A SUMMER TRAINING PROJECT REPORT ON FINANCIAL ANALYSIS OF INTARVO TECHNOLOGIES LIMITED WITH THE HELP OF RATIOS SUBMITTED IN THE

PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE OF MASTER IN BUSINESS ADMINISTRATION 2010-12 UNDER THE GUIDANCE OF: DR. GAUTAM BUDHA SITARAM Assistant Professor/ Associate Professor/ Professor, RDIAS SUBMITTED BY: RAJNI RANI 00715903911 MBA, 3RD Semester Batch 2011 - 2013 RUKMINI DEVI INSTITUTE OF ADVANCED STUDIES An ISO 9001:2008 Certified Institute (Approved by AICTE, HRD Ministry, Govt. of India) Affiliated to Guru Gobind Singh Indraprastha University, Delhi 2A & 2B, Madhuban Chowk, Outer Ring Road, Phase-1, Delhi-110085

STUDENT DECLARATION
This is to certify that I have completed the Project titled Financial Analysis of Intarvo Technologies limited with the help of Ratio Analysis under the guidance of Dr.Gautam Budha Sitaram in the partial fulfillment of the requirement for the award of the degree of Master in Business Administration from Rukmini Devi Institute of Advanced Studies, New Delhi. This is an original work and I have not submitted it earlier elsewhere.

Name of the student: RAJNI RANI Course: MBA 3rd SEM Batch: 2011-2012

(Sign)

ACKNOWLEDGEMENT
I offer my sincere thanks and humble regards to Rukmini Devi Institute Of Advanced Studies, GGSIP University, New Delhi for imparting us very valuable professional training in MBA. I pay my gratitude and sincere regards to Dr Gautam Budha Sitaram, my project Guide for giving me the cream of his knowledge. I am thankful to him as he has been a constant source of advice, motivation and inspiration. I am also thankful to him for giving his suggestions and encouragement throughout the project work. I take the opportunity to express my gratitude and thanks to our computer Lab staff and library staff for providing me opportunity to utilize their resources for the completion of the project. I am also thankful to my family and friends for constantly motivating me to complete the project and providing me an environment which enhanced my knowledge.

EXECUTIVE SUMMARY
The objective of this project is to study and analyse the revenue and expenses and have do the financial analysis of the statement of Intarvo Technologies Limited. This project involves the study of various expenses which are present in Intarvo Technologies Limited. It includes starting from understanding the function how payable and its process works in such a large organization. Studying income statement and comparative balance sheet can tell us the financial condition of the company. Through these data one can find the corrective steps required to uplift the financial health of the company. In this project I have done thorough analysis of the financial statement and studied various ratios pertaining to the findings and have suggested various points through which Intarvo Technologies Limited can improve its financial position.

List of Tables Table no. Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 4.6 Table 4.7 Table 4.8 Table 4.9 Table 4.10 Table 4.11 Table 4.12 Table 4.13 Table 4.14 Table name Current Ratio Quick Ratio Debtors Turnover Ratio Average Collection Period Return on Assets Return on capital employed Return on Shareholders Equity Dividend Per Share Earning Per Share Dividend Pay-Out Ratio Fixed Asset Turnover Ratio Proprietary Ratio Net Profit Debt-Equity Ratio Page no.

List of Charts
Chart 1.1 Chart 1.2 Techniques of Financial Analysis Types of Ratio

List of Graphs
Graph 4.1 Graph 4.2 Graph 4.3 Graph 4.4 Graph 4.5 Graph 4.6 Graph 4.7 Graph 4.8 Graph 4.9 Graph 4.10 Graph 4.11 Graph 4.12 Graph 4.13 Graph 4.14

Current Ratio Quick Ratio Debtors Turnover Ratio Average Collection Period Return on Assets Return on capital employed Return on Shareholders Equity Dividend Per Share Earning Per Share Dividend Pay-Out Ratio Fixed Asset Turnover Ratio Proprietary Ratio Net Profit Debt-Equity Ratio

CHAPTER-I
INTRODUCTION

ABOUT THE INDUSTRY

The tertiary sector of the economy (also known as the service sector or the service industry) is one of the three economic sectors, the others being the secondary sector (approximately the same as manufacturing) and the primary

sector (agriculture, fishing, and extraction such as mining). The service sector consists of the "soft" parts of the economy, i.e. activities where people offer their knowledge and time to improve productivity, performance, potential, and sustainability. The basic characteristic of this sector is the production of services instead of end products. Services (also known as "intangible goods") include attention, advice, experience, and discussion. The production of information is generally also regarded as a service, but some economists now attribute it to a fourth sector, the quaternary sector. The tertiary sector of industry involves the provision of services to other businesses as well as final consumers. Services may involve the transport, distribution and sale of goods from producer to a consumer, as may happen in wholesaling and retailing, or may involve the provision of a service, such as in pest control or entertainment. The goods may be transformed in the process of providing the service, as happens in the restaurant industry. However, the focus is on people interacting with people and serving the customer rather than transforming physical goods. For the last 100 years, there has been a substantial shift from the primary and secondary sectors to the tertiary sector in industrialised countries. This shift is called tertarisation. The tertiary sector is now the largest sector of the economy in the Western world, and is also the fastest-growing sector. It is sometimes hard to define whether a given company is part of the secondary or tertiary sector. In order to classify a business as a service, one can use classification systems such as the United Nations's International Standard Industrial Classification standard, the United States' Standard Industrial Classification (SIC) code system and its new replacement, the North American Industrial Classification System (NAICS), the Statistical Classification of Economic Activities in the European Community (NACE) in the EU and similar systems elsewhere. These governmental classification systems have a first-level hierarchy that reflects whether the economic goods are tangible or intangible. For purposes of finance and market research, market-based classification systems such as the Global Industry Classification Standard and the Industry Classification Benchmark are
7

used to classify businesses that participate in the service sector. Unlike governmental classification systems, the first level of market-based classification systems divides the economy into functionally related markets or industries. The second or third level of these hierarchies then reflects whether goods or services are produced.

