CONTENTS

chapter Particulars Page

number
Certificate

Declaration

Acknowledgement

Executive summary

1 Introduction

2 Research Methodology

3 Review of Literature

4 Results and Discussion

5 Suggestions and Conclusion

Reference
INTRODUCTION

FINANCE
Finance is the process of commission of accumulated funds to productive use. Finance
helps to direct flow of economic activity and facilitates its smooth operation. Finance is the agent
that produces this result. There are many definitions for finance among them the best was of
Howard And Upton defines finance as “The administrative areas or assets of organization
which have to do with management of flow of cash so that the possible and at the same time
meet its obligations as they become due”. Finance is concerned with the task of providing funds
to the enterprises on the item that is most favorable toward the attainment of the organization
foals objects. The function finance is merely furnishing funds to the organization. Finance has a
boarder meaning and it covers financing planning, forecasting of cash receipts and disbursement,
rising of funds, use and allocation of funds and financial control.
Financial Management
Financial management is the managerial activity; which is concerned with planning and
controlling of the firm’s financial resources. The subject of finance management is of immense
interest both to academician and practicing managers.
The practicing managers All interested in this subject become the most crucial decision of the
firm All those which results to the finance and on understanding of theory of finance
management provides them conceptual analysis insights to make these decision skill fully.
Definitions Of Financial Management
1. “Financial management is concerned with the efficient use of an important resource namely,
capital funds” .-EZRA SOLOMAN.
2. “Financial management is concerned with the efficient managerial decisions that result in the
acquisition and financing of long term and short term credits for the firm. “PHILLIPPATU
Functions of Financial management:
1. Investment Decision:
It relates to the allocation of capital are involve to decision to commit funds to long-term
assets which would yield benefits in future. It is one very significant aspect is the task of
measuring the prospective profitability of new investments future benefits are difficult to
measure and cannot be predicted with continuity because of the uncertain future capital
budgeting involves risk.
2. Financing Decision:
Broadly a finance manager must declare when, where and how to acquire funds to meet the
firms investments needs. The finance manager must strive to obtain the best financing mix or
optimum capital structure of this firm. The use of debt affects the return and rise of shareholders.
It may increase the return of the equity funds. A proper balance will have to be struck between
rises and retain.
3. Dividend Decision:
The finance manager must decide whether the firm should distribute all profits or certain
term or distribute a portion and retain the balance.
The dividend policy should be determined in terms of its impact on the market value of the
firms share. Thus, shareholders are indifferent to the firm’s dividend policy the finance manager
must decide to the optimum dividend payout ratio.

4. Liquidity Decision:
Along with terms of funds current assets should also be managed efficiently for
safeguarding the firm against the dangerous of ill liquidity and insolvency. An investment in
current assets affects the firm profitability, liquidity and risk. In order to ensure that neither
insufficient nor unnecessary funds are invested finance manager develops some techniques of
managing current assets.
Meaning of Financial Statement:

Financial statements refer to such statements which contains financial information about
an enterprise. They report profitability and the financial position of the business at the end of
accounting period. The team financial statement includes at least two statements which the
accountant prepares at the end of an accounting period. The two statements are: -
 The Balance Sheet

 Profit And Loss Account

They provide some extremely useful information to the extent that balance Sheet mirrors the
financial position on a particular date in terms of the structure of assets, liabilities and owners
equity, and so on and the Profit and Loss account shows the results of operations during a certain
period of time in terms of the revenues obtained and the cost incurred during the year. Thus the
financial statement provides a summarized view of financial position and operations of a firm

Meaning of Financial Analysis:

The first task of financial analysis is to select the information relevant to the decision
under consideration to the total information contained in the financial statement. The second step
is to arrange the information in a way to highlight significant relationship. The final step is
interpretation and drawing of inference and conclusions. Financial statement is the process of
selection, relation and evaluation.

Features of Financial Analysis

 To present a complex data contained in the financial statement in simple and
understandable form.
 To classify the items contained in the financial statement inconvenient and rational
groups.

 To make comparison between various groups to draw various

conclusions.

Purpose of Analysis of financial statements

 To know the earning capacity or profitability.
 To know the solvency.
 To know the financial strengths.
 To know the capability of payment of interest & dividends.
 To make comparative study with other firms.
 To know the trend of business.
 To know the efficiency of mgt.
 To provide useful information to mgt
Procedure of Financial Statement Analysis:
 The following procedure is adopted for the analysis and interpretation of financial
statements:-
 The analyst should acquaint himself with principles and postulated of accounting. He
should know the plans and policies of the managements that he may be able to find out
whether these plans are properly executed or not.
 The extent of analysis should be determined so that the sphere of work may be decided.
If the aim is find out. Earning capacity of the enterprise then analysis of income statement
will be undertaken. On the other hand, if financial position is to be studied then balance
sheet analysis will be necessary.
 The financial data be given in statement should be recognized and rearranged. It will
involve the grouping similar data under same heads. Breaking down of individual
components of statement according to nature. The data is reduced to a standard form. A
relationship is established among financial statements with the help of tools & techniques
of analysis such as ratios, trends, common size, fund flow etc.
 The information is interpreted in a simple and understandable way. The significance and
utility of financial data is explained for help indecision making.
 The conclusions drawn from interpretation are presented to the management in the form
of reports.
Analyzing financial statements involves evaluating three characteristics of a company: its
liquidity, its profitability, and its insolvency. A short-term creditor, such as a bank, is primarily
interested in the ability of the borrower to pay obligations when they come due. The liquidity of
the borrower is extremely important in evaluating the safety of a loan. A long-term creditor, such
as a bondholder, however, looks to profitability and solvency measures that indicate the
company’s ability to survive over a long period of time. Long-term creditors consider such
measures as the amount of debt in the company’s capital structure and its ability to meet interest
payments. Similarly, stockholders are interested in the profitability and solvency of the company.
They want to assess the likelihood of dividends and the growth potential of the stock.
Comparison can be made on a number of different bases.
Following are the three illustrations:
Intra-company basis:

This basis compares an item or financial relationship within a company in the current
year with the same item or relationship in one or more prior years. For example, Sears, Roebuck
and Co. can compare its cash balance at the end of the current year with last year’s balance to
find the amount of the increase or decrease. Likewise, Sears can compare the percentage of cash
to current assets at the end of the current year with the percentage in one or more prior years.
Intra-company comparisons are useful in detecting changes in financial relationships and
significant trends.

