the firm needs more investment in current assets for generating sales. The gross profit ratio, net profit ratio is showing the increasing trends. The profitability of the firm the increasing.

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 Operating ratio of the company has observed decreasing trend, hence it may be good control over the operating expenses. The interest that has to be paid is very less when compared to the sales. The firm is not utilizing the debt conservatively. The company financial performance is very good and also they will increase their business year by year by expanding their branches.

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Chapter - 6 ANNEXURE & BIBLIOGRAPHY

BALANCE SHEET AS AT 31 MARCH 2013 Particulars SOURCES OF FUNDS Shareholders Funds Share Capital Reserves & Surplus Loan Funds Secured Loans Unsecured Loans Deferred Tax liability Total APPLICATION OF FUNDS Fixed Assets Gross Block Schedule No. As at 31.03.2012 Rupees Rupees As at 31.03.2013 Rupees Rupees

1 2

113,875,000 2,322,782,677 2,436,657,677

113,875,000 3,217,139,470 3,331,014,470 2,266,545,502 896,075,058 1,407,083,880 136,092,961 3,979,834,518 3,162,620,560 169,506,055 6,663,141,085

3 4 5

1,074,874,049 332,209,831

6 2,577,786,073 3,105,843,108

Less: Depreciation Net Block Capital Work-in-Progress Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash & Bank Balances Loans, Advances & Deposits Other Current Assets Less: Current Liabilities & Provisions Liabilities Provisions Net Current Assets 7 8 9 10 11 12

(1,009,481,492) 1,568,304,581 61,667,597 1,629,972,178 161,941,656 921,713,415 1,459,544,977 256,000,280 859,824,054 3,110,568 3,500,193,294

(1,217,334,633) 1,888,508,475 657,409,912 2,545,918,387 162,006,625 1,943,335,704 2,264,682,019 511,453,739 1,248,478,477 8,011,086 5,975,961,025

13 735,304,583 576,968,027 1,312,272,610 2,187,920,684 1,027,373,819 99,371,133 2,020,744,952 3,955,216,073

Misc. Expenditure Total

14

3,979,834,518

6,663,141,085

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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2013 Schedule No. Year Ended on 31.03.12 Rupees 5,958,016,404 97,738,804 181,845,189 6,237,600,397 1,190,212 3,937,812,454 265,997,094 1,093,657,443 26,007,989 30,924,293 170,026,464 5,525,615,949 711,984,448 Year Ended on 31.03.13 Rupees 10,833,256,904 256,100,643 582,065,982 11,671,423,529 6,378,425 7,794,794,675 408,078,078 1,579,591,221 49,538,561 129,308,874 244,452,070 10,212,042,104 1,459,381,425 -

Particulars INCOME Sales Other Income Increase / (Decrease) in stocks Total Expenditure Purchase Of Finished Goods Raw Material Consumed Payments & Benefits to Employees Mfg., Selling Admn., & Other Expenses Taxes & Licenses Interest Depreciation Total Profit Before Taxation Add: Excess provision of Income Tax Less :Tax Provision for -Current Tax Including Deferred tax, Earlier Tax, Wealth tax, Fringe benefits tax Profit After Taxation Profit brought forward Year from Previous Profit available for appropriation Less: Transfer to General Reserve Proposed Dividend Dividend Tax Balance carried to Balance Sheet Basic Earnings per equity share

15 16

17 18 19 20 21

241,549,873 470,434,575 749,031,694 1,219,466,269 47,043,458 39,856,250 6,773,570 1,125,792,991 41.31

523,262,294 943,631,511 1,125,792,991 2,069,424,502 94,363,151 39,856,250 6,773,570 1,928,431,531 82.87

BIBLOGRAPHY 1. I.M.Pandey 2. M.Y.Khan & P.K.Jai 3. S.P. Jain & K.L. Narang 4. K.Rajeswara rao & G. Prasad 5. P.Kulakarni Web-site: www.amararaja.co.in
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Financial Management Financial Management Cost & Management accounting Accounting & Finance Financial Management