Theory of progression
Economies tend to follow a developmental progression that takes them from a heavy reliance on agriculture and mining, toward the development of manufacturing (e.g. automobiles, textiles, shipbuilding, steel) and finally toward a more service-based structure. The first economy to follow this path in the modern world was the United Kingdom. The speed at which other economies have made the transition to service-based (or "post-industrial") economies has increased over time. Historically, manufacturing tended to be more open to international trade and competition than services. However, with dramatic cost reduction and speed and reliability improvements in the transportation of people and the communication of information, the service sector now includes some of the most intensive international competition, despite residual protectionism.

Issues for service providers

Service providers face obstacles selling services that goods-sellers rarely face. Services are not tangible, making it difficult for potential customers to understand what they will receive and what value it will hold for them. Indeed some, such as consultants and providers of investment services, offer no guarantees of the value for price paid. Since the quality of most services depends largely on the quality of the individuals providing the services, it is true that "people costs" are a high component of service costs. Whereas a manufacturer may use technology, simplification, and other techniques to lower the cost of goods sold, the service provider often faces an unrelenting pattern of increasing costs. Differentiation is often difficult. For example, how does one choose one investment adviser over another, since they often seem to provide identical services? Charging a premium for services is usually an option only for the most established firms, who charge extra based upon brand recognition.
8

Industries
Examples of tertiary industries may include the following. :

Government Telecommunication Pharmaceuticals Healthcare/hospitals Public health Waste disposal Education Banking Insurance Financial services Legal services Consulting Information technology News medias Gaming Tourism Retail sales Franchising Real estate

COMPANY PROFILE

10

INTRODUCTION
InTarvo Technologies Limited (formerly known as RT Outsourcing Services Limited) is India's (1995) leading provider of Integrated Lifecycle Management (ILM) support services for Technology Products for Original Equipment Manufacturers, EMS Companies, Distributors, Large Corporation and Retail Chains. InTarvo stands for core ideology of Delivering Value (InTarvo = Integration +Value). As leaders in ILM services they cover end-to-end services like Technical Helpdesk, Installation & Commissioning, Repair & Refurbishment, E-Waste recycling etc. with experience of more than 15 years with 2,500+ technical experts in 150+ cities covering 400+ service centres. Sonoma Management Partners is one of their promoting companies.

Sonoma Management Partners

Sonoma Management Partners (SMP) is a technology and innovation focused mid-stage buyout and incubation firm catering to India based technology companies, with the word Technology defined in a much broader sense. In addition to buyouts, SMP scouts for acquiring significant minority stakes in the potential investee companies where it can add substantial operation value to support the growth of the company. SMP focuses on supporting portfolio companies to achieve rapid growth and operational efficiencies. SMPs team combines a unique mix of deep entrepreneurial, operating and investing experience which has resulted in portfolio companies witnessing a CAGR greater than 40%. SMP prides itself on the high touch deep engagement model... Their value system is build around following key aspects:

People are the biggest asset Passionate about developing the Entrepreneurial Ecosystem in India Quality maintenance in the midst of high growth Focused on creating innovative solutions and operational excellence .

11

12

Intarvo Technologies Limited Vision

To become a leading and preferred vertically integrated global Provider of technical support services. They will uphold there values on: Customer Focus Team Working Dignity of employee and concern for the individual Appropriate delegation of Authority

Encouraging new ideas and risk taking

Intarvo Technologies Limited Mission

Intarvo Technologies Limited is an excellence driven Organization and a pioneer in after sale services. Ensure customer delight Enhance Shareholder Value Treat employees as partners in progress Be a good Corporate citizen

13

QUALITY
InTarvo is known for its constant focus on quality which is driven from every aspect. So, every business activity is controlled by a skilled and knowledgeable team of professionals. The quality team is equipped with latest tools and technology to achieve service quality index.

TEAM
They have a team of professionals that includes Six Sigma, ITIL, Kaizen, IPC 610-D, 7 QC tools, 5S, and MIL-105-E, ISO certified professionals. . We are an ISO 9001:2008, ISO 14001:2004, ISO 27001:2005, OHSAS 18001:2007 & ROHS certified and our auditors constantly work towards maintaining and upgrading these standards.

PROCESS
The process involves a systematic manner of carrying out pre-defined operations at various stages. At the initial stage of any business a detailed process is brainstormed, documented and approved by our quality team. Engineers and technicians are also certified by the quality team before going live for further development in any process. .

They keep a check upon every call from call centre. They focus on out of the box sampling based on MIL-105-E standard for outgoing product from our service centre and refurbishing centre, this is done by a dedicated and independent team against specifications of the product &standards.

Periodic audits are also conducted by a team of qualified lead auditors to verify the process adherence at every business unit to ensure an error free process.

14

INVESTORS

New Enterprise Associates (NEA) For more than 30 years, NEA has been helping to build great companies. Their committed capital has grown to $11 billion and they have funded more than 650 companies in the Information Technology, Energy Technology and Healthcare sectors.

Motilal Oswal Group Motilal Oswal Private Equity Advisors Private Limited (MOPEAPL) is the private equity arm of Motilal Oswal Financial Services Limited (MOFSL). Started in 2006, it has quickly emerged as one of the most active private equity funds in the country with the primary investment objective of achieving long-term capital appreciation by providing financial, strategic and operational assistance to emerging companies in the Mid-Market (MMEs) space and Real Estate sector..

IDFC Investment Advisors Limited (IDFC IAL) IDFC Investment Advisors Ltd. (IDFCIA) was set-up in April 2006 to be engaged in the business of investment advisory and third party asset management business in India. IDFC IA is a 100 % subsidiary of IDFC Asset Management Company Limited which in turn is a 100% subsidiary of IDFC Ltd. IDFC recently completed the acquisition of Standard Chartered Asset Management Co. Pvt. Ltd. (SCAMC) and Standard Chartered Trustee Co. Pvt. Ltd. in India. Standard Chartered Mutual Fund, now renamed IDFC Mutual Fund, manages assets of about US$ 5 billion across a range of uniquely positioned debt and equity products. IDFC AMC (erstwhile SCAMC) brings with it proven fund management capabilities excelling in creating innovative products that have gone on to become burgeoning categories within the Indian MF industry.