Industry averages:
This basis compares an item or financial relationship of a company with industry averages (or
norms) published by financial ratings organizations such as Dun & Bradstreet, Moody’s and
Standard & Poor’s. For example, Sears’s net income can be compared with the average net
income of all companies in the retail chain-store industry. Comparisons with industry averages
provide information as to a company’s relative performance within the industry.
Intercompany basis.
This basis compares an item or financial relationship of one company with the same item
or relationship in one or more competing companies. The comparisons are made on the basis of
the published financial statements of the individual companies. For example, Sears’s total sales
for the year can be compared with the total sales of its major competitors such as Kmart and
Wal-Mart. Intercompany comparisons are useful in determining a company’s competitive
position.
Tools of Financial Statement Analysis:
Various tools are used to evaluate the significance of financial statement data. Three commonly
used tools are these:
 Ratio Analysis

 Funds Flow Analysis

 Cash Flow Analysis

 Ratio Analysis:

 Fundamental Analysis has a very broad scope. One aspect looks at the general
(qualitative) factors of a company. The other side considers tangible and measurable
factors (quantitative). This means crunching and analyzing numbers from the financial
statements. If used in conjunction with other methods, quantitative analysis can produce
excellent results.

 Ratio analysis isn't just comparing different numbers from the balance sheet, income
statement, and cash flow statement. It's comparing the number against previous years,
other companies, the industry, or even the economy in general. Ratios look at the
relationships between individual values and relate them to how a company has performed
in the past, and might perform in the future.

Meaning of Ratio:
A ratio is one figure express in terms of another figure. It is a mathematical yardstick that
measures the relationship two figures, which are related to each other and mutually
interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio
is an expression relating one number to another. It is simply the quotient of two numbers. It can
be expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as “so many
times”. As accounting ratio is an expression relating two figures or accounts or two sets of
account heads or group contain in the financial statements.
 Meaning of 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 measure or guides concerning the financial health and profitability
of business enterprises. Ratio analysis can be used both in trend and static analysis. There are
several ratios at the disposal of an analyst but their group of ratio he would prefer depends on the
purpose and the objective of analysis.
While a detailed explanation of ratio analysis is beyond the scope of this section, we will
focus on a technique, which is easy to use. It can provide you with a valuable investment
analysis tool. This technique is called cross-sectional analysis. Cross-sectional analysis
compares financial ratios of several companies from the same industry. Ratio analysis can
provide valuable information about a company's financial health. A financial ratio measures a
company's performance in a specific area. For example, you could use a ratio of a company's
debt to its equity to measure a company's leverage. By comparing the leverage ratios of two
companies, you can determine which company uses greater debt in the conduct of its business. A
company whose leverage ratio is higher than a competitor's has more debt per equity. You can
use this information to make a judgment as to which company is a better investment risk.
However, you must be careful not to place too much importance on one ratio. You obtain a better
indication of the direction in which a company is moving when several ratios are taken as a
group.

Objective of Ratios:
Ratios are worked out to analyze the following aspects of business organization-
A) Solvency-

1) Long term

2) Short term

3) Immediate

B) Stability

C) Profitability
D) Operational efficiency

E) Credit standing

F) Structural analysis

G) Effective utilization of resources

H) Leverage or external financing

STEPS IN RATIO ANALYSIS:

 The first task of the financial analysis is to select the information relevant to the decision
under consideration from the statements and calculates appropriate ratios.

 To compare the calculated ratios with the ratios of the same firm relating to the pas6t or
with the industry ratios. It facilitates in assessing success or failure of the firm.

 Third step is to interpretation, drawing of inferences and report writing conclusions are
drawn after comparison in the shape of report or recommended courses of action.

 Third step is to interpretation, drawing of inferences and report writing conclusions are
drawn after comparison in the shape of report or recommended courses of action.

Pre-Requisites to Ratio Analysis:

In order to use the ratio analysis as device to make purposeful conclusions, there are
certain pre-requisites, which must be taken care of. It may be noted that these prerequisites are
not conditions for calculations for meaningful conclusions. The accounting figures are inactive in
them & can be used for any ratio but meaningful & correct interpretation & conclusion can be
arrived at only if the following points are well considered.

1) The dates of different financial statements from where data is taken must be same.

2) If possible, only audited financial statements should be considered, otherwise there must be

sufficient evidence that the data is correct.

3) Accounting policies followed by different firms must be same in case of cross section analysis

otherwise the results of the ratio analysis would be distorted.

4) One ratio may not throw light on any performance of the firm. Therefore, a group of ratios must

be preferred. This will be conductive to counter checks.