15

Major services provided by Intarvo Technologies Limited:

Technical Assistance Installation and Commissioning Repair and Refurbishment Return merchandise authorization Logistics Product upgrades Remote infrastructure management Warehousing & spare parts management Return merchandise authorization(RMA) management & warranty fulfillment

Major products that Intarvo Technologies Limited specializes in:

VSAT devices such as IDU/ODU Mobiles (GSM,CDMA, PDA) GSM & CDMA FWP / FWT Set Top Boxes Lease Line Modems ATM Machines EDC Machines NW Cards Automation and Security Products Power Supplier

16

Intarvo Technologies Limited is the Clients for:

HP IBM ACER Toshiba Lenovo TCS NSN Educomp KAON Technicolor TPV Chimei Innolux Western digital Samsung Vodafone Reliance Micromax Idea Emerson NCR NEC Zenith Aparto Avaya Global Connect Intex Zenith

17

AWARDS

Deloitte Technology Fast 500 Asia Pacific Rankinga global platform for measuring, recognizing and analysing the growth of the fastest-growing technology companies in the region. Five hundred companies are ranked according to revenue growth rates over the past three years.

Deloitte Technology Fast 50 India 2007, 2008, 2009 & 2010 program conducted by Deloitte Touch Tohmatsu

Deloitte Technology Fast 500 Asia Pacific Ranking & CEO Survey 2007, 2008, 2009 & 2010

Winner of prestigious TIE Entrepreneur Excellence award during the TiEcon annual conference Oct.2008

Winner of VARIndia Star Nite Award 2009 & 2011, for Best After Market Services Company

CERTIFICATIONS
To set standard guidelines and follow best practices implemented and got certification on following quality standards ISO 9001:2008 (QMS - Quality Management System) The ISO quality management principle primarily focuses on all the aspects of a quality service delivery mechanism namely customer focus, process-centric approach and mutually beneficial supplier relationships among others. ISO 14001:2004(EMS - Environment Management System) The purpose of this standard is to help organization to protect the environment, to prevent pollution, and to improve their environmental performance by controlling the impact of their activities, product and services. OHSAS 18001:2007(Occupational Health and Safety Management Systems) The purpose of this standard is to identify the hazardous activities and associated risks on employees health of the organization and define policies & procedures to mitigate them. ISO 27001:2005(ISMS - Information Security Management System) It helps organization to maintain confidentiality and integrity of customers and its own information. The entire concept of this works on CIA (Confidentiality, Integrity, and Availability). This standard focuses on maintaining of confidentiality of information with its integrity and availability to all authorized users and stakeholder

18

Brief history of Intarvo Technologies Limited Company : Intarvo Technologies Limited

Year Founded

: 1995

Headquarter

: Noida, India

Industry

: Information technology Services

Services

: Help desk/call centre, Technology Support, Warranty Management, Repair and Refurbishing, Infrastructure Management, Back-office Processing

Quality Standards

: ISO 9001:2008, ISO 14001:2004, OHSA18001:2007, ISO 27001:2005

Headcount

: 1001-5000 employees

Service centre Locations

: More than 400 locations in India

Call Centre

: New Delhi &Noida

Refurbishment Centres : New Delhi &Bangalore

Number of Clients

: 40

19

INTRODUCTION ABOUT THE TOPIC

The Project Financial Analysis of Intarvo Technologies Limited with the help of Ratio is the project which is made with the view of obtaining all the relevant information regarding all the information how to analysis financial position of the company. Ratio analysis is one of the techniques of financial analysis where ratios are used as a yardstick for evaluating the financial condition and performance of a firm. Analysis and interpretation of various accounting ratios gives a skilled and experienced analyst a better understanding of the financial condition and performance of the firm than what he could have obtained only through a perusal of financial statement.

TECHNIQUES OF FINANCIAL ANALYSIS

Techniques of Financial Analysis

Comparative Financial Statement

Fund Flow Analysis

Cash Flow Analysis

Ratio Analysis

Trend Analysis

Chart 1.1

20

RATIO ANALYSIS Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry.

Ratios can be expressed in two ways: Times: When one value is divided by another, the unit used to express the quotient is
termed as times.

Percentage: If the quotient is multiplied by 100, the unit of expression is termed as

Percentage.

TYPES OF RATIO

Liquidity Ratio Turnover Ratio Profitability Ratio Leverage Ratio

Chart 1.2

21

I. Liquidity Ratios
Liquidity ratios are the ratios that measure the ability of a company to meet its short term debt obligations. These ratios measure the ability of a company to pay off its short-term liabilities when they fall due. 1. Current Ratio. The current ratio indicates a company's ability to meet short-term debt obligations. Potential creditors use this ratio in determining whether or not to make short-term loans. The current ratio can also give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Current Ratio = Current Assets / Current Liabilities 2. Quick Ratio The quick ratio is a measure of a company's ability to meet its short-term obligations using its most liquid assets (near cash or quick assets). Quick ratio is viewed as a sign of a company's financial strength or weakness; it gives information about a companys short term liquidity. The ratio tells creditors how much of the company's short term debt can be met by selling all the company's liquid assets at very short notice. The quick ratio is also known as the acid-test ratio or quick assets ratio.

Quick ratio = (Current Assets - Inventories) / Current Liabilities

22

II. Turnover Ratio

The Turnover Ratios are also known as activity or efficiency ratios. They indicate the efficiency with which the capital employed is rotated in the business. Turnover ratio indicated the number of times the capital has been rotated in the process of doing business. 1. Fixed Assets Turnover Ratio This ratio indicates the extent to which the investments in fixed assets contribute towards sales. Net sales/fixed assets (net) 2. Stock / Inventory Turnover Ratio: Inventory turnover ratio indicates how many times inventory is sold and replaced in a financial year. In other words, the ratio gives the frequency of conversion of inventory into cash in a given financial year. Normally, higher ratio is considered good as it suggests better inventory management. Stock Turnover Ratio= Cost of goods sold/Average Inventory

3. Debtors Turnover Ratio Debtors turnover ratio indicates the frequency of conversion from debtors to cash normally in a year. It also suggests the extent of liquidity of debtors. Debtors Turnover Ratio= Credit sale /Average Debtors

4. Creditors Turnover Ratio It is similar to Debtors Turnover Ratio. It indicates the speed with which the payments for credit purchase are made to the creditors.