5) Last but not least, the analyst must find out that the two figures being used to calculate a ratio

must be related to each other, otherwise there is no purpose of calculating a ratio

GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS:

The calculation of ratios may not be a difficult task but their use is not easy. Following guidelines or
factors may be kept in mind while interpreting various ratios are

 Accuracy of financial statements

 Objective or purpose of analysis

 Selection of ratios

 Use of standards

 Caliber of the analysis

Importance of Ratio Analysis:

As a tool of financial management, ratios are of crucial significance. The importance of ratio
analysis lies in the fact that it presents facts on a comparative basis & enables the drawing of
interference regarding the performance of a firm. Ratio analysis is relevant in assessing the
performance of a firm in respect of the following aspects:
1] Liquidity position

2] Long-term solvency

3] Operating efficiency

4] Overall profitability

5] Inter firm comparison

6] Trend analysis.
1] Liquidity position: -

With the help of Ratio analysis conclusion can be drawn regarding the liquidity position

of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current

obligation when they become due. A firm can be said to have the ability to meet its short-term

liabilities if it has sufficient liquid funds to pay the interest on its short maturing debt usually

within a year as well as to repay the principal. This ability is reflected in the liquidity ratio of a

firm. The liquidity ratio is particularly useful in credit analysis by bank & other suppliers of short

term loans.

2] Long-term solvency: -
Ratio analysis is equally useful for assessing the long-term financial viability of a
firm. This respect of the financial position of a borrower is of concern to the long-term creditors,
security analyst & the present & potential owners of a business. The long-term solvency is
measured by the leverage/ capital structure & profitability ratio Ratio analysis s that focus on
earning power & operating efficiency.
Ratio analysis reveals the strength & weaknesses of a firm in this respect. The
leverage ratios, for instance, will indicate whether a firm has a reasonable proportion of various
sources of finance or if it is heavily loaded with debt in which case its solvency is exposed to
serious strain. Similarly the various profitability ratios would reveal whether or not the firm is
able to offer adequate return to its owners consistent with the risk involved.

3] Operating efficiency:
Yet another dimension of the useful of the ratio analysis, relevant from the viewpoint of
management, is that it throws light on the degree of efficiency in management & utilization of its
assets. The various activity ratios measure this kind of operational efficiency. In fact, the
solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by
the use of its assets- total as well as its components.
4] Overall profitability:
Unlike the outsides parties, which are interested in one aspect of the financial position
of a firm, the management is constantly concerned about overall profitability of the enterprise.
That is, they are concerned about the ability of the firm to meets its short term as well as long
term obligations to its creditors, to ensure a reasonable return to its owners & secure optimum
utilization of the assets of the firm. This is possible if an integrated view is taken & all the ratios
are considered together.
5] Inter firm comparison:
Ratio analysis not only throws light on the financial position of firm but also serves as a
stepping-stone to remedial measures. This is made possible due to inter firm comparison &
comparison with the industry averages. A single figure of a particular ratio is meaningless unless
it is related to some standard or norm. One of the popular techniques is to compare the ratios of a
firm with the industry average. It should be reasonably expected that the performance of a firm
should be in broad conformity with that of the industry to which it belongs. An inter firm
comparison would demonstrate the firms position vice-versa its competitors. If the results are at
variance either with the industry average or with those of the competitors, the firm can seek to
identify the probable reasons & in light, take remedial measures.
6] Trend analysis:
Finally, ratio analysis enables a firm to take the time dimension into account. In other
words, whether the financial position of a firm is improving or deteriorating over the years. This
is made possible by the use of trend analysis. The significance of the trend analysis of ratio lies
in the fact that the analysts can know the direction of movement, that is, whether the movement
is favorable or unfavorable. For example, the ratio may be low as compared to the norm but the
trend may be upward. On the other hand, though the present level may be satisfactory but the
trend may be a declining one.
Brief Introduction About Rubber Industry:
The rubber industry provides the most important market for precipitated silica which
plays the role of white reinforcing filler in tires rubber diaphragm and mechanical rubber goods.
Precipitated silica provides excellent reinforcing properties such as hardness, tensile tear and
abrasion resistance. Its high purity makes possible the manufacture of translucent and colored
articles. It has fast incorporation and good processing properties at low viscosity values
reproducing excellent rheumatic and mechanical properties depending on the formulation where
is used. Rubber industry develops and produces performance enhancing fillers such as
precipitated silica and precipitated calcium carbonate for rubber paper, plastics, healthcare and
other manufacturing industries. There are many advantages that industry can proudly offer
business.

GROWTH AND DEVELOPMENT:

Since the beginning of this year, rubber industry under the background of sharp price
rises of raw materials, has made positive efforts in adjustment of product mix, and achieved a
steady development. According to statics 500 members of the Exel rubber industry association.
Exel tyre output increased to 13.9% in the first half of this year, output of rubber products went
up 4.15%, that of transmission belt, up 20.4%, that of black carbon, up 13.9%, and that of radial
ply tyre detachable dye ,up 10% consumption of rubber by member enterprises of the association
reached 1.119 million tons in first half, up 20.23%year on year.
Indian Rubber Industries is 32 years old Co. & the brand owner of Maruti Lawn Mower.
It is one of the leading distributors in the field of horticulture tools and equipment that include
rotary slasher, brush cutter, hedge trimmer, long reach hedge trimmer, chain saw, pole pruner,
gang mower, cut-off saw, concrete cutter, power sprayer, mist blower, vacuum shredder, earth
auger, fogging machine and garden roller, with manufacturing facilities of Lawn Mowers with
Brand name Maruti Lawn Mower in New Delhi India.

The company is very well positioned to support its customers through its world class
quality products, spare parts supply and prompt after sales service. With the state of art service
and training facilities at Nangloi New Delhi, the company is in a good position to provide
excellent technical, marketing and after sales support through its trained service staff and
efficient & dedicated worker Indian Rubber Industries (IRI) offers wide range of manual lawn
mowers, electrical lawn mowers,engine operated lawn mowers by the brand maruti lawn mower,
chainsaws, brush cutters, hedge trimmers, blowers, vacuum shredders, telescopic pruners, earth
augers, rescue saw, cut –off saws by STIHL brand, fogging machine, rotary slasher and garden
roller etc. Our Company‘s products are widely used in India by various end users related to
professional logging, landscaping, horticulture, agriculture, plantations and government
institutions like railways, disaster management and emergency services, health services,
municipal corporations and defence establishments etc.

RATIONALE OF RUBBER INDUSTRY

ORIGIN: Although most rubbers are nowadays produced synthetically, originally rubber is a
natural product, known by natives of South-America already before the beginning of our era.
They found that by cutting the surface of a particular tree, white fluid started to run down from it.
During the ages the tears of these trees were also considered as expressions of divinity. As far as
is known, it was Kristopher Columbus who first noticed, that American Indians utilized rubber in
their religious ballgames in the end of the 13th Century.

European scientists became interested in rubber as raw material in the 16th Century. In
1736 explorer Charles Marie de la Condamine reported about his discovery of waterproof dishes
and footwear used by natives in South America. More extensive applications of rubber were
inhibited for years because of its poor heat exchange tolerance and stickiness. Another
significant invention within the rubber industry is the discovering of air-filled tyre by John Boyd
Dunlop in 1888.

The demand for rubber products increased as well as the demand for technical rubber due
to general industrialization and increased traffic. The production of tubes began in 1925 and as
the number of cars exceeded 35 000 in 1933, tyre production began.

The production ratio between footwear, tyres and technical rubber has changed during the
decades. The ratio has, for instance, been affected by economic cyclicity, general standard of
living, the oil crisis and wars. The demand for raw material has been solved with recycling and
with the increasing use of synthetic rubber.

Brief Introduction About Company Profile:

EXEL was incorporated on 1987 as a private limited company names “EXEL

RUBBER (P) LTD” by Sri.T.S.Manohar & Sri.G.J.K.Naveen and taken over by Sri.P.Nagi
Reddy & Sri.G.Raghunath Reddy and associates who has vast experience in the rubber field.
The company which made a small beginning as small scale unit manufacturing Automotive
Butyl Tubes with a turnover of Rs.20.00 lakhs and with a work force of 20 has become a
conglomerate to 2 manufacturing facilities with a turnover of Rs.29.20 crores and a work force
of over 500 people.
Exel is an Indian enterprise depending on the type companies for the orders molded
by quality aspirations. This has always demanded a preparedness and long-term organization
vision that can encompass the turbulences and paradoxes of shifting terms and terrian’s of
business. At Exel individual perspective are harmonized with rapid growth into one organic and
self-sustaining force. The insistence on care, concern, responsibility and effectiveness run as
concurrent themes. Lending critical mass to the Company’s evolution as a transactional
corporation.
Consistently ranked among the fastest growing rubber industry companies in the
Country, Exel is utilizing its collective past experience to kick start its future plans as a global
company. Respected for quality. For performance, for care, concern and responsibility and
equally much for the creation and maximization of wealth for its shareholder. Exel Rubber Ltd
represents a strategic stage in constant evolution as the complete rubber industry.
Here are some of the advantages that our industry proudly offer business
- abundant raw material supply
- money saving enery use
- complete product line for tires
- pollution free technology
- development and research.
FACILITIES:
Exel own and operates 2 manufacturing facilities in covering almost every area of tube
manufacturing. Located in and around Hyderabad, they are built to accommodate current and
emerging international standards in Good Manufacturing Practices.
ACFILITIES NUFACTURINFOR MAG: Butyl tubes are manufactured from two large
facilities in India. The facilities insist on rigorous quality stand and follow good manufacturing
practices prescribed by the tyre companies. Exel is among who have achieved the ISO 9002
accreditation for its quality standards.
PRODUCTS:
Exel manufacture a comprehensive range of branded and generic butyl tubes like
 - Specialty silicas
- Silica slab rubber
- Track plate
- Antistatic slab rubber
- High dot slab rubber
- Anti slippery rubber gasket
- Fluorine rubber sheet
- Fitness mat
- Thin strip slab rubber
- Rubber tubes
- Rubber sheets
- Rubber washers
- Rubber tyres
- Rubber gaskets
- Rubber diaphragm
- Rubber pads
- Rubber valve
- Rubber hose
- Calcium carbonate nano fillers

DOMESTIC MARKETING:
EXEL operates in the market place, implementing corporate strategies including one for
high value specialty products. A strong sales force supported by marketing services, product
management and commercial functions.
INTERNATIONAL BUSINESS:
Offices in India, the USA, and the CIS facilitate Exel’s growing international presence
currently focused on the consolidation and expansion of business.
A multi pronged strategy including joint ventures, acquisitions, marketing alliances,
manufacturing tie – ups. Custom synthesis and other collaborative ventures are being pursued for
long-term growth.
Objective Of Study:
To understand the information contained in financial statements with a view to know the strength

or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby

enabling the financial analyst to take different decisions regarding the operations of the firm.

1. To study the present financial system at EXEL RUBBER LTD.

2. To determine the Profitability, Liquidity Ratios, Cash flow and Fund flow statement.

3. To analyze the capital structure of the company with the help of Leverage ratio.

4. To offer appropriate suggestions for the better performance of the organization

NEED FOR THE STUDY:

The present study is a part and parcel in MBA curriculum, after completion of 1st year
during the summer I have undergone project work at this juncture I have decided to do my
project in finance area for that the present topic has been selected. It is my duty to fulfill the
curriculum which will helps us to new look inside of the learning that has been processed or
taken into consideration therefore, as per the norms and regulations of the ADIKAVI
NANNAYA UNIVERSITY. I have opted to do research project according to my interest in the
field of Finance the main reason behind for choosing this topic is to get an in depth of study of
the Ratio analysis
 To study the usage of financial statement analysis in the present day market.