Creditors Turnover Ratio= Credit Purchases/Average Creditors

23

III. Profitability Ratio

Profitability is an indication of the efficiency with which the operations of the business are carried on. Poor operational performance may indicate poor scale and hence poor profits. A lower profitability may arise due to the lack of control over the expenses. Bankers, financial institutions and other creditors look at the profitability ratios as an indicator whether or not the firm earns substantially more than it pays interest for the use of borrowed funds and whether the ultimate repayment of their debt appears reasonably certain. Owners are interested to know the profitability as it indicates the return which they can get on their investments.

1. Gross Profit Ratio This ratio indicates the degree to which the selling price of goods per unit may decline without resulting in losses from operation to the firm. It also helps in ascertaining whether the average percentage of mark-up on the goods is maintained. Gross Profit Ratio= Gross Profit/Net sale*100 2. Net Profit Ratio Net profit ratio is used to measure the overall profitability and hence it is very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment. This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc. Higher the ratio the better is the profitability. Net Profit Ratio= Net Profit/Net sale*100 3. Return on investment (ROI) Overall profitability ratio is also called as "Return on Investments" (ROI). It indicates the percentage of return on the total capital employed in the business. Return on investment (ROI) = Operating profit / Capital employed *100

24

4. Earning Per Share The earning per share helps in determining the market price of the equity shares of the company. A comparison of earning per share of the company with another company will also help in deciding whether the equity shares capital is being effectively used or not. It also helps in estimating the companys capacity to pay dividend to its equity shareholders. Earning per Share= Net profit after tax-preference dividend/Number of equity shares 5. Pay-Out Ratio The Pay-out ratio is indicators of the amount of earnings that have been ploughed back in the business. The lower the pay-out ratio, the higher will be the amount of earning ploughed back in the business and vice versa. Pay-Out Ratio=Dividend per share/Earning per share

25

IV. Coverage Ratio

A measure of a company's ability to meet its financial obligations. In broad terms, the higher the coverage ratio, the better the ability of the enterprise to fulfil its obligations to its lenders. The trend of coverage ratios over time is also studied by analysts and investors to ascertain the change in a company's financial position. 1. Debt-Equity ratio The relationship between borrowed funds and internal owner's funds is measured by DebtEquity ratio. This ratio is also known as debt to net worth ratio. Debt Equity Ratio = Total long term debts / shareholder' funds
.

2. Debt Service Ratio or Interest Coverage Ratio The ratio measures debts servicing capacity of a business so far as interest on long-term loans is concerned. This ratio shows how many times the interest charges are covered by the earnings. A debt service ratio is also known as interest coverage ratio. Debt service ratio = Earnings before interest and taxes (EBIT) / Fixed interest charges

26

Advantages of Ratio Analysis

Financial ratios are essentially concerned with the identification of significant accounting data relationships, which give the decision-maker insights into the financial performance of a company. The advantages of ratio analysis can be summarized as follows: 1. Ratios facilitate conducting trend analysis, which is important for decision making and forecasting. 2. Ratio analysis helps in the assessment of the liquidity, operating efficiency, profitability and solvency of the firm. 3. Ratio analysis provides a basis for both intra-firm as well as inter-firm comparisons. 4. The comparison of actual ratios with base year ratios or standard ratios helps the management to analyse the financial performance of the firm. 5. Ratio analysis helps in planning and forecasting. Over a period of time a firm or industry develops certain norms that may indicate future success or failure. If relationship changes in firms data over different time periods, the ratios may provide clues on trends and future problems.

27

Disadvantages of Ratio Analysis

1. A ratio in isolation is of little help. It should be compared with the base year ratio or standard ratio, the computation of which is difficult as it involves the selection of a base year and the determination of standards. 2. Inter-firm comparison may not be useful unless the firms compared are of the same size and age, and employ similar production methods and accounting practices. 3. Ratios provide only quantitative information, not qualitative information. 4. Ratios are calculated on the basis of past financial statements. They do not indicate future trends and they do not consider economic conditions. 5. Ratios are based only on the information which has been recorded in financial statements. Financial statements suffer from a number of limitations; the ratios derived therefore, are also subject to those limitations. 6. The comparison of one firm with another on the basis of ratio analysis without taking into account the fact of companies having different accounting policies, will be misleading and meaningless. 7. No fixed standards can be laid down for ideal ratios.

28

CHAPTER-II LITERATURE REVIEW

29

A financial ratio is a number that expresses the value of one financial variable relative to another. It is the numeric result gained by dividing one financial number by another. Calculated this way, financial ratio allows an analyst to assess not only the absolute value of a relationship but also to quantify the degree of change within the relationship (Lawder, 1989). From a management perspective, the rationale for use of financial ratio analysis is that by expressing several figures as ratio, information will be revealed that is missed when the individual members are observed (Thomas & Evanson,1987). Managers can then use this information to improve their operations. The two most important and most commonly available sources of financial variables that can be used in calculating ratios are the balance sheet and the income statement. These particular statements appear to be the most universally accepted. And because almost all of business firms develop such statements, the use of ratio analysis is to be found throughout a variety of industries. A new trend in this regard, however, has been the development of different ratios depending on the data provided by the statement of cash flows. However, the newly developed ratios are not as commonly used as those which are based on the balance sheet and income statement. Rating agencies and financial publishing firms collect data on large publicly traded companies and make this information available for various interested entities. Users of such financial data and ratios may include companies evaluating the creditworthiness of their debtors, investors considering the merit of alternative investment, and banks and other lenders when granting loans. Also, auditors can use ratios when conducting analytical reviews of their clients (Gardiner, 1995). Given that both the balance sheet and the income statement provide numerous amount of information, it is possible to develop an endless number of ratios. Ratios relate items of the income statement to each other, items of the balance sheet to each other, and items of one statement to items of the other statement. However, the various items in the financial statements are usually highly correlated with each other and hence financial ratios are highly correlated with one another (Horrigan, 1966; Zeller & Stanko, 1997). As a result, the tendency among analysts is to classify and reduce a large number of ratios to a small subset. along with examples from the literature.