 To know the various ratios of the company basing on their financial data.

 To notice the different interpretations of various ratios in the business entity.

 To understand the firm’s liquidity position basing on the current ratios and to make

suggestions to it.
 LIMITATIONS OF THE STUDY
The study was conducted with the data available and the analysis was made accordingly.

- EXEL RUBBER LTD is only major organization engaged in producing rubber. As such
comparison with other organization is not possible.
- The variations in the profits of EXEL RUBBER LTD from year to year can be partly
attributed to changes in economic conditions, globalization, opining up is the market due
to policy changes by Government of India which are beyond the control of EXEL
RUBBER LTD.
- Deficiency arises while interpreting the due to inflationary situations and changing price
levels.
CHAPTER-2
 RESEARCH METHODOLOGY

RESEARCH:
Research is defined as a careful consideration of study regarding a particular concern or a
problem using scientific methods. According to the American sociologist Earl Robert Babbie,
“Research is a systematic inquiry to describe, explain, predict and control the observed
phenomenon. Research involves inductive and deductive methods.”
Inductive research methods are used to analyze the observed phenomenon whereas,
deductive methods are used to verify the observed phenomenon. Inductive approaches are
associated with qualitative research and deductive methods are more commonly associated
with quantitative research.
One of the most important aspects of research is the statistics associated with it,
conclusion or result. It is about the “thought” that goes behind the research. Research is
conducted with a purpose to understand:
 What do organizations or businesses really want to find out?
 What are the processes that need to be followed to chase the idea?
 What are the arguments that need to be built around a concept?
 What is the evidence that will be required that people believe in the idea or concept?
Characteristics of Research
1. A systematic approach is followed in research. Rules and procedures are an integral part of
research that set the objective of a research process. Researchers need to practice ethics and code
of conduct while making observations or drawing conclusions.
2. Research is based on logical reasoning and involves both inductive and deductive methods.
3. The data or knowledge that is derived is in real time, actual observations in the natural
settings.

4. There is an in-depth analysis of all the data collected from research so that there are no
anomalies associated with it.

5. Research creates a path for generating new questions. More research opportunity can be
generated from existing research.
6. Research is analytical in nature. It makes use of all the available data so that there is no
ambiguity in inference.

7. Accuracy is one of the important character of research, the information that is obtained while
conducting the research should be accurate and true to its nature. For example, research
conducted in a controlled environment like a laboratory. Here accuracy is measured of
instruments used, calibrations, and the final result of the experiment.
Basic Research:
Basic research is mostly conducted to enhance knowledge. It covers fundamental
aspects of research. The main motivation of this research is knowledge expansion. It is a non-
commercial research and doesn’t facilitate in creating or inventing anything. For example, an
experiment is a good example of basic research.
Applied Research:
Applied research focuses on analyzing and solving real-life problems. This type of research
refers to the study that helps solve practical problems using scientific methods. This research
plays an important role in solving issues that impact the overall well-being of humans. For
example, finding a specific cure for a disease.
Problem Oriented Research:
As the name suggests, problem-oriented research is conducted to understand the exact
nature of the problem to find out relevant solutions. The term “problem” refers to having issues
or two thoughts while making any decisions.
For e.g Revenue of a car company has decreased by 12% in the last year. The following could be
the probable causes: There is no optimum production, poor quality of a product, no advertising,
economic conditions etc.
Problem Solving Research:
This type of research is conducted by companies to understand and resolve their own
problems. The problem-solving research uses applied research to find solutions to the existing
problems.
Qualitative Research:
Qualitative research is a process that is about inquiry, that helps in-depth understanding of
the problems or issues in their natural settings. This is a non- statistical research method.
 Methodology is an intensive and purposeful search for knowledge and for the understanding
of social and physical phenomenon. It is the method for the discovery of true values in a
scientific way.

Research Design:
Research Design pertains to the great research approach or strategy adopted for a
particular project. A research project has to be the conducted scientifically making sure that the
data is collected adequately and economically.
The study used a descriptive research design for the purpose of getting an insight
over the issue. It is to provide an accurate picture of some aspects of market environment.
Descriptive research is used when the objective is to provide a systematic description that is as
factual and accurate as possible.

There are two sources of data,

 Primary Sources and

 Secondary Sources

Primary Data:
The data which is collected at first hand for the purpose of the study is known as primary data.
Primary data which is collected through interaction with the assistant financial manager of KCP
company.
Primary sources:
It is also called as first handed information; the data is collected through the observation in the
organization and interview with officials. By asking question with the accounts and other persons in
the financial department. Apart from these some information is collected through the seminars, which
were held by EXEL company.
Secondary Data:
The data which is corrected by some one previously is called secondary Data. It is already
available in the form of internal records of the company and other publications.
Secondary sources:
The secondary data have been collected through the various books, magazines, broachers &
websites
CHAPTER-3
 REVIEW OF LITERATURE
Financial statements refer to such statements which contains financial information about an
enterprise. They report profitability and the financial position of the business at the end of
accounting period. The team financial statement includes at least two statements which the
accountant prepares at the end of an accounting period. The two statements are: -

 The Balance Sheet

 Profit And Loss Account

They provide some extremely useful information to the extent that balance Sheet
mirrors the financial position on a particular date in terms of the structure of assets, liabilities and
owners equity, and so on and the Profit and Loss account shows the results of operations during a
certain period of time in terms of the revenues obtained and the cost incurred during the year.
Thus the financial statement provides a summarized view of financial position and operations of
a firm

CLASSIFICATIONS OF RATIOS:
The use of ratio analysis is not confined to financial manager only. There are
different parties interested in the ratio analysis for knowing the financial position of a firm for
different purposes. Various accounting ratios can be classified as follows:
1. Traditional Classification

2. Functional Classification

3. Significance ratios

1. Traditional Classification: It includes the following.

 Balance sheet (or) position statement ratio: They deal with the relationship between two
balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items
must, however, pertain to the same balance sheet.

 Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship
between two profit & loss account items, e.g. the ratio of gross profit to sales etc.
  Composite (or) inter statement ratios: These ratios exhibit the relation between a profit &
loss account or income statement item and a balance sheet items, e.g. stock turnover ratio,
or the ratio of total assets to sales.

2. Functional Classification

These include liquidity ratios, long term solvency and leverage ratios, activity
ratios and profitability ratios.

3. Significance ratios:

Some ratios are important than others and the firm may classify them as primary
and secondary ratios. The primary ratio is one, which is of the prime importance to a concern.
The other ratios that support the primary ratio are called secondary ratios.

In The View Of Functional Classification The Ratios Are

1. Liquidity ratio

2. Leverage ratio

3. Activity ratio

4. Profitability ratio

1. LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current obligations as &
when there becomes due. The short term obligations of a firm can be met only when there are
sufficient liquid assets. The short term obligations are met by realizing amounts from current,
floating (or) circulating assets The current assets should either be calculated liquid (or) near
liquidity. They should be convertible into cash for paying obligations of short term nature. The
sufficiency (or) insufficiency of current assets should be assessed by comparing them with short-
term current liabilities. If current assets can pay off current liabilities, then liquidity position will
be satisfactory.

To measure the liquidity of a firm the following ratios can be calculated

 Current ratio
  Quick (or) Acid-test (or) Liquid ratio

 Absolute liquid ratio (or) Cash position ratio

(a) CURRENT RATIO:

Current ratio may be defined as the relationship between current assets
and current liabilities. This ratio also known as Working capital ratio is a measure of general
liquidity and is most widely used to make the analysis of a short-term financial position (or)
liquidity of a firm.
Current assets

Current ratio = Current Liabilities

Components of current ratio

CURRENT ASSETS CURRENT LIABILITIES

Cash in hand Out standing or accrued expenses

Cash at bank Bank over draft

Bills receivable Bills payable

Inventories Short-term advances

Work-in-progress Sundry creditors

Marketable securities Dividend payable

Short-term investments Income-tax payable

Sundry debtors

Prepaid expenses

(b) QUICK RATIO:

Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to
the ability of a firm to pay its short-term obligations as & when they become due. Quick ratio
may be defined as the relationship between quick or liquid assets and current liabilities. An asset
is said to be liquid if it is converted into cash with in a short period without loss of value.
 Quick or liquid assets

Quick ratio = Current Liabilities

Components Of Quick Or Liquid Ratio

QUICK ASSETS CURRENT LIABILITIES

Cash in hand Out standing or accrued expenses

Cash at bank Bank over draft

Bills receivable Bills payable

Sundry debtors Short-term advances

Marketable securities Sundry creditors

Temporary investments Dividend payable

Income tax payable

(c) ABSOLUTE LIQUID RATIO

Although receivable, debtors and bills receivable are generally more liquid than
inventories, yet there may be doubts regarding their realization into cash immediately or in time.
Hence, absolute liquid ratio should also be calculated together with current ratio and quick ratio
so as to exclude even receivables from the current assets and find out the absolute liquid assets.
Absolute liquid assets

Absolute liquid ratio = Current liabilities

Absolute liquid assets include cash in hand etc. The acceptable forms for this ratio is
50% (or) 0.5:1 (or) 1:2 i.e., Rs.1 worth absolute liquid assets are considered to pay Rs.2 worth
current liabilities in time as all the creditors are nor accepted to demand cash at the same time
and then cash may also be realized from debtors and inventories.
Components of Absolute Liquid Ratio

ABSOLUTE LIQUID ASSETS CURRENT LIABILITIES

Cash in hand Out standing or accrued expenses

Cash at bank Bank over draft

Interest on Fixed Deposit Bills payable

Short-term advances

Sundry creditors

Dividend payable

Income tax payable

2. LEVERAGE RATIOS

The leverage or solvency ratio refers to the ability of a concern to meet its long term
obligations. Accordingly, long term solvency ratios indicate firm’s ability to meet the fixed
interest and costs and repayment schedules associated with its long term borrowings.
The following ratio serves the purpose of determining the solvency of the concern.

PROPRIETORY RATIO
A variant to the debt-equity ratio is the proprietory ratio which is also known as equity
ratio. This ratio establishes relationship between share holders funds to total assets of the firm.
Shareholders’ funds

Proprietary ratio = Total assets

 SHARE HOLDERS FUND TOTAL ASSETS

Share Capital Fixed Assets

Reserves & Surplus Current Assets

Cash in hand & at bank

Bills receivable

Inventories

Marketable securities

Short-term investments

Sundry debtors

Prepaid Expenses

3. ACTIVITY RATIOS:

Funds are invested in various assets in business to make sales and earn profits.
The efficiency with which assets are managed directly effect the volume of sales. Activity ratios
measure the efficiency (or) effectiveness with which a firm manages its resources (or) assets.
These ratios are also called “Turn over ratios” because they indicate the speed with which assets
are converted or turned over into sales.

 Working capital turnover ratio

 Fixed assets turnover ratio

 Capital turnover ratio

 Current assets to fixed assets ratio

(a) WORKING CAPITAL TURNOVER RATIO: Working capital of a concern is

directly related to sales.