30

CHAPTER-III RESEARCH METHODOLOGY

31

RESEARCH OBJECTIVES OF THE STUDY Access the present profitability and operating efficiency of the company.
Access the relationship between a firms short-term assets and its short-term liabilities. Identify the reason for changes in efficiency and financial position of company. To study about the tools of financial analysis. How Ratios are helpful to evaluate the financial status of a company.

32

RESEARCH METHODOLOGY
A Research methodology is a way to systematically solve the research problem. In it we study the various steps that are generally adopted by a researcher in studying his research problem along with the logic behind them, A Research methodology is a plan structure and strategy of investigation so as to obtain answers to record, study and control variance. There are basically two types of collecting information:

RESEARCH DESIGN
A Research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. Research design is the conceptual structure within which research is conducted; it constitutes the blueprint for the collection, measurement and analysis of data. The research design applied here were exploratory research and descriptive search. Exploratory Research is that where the researcher / scholar is not aware about the problem. In this type of research design researcher doesnt know about the problem. He has to find about the problem and then work on solving the problem. Whereas in case of descriptive research, we know the problem, we just have to find the solution to the problem. Generally descriptive research design is applied after exploratory research design. Here after doing the secondary research, we found the general perception about the Intarvo Technology Ltd. But then in second phase we tried to figure out the reasons of difference lies and on the basis of which ratios the companys profitability access.

METHOD OF DATA COLLECTION 1. PRIMARY DATA: Data observed or collected directly from first hand experience.
These are questionnaires, observation, informal interview.

2. SECONDARY DATA: Published data and the data collected in the past or other
parties called secondary data. These are journals, magazines, text books etc.

33

INSTRUMENTS FOR DATA COLLECTION

Research is related to the financial analysis of Intarvo Technology Ltd., therefore it is based on the secondary data such as Profit & Loss Account, Balance sheet and ratios. The data have taken from accounts departments of the company and their annual magazines. During the analysis different business newspapers and magazines about analysing the ratios. For the purpose to conduct this research only secondary data has been collected as the research deals in the ratio analysis which is based on the available data of the companies. SECONDARY DATA: They are those data which are already been collected by someone else and which have already passed through statistical process. Sources of collecting secondary data are: Companys account books Companys annual magazines Journals and magazines Internet Economic times Intarvo Technology Ltd. Brouchers and its intranet.

34

LIMITATIONS OF THE STUDY

Some employees gave some bias information. Due to the use of secondary data, somewhere accurate analysis is not possible. As the project is on a financial Topic, which is very confidential for a company, so it is very difficult for the scholar to collect the confidential data from the company books. Errors might have crept into the report during typing & compilation. To make comparative study of Balance sheet and Income Statement.

35

CHAPTER-IV ANALYSIS AND INTERPRETATION

36

CURRENT RATIO 2007-08 Current assets Current liabilities Current ratio

Table 4.1 51485.24 42725.95 1.21

2008-09
28300.89 15712.62 1.80

2009-10
60576.05 32458.78 1.021

2010-11
46696.36 27564.01 1.69

2011-12
80597.67 37048.89 2.18

Current ratio
2.5 2.18 2 1.5 1.21 1 0.5 0 2007-08 2008-09 2009-10 2010-11 2011-12 1.021 Current ratio 1.8 1.69

Graph 4.1 The higher the receivables and inventory turnover, greater the firm ability to pay its current liabilities. Generally, a low current ratio indicates the firms ability to meet its current obligation. But a high current ratio may represent unnecessary blockage of funds. The norm for the current ratio is 2:1. The current ratio of Intarvo Ltd. is not following this ideal ratio, which is less than the norm. On an average, it is not up to the mark and satisfactory. But in the year 2011-12 current ratio is improved. It should be maintained in future for the fulfilment of short term liability.

37

QUICK RATIO 2007-08 Quick assets Current liabilities Quick ratio

Table 4.2 40322.61 42725.95 0.94

2008-09
19088.48 15712 1.21

2009-10
30271.44 32458.78 0.93

2010-11
36821.38 27564.01 1.34

2011-12
71131.79 37048.89 1.92

Quick ratio
2.5 2 1.5 1 0.5 0 2007-08 2008-09 2009-10 2010-11 2011-12 0.94 1.34 0.93 Quick ratio 1.92

1.21

Graph 4.2 A quick ratio of 1:1 is usually considered satisfactory. In the case of Intarvo Ltd., in the year 2007-08 it is not satisfactory but later on it is improving the quick ratio as well as current ratio which indicate effective working capital management.

38

DEBTOR TURNOVER RATIO 2007-08 Net Credit Sales

4356.58

2008-09
4125.63 9537.21 0.43

2009-10
7469.35 7542.69 0.99

2010-11
5698.35 8257.48 0.69

2011-12
7896.35 12413.57 0.64

Average Debtors 5122.67 Debtors Turnover Ratio

Table 4.3 0.85

Debtors Turnover Ratio

1.2 1 0.85 0.8 0.6 0.4 0.2 0 2007-08 2008-09 2009-10 2010-11 2011-12 0.43 0.69 0.64 Debtors Turnover Ratio 0.99

Graph 4.3 The debtors turnover ratio of Intarvo Ltd. shows a zigzag trend. The higher the ratio, the better it is, it would indicate that debts are being collected more promptly. For measuring the efficiency, it is necessary to set up a standard figure; a ratio lower than the standard will indicate inefficiency. Intarvo Ltd. company should consistent its debtors turnover ratio.

39

AVERAGE COLLECTION PERIOD 2007-08 Net Credit Sales

4356.58

2008-09
4125.63 9537.21 0.43 849

2009-10
7469.35 7542.69 0.99 369

2010-11
5698.35 8257.48 0.69 529

2011-12
7896.35 12413.57 0.64 570

Average Debtors 5122.67

0.85 Debtors Turnover Ratio 429 Average collection period Table 4.4

Average collection period

900 800 700 600 500 400 300 200 100 0 2007-08 2008-09 2009-10 2010-11 2011-12 429 369 Average collection period 529 570 849

Graph 4.4 The average collection period indicates the extent to which the debts have been collected in time. It gives the average debt collection period. The ratio is very helpful to the lenders because it explains to them whether their borrowers are collecting money within a reasonable time. An increase in the period will result in greater blockage of funds in debtors. Here, the average collection period is increased in the year 2008-09, and then decrease in the year 2009-10 and then again increase in the next 2 years, which indicate that collection period is not stable. The firms debt collection team is not performing well; as a result funds are blocked.

40

RETURN ON ASSETS (ROA) 2007-08 Profit after tax 2543.16 (PAT) Average total assets 58989.76 ROA(PAT/Average 4.31 total assets*100)
Table 4.5

2008-09
1208.87 39597.06 3.05

2009-10
948.43 47112.24 2.01

2010-11
1110.03 48797.11 2.27

2011-12
1568.49 66722.45 2.35

Return on assets
5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 4.31

3.05 2.01 2.27 2.35 ROA(PAT/Average total assets*100)

2007-08

2008-09

2009-10

2010-11

2011-12

Graph 4.5 This ratio is compared to know the productivity of the total assets. Return on Assets is high in the year 2007-08 but in the later years it was decreased, which shows that total assets employed in the business is not performing well.

41

RETURN ON CAPITAL EMPLOYED (ROCE)

2007-08 Profit before interest 2945.96 tax (PAT) Average capital 18999.93 employed ROCE(PBIT/Average 15.51 capital employed *100)
Table 4.6

2008-09
1775.97 50960.125 3.49

2009-10
1407.03 41582.865 3.38

2010-11
1808.97 33334.595 5.43

2011-12
2272.85 39155.015 5.80

Return on capital employed

18 16 14 12 10 8 6 4 2 0 2007-08 2008-09 2009-10 2010-11 2011-12 3.49 3.38 5.43 5.8 ROCE(PBIT/Average capital employed *100) 15.51

Graph 4.6 This ratio measures how well the long-term fund of owners and creditors are used. The higher the ratio, the more efficient the utilization of capital employed. In case of Intarvo Ltd. it has very good in the year 2007-08 and then decrease in the year 2008-10 and then again show slight increase in the capital employed. The ROCE ratio should be improve to show that capital employed in the business is performing well.

42

RETURN ON SHAREHOLDERS EQUITY

2007-08 Net profit after 2543.16 tax (PAT) Average total 18999.93 shareholders equity Return on total 13.39 shareholders equity
Table 4.7

2008-09
1208.87 50960.125

2009-10
948.43 41582.865

2010-11
1110.03 33334.595

2011-12
1568.49 39155.015

2.37

2.28

3.33

4.01

Return on total shareholders equity

16 14 12 10 8 6 4 2 0 2007-08 2008-09 2009-10 2010-11 2011-12 2.37 3.33 2.28 4.01 Return on total shareholders equity 13.39

Graph 4.7 The return on total shareholders equity has been decreasing since 2008-09 and then it raise but still low in comparison with the year of 2007-08. So company should find out the reasons why it is happened.

43

DIVIDEND PER SHARE

2007-08 Dividend to 1710.96 ordinary shareholders Numbers of share 500 outstanding Dividend per 3.42 share
Table 4.8

2008-09
660.5

2009-10
335.21

2010-11
736.48

2011-12
1046.45

500 1.32

530 0.63

580 1.27

580 1.8

Dividend per share

4 3.5 3 2.5 2 1.5 1 0.5 0 2007-08 2008-09 2009-10 2010-11 2011-12 1.32 0.63 1.27 1.8 Dividend per share 3.42

Graph 4.8 The dividend pay-out ratio has been decreasing year after year, resulting in a decrease in dividend per share (DPS). For the growth and survival of the company in this era of competition, it is not good for the company because DPS is not stable it has very much fluctuation. Intarvo company should improve this.

44

EARNING PER SHARE (EPS)

2007-08 Net profit 2543.16 available to equity holders Numbers of 500 shares outstanding EPS= profit 5.09 available to equity holders/ Numbers of shares outstanding
Table 4.9

2008-09
1208.87

2009-10
948.43

2010-11
1110.03

2011-12
1568.49

500

530

580

580

2.42

1.79

1.91

2.70

Earning per share

6 5.09 5 4 3 2 1 0 2007-08 2008-09 2009-10 2010-11 2011-12 2.42 1.79 1.91 2.7 EPS= profit available to equity holders/ Numbers of shares outstanding

Graph 4.9 Earning per share (EPS) is a measure of the Profitability of a company from the owners point of view. EPS is high in the year 2007-08, but in the next year it is decreasing year by year, which can adversely affect companys value in the market.

45

DIVIDEND PAY-OUT RATIO

2007-08 Dividend per 3.42 equity share Earning per equity 5.09 share Dividend pay-out 67.19 ratio= Dividend per equity share/ Earning per equity share*100
Table 4.10

2008-09
1.32 2.42 54.55

2009-10
0.63 1.79 35.20

2010-11
1.27 1.91 66.49

2011-12
1.8 2.7 66.67

Dividend pay-out ratio

80 70 60 50 40 30 20 10 0 2007-08 2008-09 2009-10 2010-11 2011-12 35.2 Dividend pay-out ratio= Dividend per equity share/ Earning per equity share*100 67.19 54.55 66.49 66.67

Graph 4.10 This ratio indicates what proportion of earning per share has been used for paying dividend. In the year 2008-10, this ratio is decreased which shows that in this period dividend is paid less in proportion of earning per share but in the 2010-11 and 2011-12 it was increased.