Working capital = Current assets - Current liabilities

 It indicates the velocity of the utilization of net working capital. This indicates the
no. of times the working capital is turned over in the course of a year. A higher ratio indicates
efficient utilization of working capital and a lower ratio indicates inefficient utilization.

Working capital turnover ratio=cost of goods sold/working capital.

Components of Working Capital

CURRENT ASSETS CURRENT LIABILITIES

Cash in hand Out standing or accrued expenses

Cash at bank Bank over draft

Bills receivable Bills payable

Inventories Short-term advances

Work-in-progress Sundry creditors

Marketable securities Dividend payable

Short-term investments Income-tax payable

Sundry debtors

Prepaid expenses

(b) FIXED ASSETS TURNOVER RATIO:

It is also known as sales to fixed assets ratio. This ratio measures the efficiency
and profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization of
fixed assets. Lower ratio means under-utilization of fixed assets.

Cost of Sales

Fixed assets turnover ratio = Net fixed assets

Cost of Sales = Income from Services

Net Fixed Assets = Fixed Assets - Depreciation

(c) CAPITAL TURNOVER RATIOS:

Sometimes the efficiency and effectiveness of the operations are judged by

comparing the cost of sales or sales with amount of capital invested in the business and not with
assets held in the business, though in both cases the same result is expected. Capital invested in
the business may be classified as long-term and short-term capital or as fixed capital and
working capital or Owned Capital and Loaned Capital. All Capital Turnovers are calculated to
study the uses of various types of capital.
Cost of goods sold

Capital turnover ratio = Capital employed

Cost of Goods Sold = Income from Services

Capital Employed = Capital + Reserves & Surplus

(d) CURRENT ASSETS TO FIXED ASSETS RATIO:

This ratio differs from industry to industry. The increase in the ratio means that
trading is slack or mechanization has been used. A decline in the ratio means that debtors and
stocks are increased too much or fixed assets are more intensively used. If current assets increase
with the corresponding increase in profit, it will show that the business is expanding.

Current Assets

Current Assets to Fixed Assets Ratio = Fixed Assets

Component Of Current Assets To Fixed Assets Ratio

CURRENT ASSETS FIXED ASSETS

Cash in hand Machinery

Cash at bank Buildings

Bills receivable Plant

Inventories Vehicles
Work-in-progress

Marketable securities

Short-term investments

Sundry debtors

Prepaid expenses

4. PROFITABILITY RATIOS:
The primary objectives of business undertaking are to earn profits. Because profit
is the engine, that drives the business enterprise.

 Net profit ratio

 Return on total assets

 Reserves and surplus to capital ratio

 Earnings per share

 Operating profit ratio

 Price – earning ratio

 Return on investments

(a) NET PROFIT RATIO

Net profit ratio establishes a relationship between net profit (after tax) and sales
and indicates the efficiency of the management in manufacturing, selling administrative and
other activities of the firm.
Net profit after tax

Net profit ratio= Net sales

Net Profit after Tax = Net Profit (–) Depreciation (–) Interest (–) Income Tax

Net Sales = Income from Services

 It also indicates the firm’s capacity to face adverse economic conditions such as
price competitors, low demand etc. Obviously higher the ratio, the better is the profitability.

(b) RETURN ON TOTAL ASSETS:

Profitability can be measured in terms of relationship between net profit and
assets. This ratio is also known as profit-to-assets ratio. It measures the profitability of
investments. The overall profitability can be known.

Net profit

Return on assets = Total assets

Net Profit = Earnings before Interest and Tax

Total Assets = Fixed Assets + Current Assets

(c) RESERVES AND SURPLUS TO CAPITAL RATIO:

It reveals the policy pursued by the company with regard to growth shares. A very
high ratio indicates a conservative dividend policy and increased ploughing back to profit.
Higher the ratio better will be the position.
Reserves& surplus

Reserves & surplus to capital = Capital

(d) EARNINGS PER SHARE

Earnings per share is a small verification of return of equity and is calculated by
dividing the net profits earned by the company and those profits after taxes and preference
dividend by total no. of equity shares.
Net profit after tax
Earnings per share = Number of Equity shares
The Earnings per share is a good measure of profitability when compared with
EPS of similar other components (or) companies, it gives a view of the comparative earnings of a
firm.
(e) OPERATING PROFIT RATIO:

Operating ratio establishes the relationship between cost of goods sold and other
operating expenses on the one hand and the sales on the other.

Operating cost

Operation ratio = Net sales

However 75 to 85% may be considered to be a good ratio in case of a manufacturing
under taking.

Operating profit ratio is calculated by dividing operating profit by sales.

Operating profit = Net sales - Operating cost

Operating profit

Operating profit ratio = Sales

(f) PRICE - EARNING RATIO:

Price earning ratio is the ratio between market price per equity share and earnings
per share. The ratio is calculated to make an estimate of appreciation in the value of a share of a
company and is widely used by investors to decide whether (or) not to buy shares in a particular
company.
Generally, higher the price-earning ratio, the better it is. If the price earning ratio
falls, the management should look into the causes that have resulted into the fall of the ratio.
Market Price per Share

Price – Earning Ratio = Earnings per Share

Capital + Reserves & Surplus

Market Price per Share = Number of Equity Shares

Earnings before Interest and Tax

Earnings per Share = Number of Equity Shares

(g) RETURN ON INVESTMENTS:
Return on share holder’s investment, popularly known as Return on investments
(or) return on share holders or proprietor’s funds is the relationship between net profit (after
interest and tax) and the proprietor’s funds.
Net profit (after interest and tax)

Return on shareholder’s investment = Shareholder’s funds

The ratio is generally calculated as percentages by multiplying the above with 100.