46

FIXED ASSETS TURNOVER

2007-08 Net Sale Net fixed assets

7137.8 14566.78

2008-09
8363.3 14695.21 0.57

2009-10
10978.3 14670.45 0.75

2010-11
11458.3 17586.34 0.65

2011-12
11861.77 17897.87 0.66

Fixed assets 0.49 turnover= Net Sale/ Net fixed assets

Table 4.11

Fixed assets turnover

0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2007-08 2008-09 2009-10 2010-11 2011-12 0.49 Fixed assets turnover= Net Sale/ Net fixed assets 0.57 0.75 0.65 0.66

Graph 4.11 This ratio indicates the extent to which the investments in fixed assets contribute towards sales. It was increased in the year 2008-09 and 2009-10 but it was decreased in the year 201011 and 2011-2012. It means increase in the investment in fixed assets has not brought commensurate gain.

47

PROPRIETARY RATIO

2007-08
50000 Shareholders fund Total tangible 93159.55 assets 53.67 Proprietary Ratio= Shareholders fund / Total tangible assets Table 4.12

2008-09
50000 68013.37 73.51

2009-10
53000 79454.96 66.70

2010-11
58000 83235.45 69.68

2011-12
58000 119045.68 48.72

Proprietary Ratio
80 70 60 50 40 30 20 10 0 2007-08 2008-09 2009-10 2010-11 2011-12 53.67 73.51 66.7 69.68

48.72 Proprietary Ratio= Shareholders fund / Total tangible assets

Graph 4.12 This ratio focuses the attention on the general financial strength of the enterprise. The ratio is particular important to the creditors who can find out the proportion of shareholders funds in the total asset employed in the business. A high proprietary ratio will indicate a relatively little danger to the creditors. In the year 2008-09 it was increase but in the following year it was decreased continuously.

48

NET PROFIT RATIO

2007-08 Net profit Net sale

2543.16 7137.8

2008-09
1208.87 8363.3 14.45

2009-10
948.43 10978.3 8.63

2010-11
1110.03 11458.3 9.68

2011-12
1568.49 11861.77 13.22

Net profit Ratio= 35.6 Net profit/ Net sale*100

Table 4.13

Net profit Ratio

40 35 30 25 20 15 10 5 0 2007-08 2008-09 2009-10 2010-11 2011-12 14.45 8.63 9.68 13.22 Net profit Ratio= Net profit/ Net sale*100 35.6

Graph 4.13 This ratio indicates net margin earned on a sale of Rs.100. This ratio helps in determining the efficiency with which affairs of the business are being managed. An increase in the ratio over the previous period indicates improvement in the operational efficiency of the business. In case of Intarvo Ltd. company net profit ratio has not a stable trend.

49

DEBT-EQUITY RATIO

2007-08 Total long term 41062.15 debt 34191.42 Shareholders Fund Debt equity ratio= 1.20 Total long term debt /Shareholders Fund
Table 4.14

2008-09
36845.63 24105.18 1.53

2009-10
32391.87 29359.47 1.10

2010-11
41723.17 26129.96 1.60

2011-12
54285.75 40148.96 1.35

Debt equity ratio

1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2007-08 2008-09 2009-10 2010-11 2011-12 Debt equity ratio= Total long term debt /Shareholders Fund 1.2 1.1 1.53 1.6 1.35

Chart 4.14 The ratio indicates the proportion of owners stake in the business. Excessive liabilities tend to cause insolvency. The ratio indicates the extent to which the firm depends upon outsiders for its existence. The ratio provides a margin of safety to the creditors. It tells the owners the extent to which they can gain the benefits or maintain control with a limited investment. In case of Intarvo Technology Ltd. they are using more external funds for the operations of the business than external funds.
50

Debt-equity ratio had increase in the year 2008-09 and 2010-11 which shows that external funds are more in the operation of the business than internal funds. The debt-equity ratio is least in the year 2009-10, which shows that in this year internal funds had least used in the business.

51

CHAPTER-V FINDING

52

Out of the past 5 year in first three year working capital was not managed efficiently but in next two year Intarvo Ltd. has manage working capital effectively therefore which resulting increase in current and quick ratio in last 2 years.

Debtors turnover ratio of the company is very unstable; therefore, company should work upon its credit policy. Companys much of the amount of income has blocked in the market as the average collection period is too long. The Assets of the company has not been utilizing efficiently as the asset turnover ratio is declining. Out of the last 5 year in the 1st year capital employed in the business has performed well, but in other 4 year capital employed in business has not performed well. The ratio on shareholders fund is declining since 2008-09, it give bad message about the company to the market about its performance. Dividend per share is declining since last five year, this give impression to investor, which resulting less new investment in the company. The profitability of the company has an up down trend since last five year. This makes the organization more risky. As the analysis shows that company has largely dependent to the outsiders fund for the operation of the, it shows either the company does not have the enough funds inside the company or the available internal funds are not utilizing in an efficient manner.

53

CHAPTER-VI
RECOMMENDATION

54

Since Intarvo Technology Limited has been set up in 1995, it has been expanding it services across the country. It has been 17 years and the company is performing well in the market, but since last 5 years the company has bearing loss. There are few suggestions for the company to improve its performance. 1. When analysing the average collection period it had found that there is not stability in it, because of which, there is greater amount of blockage of funds. Intarvo Technology Limited should improve the credit policy of the company. 2. From the analysis, it came to know that company is mostly depends on the outsiders funds for the operation of the business. So it should increase its internal fund and dependent on outsiders should be reduced in the business. 3. Company should utilize its assets in very efficient manner, as the fixed asset turnover ratio is declining significantly. 4. Company should opt stable dividend policy for the future growth as there is much variation in the dividend pay-out ratio. 5. For improving profitability, the available capital, assets and manpower should be use efficiently. Company should make there HR policies in such a way so that there should not be excess or deficit of manpower. 6. Company should analyse their expenditure where they are incurring over expenditure and should control their wastage also which are incurring in the organisation. 7. There is a shortage of working capital in past 4 year, but at the last year company had been managing the working capital. It should be manage properly in the future, for that; company should revised its credit policy time to time.

55

CONCLUSION

56

Intarvo Technology Limited is a large organization providing services to the customers. It has a large employee base and has an operations spread in all over the country. The company has recorded increasing sale for the last 4 years. Although they has not been showing significance increase in profit in comparison of its sale. After analysing the financial statement of Intarvo Technology Limited following conclusion is driven: 1. The customer base of the company increasing but still the company is not showing any significant increase in the profitability. It should be access by the company, that where they are lacking in generating profit even if the customer base is increasing. 2. It is analysis that the company is mostly depends on the outsiders funds for the operation of the business. So it should increase its internal fund and dependent on outsiders should be reduced in the business. 3. The liquidity of the company was not very satisfactory in the starting year but at the last year of the analysis i.e. fifth year, the company has recorded increment in its liquidity position in the year 2011-12. 4. The Assets of the Intarvo Company is not utilizing in efficient manner. 5. It is concluded that Intarvo Company is not adopting as stable dividend policy. 6. It is also concluded that credit policy of the Intarvo Company is not efficient enough. The credit period allowed to creditors is very large which cause blockage of funds of the company, which directly affect the liquidity position of the company.

57

BIBLIOGRAPHY

58

Books:
Rustagi, R.P.: Financial Management, 2nd Edition, 2000, Galgotia Publishing Company, New Delhi, Kothari, C.R.: Research methodology, 3rd edition, 1997, Vikas Publishing House Pvt. Ltd, New Delhi,

Magazines:
Annual magazine of Intarvo Technologies limited, 2009-2010 Annual magazine of Intarvo Technologies limited, 2011-2012

Website:
http://www.accountingexplanation.com/accounting_ratios_analysis.htm http://www.intarvo.com/

59

ANNEXURE

60

COMPARATIVE BALANCE SHEET OF INTARVO TECHNOLOGY LIMITED

INTARVO TECHNOLOGY LIMITED THOUSAND SOURCES FUNDS Equity Capital, each Reserves Surplus Preference capital 34191.42 Share Application Money LOAN FUNDS Secured loans Unsecured loans 3429.16 37632.99 41062.15 Deferred liabilities 75253.57 APPLICATION OF FUNDS FIXED ASSETS Gross block Less: depreciation 23867.45 9300.67 22614.8 7919.59 22564.57 7894.12 35484.57 17898.23 37754.1 19874.23 63481.49 61765.69 67863.38 96396.01 tax 3650.68 33194.95 36845.63 2518.92 3826.9 28564.97 32391.87 11463.96 30259.21 41723.17 12589.25 41696.5 54285.75 1947.72 24105.18 11.76 29359.47 14.35 0 26129.96 10.25 0 40148.96 13.58 and 34141.42 24055.18 29306.47 26071.96 40090.96 Share 50 Rs.100 50 53 58 58 OF 12MONTHS 12MONTHS 12MONTHS 12MONTHS 12MONTHS 2007-08 2008-09 2009-10 2010-11 2011-2012

61

Net Block

14566.78

14695.21 3274.2

14670.45 3125.57

17586.34 3436.6

17879.87 3548.07

Capital work-in- 4287.66 progress Investment Deferred asset(net) CURRENT ASSET, LOANS AND ADVANCES Short-term investment Sundry debtors cash and 10245.35 11985.19 tax 10627

9760.71

10258.21

9874.98

9987.92

8829.07 2352.87

6256.32 12371.18

10258.64 15640.58

14568.51 45712.14

bank 20181.95

balances Other asset Loans advances 52317.8 28849.19 40529.65 46696.36 81119.71 and 8559.78 6886.39 9789.58 9874.58 8745.96 current 1345.43 1020.25 1854.36 1047.58 2105.18

Less: CURRENT LIABILITIES AND PROVISION Current liabilities Provision

58989.76

39597.06

47112.24

48797.11

66722.45

35414 7311.95 42725.95

8331.2 7381.42 15712.62 13136.57

25874.24 6584.54 32458.78 8070.87

21874.54 7856.29 29730.83 16965.53

28974.31 8074.58 37048.89 44070.82

NET CURRENT ASSETS

9591.85

75253.57

63481.49
62

61765.69

67863.38

96396

INCOME STATEMENT OF INTARVO TECHNOLOGY LIMITED

INTARVO TECHNOLOGY LIMITED Rs.Lakhs 12MONTHS 12MONTHS 12MONTHS 12MONTHS 12MONTHS 2007-08 2008-09 2009-10 2010-11 2011-02

Income
Cash Credit Other income Change in stocks Non-recurring income 7397.5 8629.5 11390.52 11895.85 12501.82 2781.22 4356.58 106.7 15.2 137.8 4237.67 4125.63 165.2 45.5 55.5 3508.95 7469.35 269.3 128.52 14.4 5759.95 5698.35 305.9 83.85 47.8 3965.42 7896.35 283.14 46.33 310.58

Expenditure
Rent 2365.55 4421.24 547 99.66 6548.4 584.1 123.17 6388.8 614.31 139.96 6381.54 591.74 152.32 Wages & Salaries 358.2 Energy (power & 105.89 fuel) Indirect (excise, etc.) Advertising marketing expenses Distribution expenses Others Non-recurring expenses Depreciation 55.2 4451.54 57.9 6853.53 106.1 9983.49 130.21 10086.88 144.66 10228.97 356.88 246.93 245.69 459.31 368.94 369.99 226.39 561.17 301.47 435.27 178.54 210.74 275.89 446.23 465.87 and 210.24 354.78 745.65 709.56 835.63 taxes 574.11 457.21 861.25 870.25 920.47

63

PBIT Tax Provision PAT Appropriation of profits Dividendsinterim Dividend-Final Transfer general reserve

2945.96 402.8 2543.16

1775.97 567.1 1208.87

1407.03 458.6 948.43

1808.97 698.94 1110.03

2272.85 704.36 1568.49

745.64 to 965.32

322.25 338.25

335.21

173.21 563.27

256.47 789.98

Retained earnings 569.32 262.88

398.04 150.33

447.86 165.36

172.3 201.25

336.54 185.5

64

65