Purpose of Ratio Analysis:

1. To identify aspects of a business’s performance to aid decision making

2. Quantitative process – may need to be supplemented by qualitative factors to get a

complete picture.

3. 5 main areas-

 Liquidity – the ability of the firm to pay its way

 Investment/shareholders – information to enable decisions to be made on the extent of the
risk and the earning potential of a business investment
 Gearing – information on the relationship between the exposure of the business to loans as
opposed to share capital
 Profitability – how effective the firm is at generating profits given sales and or its capital
assets
 Financial – the rate at which the company sells its stock and the efficiency with which it
uses its assets
Role of Ratio Analysis:
It is true that the technique of ratio analysis is not a creative technique in the sense that it
uses the same figure & information, which is already appearing in the financial statement. At the
same time, it is true that what can be achieved by the technique of ratio analysis cannot be
achieved by the mere preparation of financial statement. Ratio analysis helps to appraise the firm
in terms of their profitability & efficiency of performance, either individually or in relation to
those of other firms in the same industry. The process of this appraisal is not complete until the
ratio so computed can be compared with something, as the ratio all by them do not mean
anything. This comparison may be in the form of intra firm comparison, inter firm comparison or
comparison with standard ratios. Thus proper comparison of ratios may reveal where a firm is
placed as compared with earlier period or in comparison with the other firms in the same
industry.
Ratio analysis is one of the best possible techniques available to the management to
impart the basic functions like planning & control. As the future is closely related to the
immediate past, ratio calculated on the basis of historical financial statements may be of good
assistance to predict the future. Ratio analysis also helps to locate & point out the various areas,
which need the management attention in order to improve the situation.

As the ratio analysis is concerned with all the aspect of a firms financial analysis i.e.
liquidity, solvency, activity, profitability & overall performance, it enables the interested persons
to know the financial & operational characteristics of an organisation & take the suitable
decision.

Fund Flow Analysis:

Fund may be interpreted in various ways as

(a) Cash,

(b) Total current assets,

(c) Net working capital,

(d) Net current assets.

For the purpose of fund flow statement the term means net working capital. The flow of fund
will occur in a business, when a transaction results in a change i.e., increase or decrease in the
amount of fund.
According to Robert Anthony the funds flow statement describes the sources from which
additional funds were derived and the uses to which these funds were put. In short, it is a
technical device designed to highlight the changes in the financial condition of a business
enterprise between two balance sheets.
Different names of Fund-Flow Statement

 A Funds Statement
 A statement of sources and uses of fund
 A statement of sources and application of fund
 Where got and where gone statement
 Inflow and outflow of fund statement
Objectives of Fund Flow Statement
The main purposes of FFS are:
 To help to understand the changes in assets and asset sources which are not readily evident in
the income statement or financial statement.
 To inform as to how the loans to the business have been used.
 To point out the financial strengths and weaknesses of the business.
Format of Fund Flow Statement

Sources Applications

Fund from operation Fund lost in operations

Non-trading incomes Non-operating expenses

Issue of shares Redemption of redeemable preference share

Issue of debentures Redemption of debentures

Borrowing of loans Repayment of loans

Acceptance of deposits Repayment of deposits

Sale of fixed assets Purchase of fixed assets

Sale of investments (Long Term) Purchase of long term investments

Decrease in working capital Increase in working capital

Cash Flow Statement:

Cash is a life blood of business. It is an important tool of cash planning and control. A
firm receives cash from various sources like sales, debtors, sale of assets investments etc.
Likewise, the firm needs cash to make payment to salaries, rent dividend, interest etc.
Cash flow statement reveals that inflow and outflow of cash during a particular period. It
is prepared on the basis of historical data showing the inflow and outflow of cash.

To preparing Account for all non-current items is easier for preparing Cash Flow Statement.

Cash from operation can be prepared by this formula also.

Net Profit + Decrease in Current Assets - Increase in Current Assets

OR OR

Increase in Current Liabilities Decrease in Current Liabilities.

Cash Flow Statement:

Inflow of Cash Amount Outflow of cash Amount

Opening cash balance *** Redemption of preference ***

shares

Cash from operation *** Redemption of debentures ***

Sales of assets *** Repayment of loans ***

Issue of debentures *** Payment of dividends ***

 Raising of loans *** Pay of tax ***

Collection from *** Cash lost in debentures ***

debentures

Refund of tax *** Closing cash balance ***

Cash from operation can be calculated in two ways:

Cash Sales Method:
Cash Sales – (Cash Purchase + Cash Operation Expenses)

Net Profit Method

It can be prepared in statement form or by Adjusted Profit and Loss Account.

Chapter-4
 Results And Discussion

CURRENT RATIO:

Formula:
Current assets
Current ratio = Current liabilities
Current Ratio
Current Assets Current Liabilities
Year Ratios
Rs. Rs.
2014 27,50,405 53,34,424 0.516
2015 2,86,42,001 1,42,28,321 2.013
2016 4,03,58,761 1,55,72,754 2.592
2017 7,15,90,715 4,94,16,171 1.449
2018 1,01,00,563 6,20,50,277 1.628

Current ratio
3
2.5
2
1.5
Current ratio
1
0.5
0
2014 2015 2016 2017 2018

Interpretation:
A relatively high value of current ratio is considered as an indicator that the firm is liquid and has
the ability to pay bills. On the other hand, a relatively low value of current ratio is considered as
an indicator that the firm will find difficulty in paying its bills. As a conventional rule, a current
ration of 2 to 1 or more is considered satisfactory.
2. Quick Ratio:
Quick ratio = Quick or Liquid assets / Current liabilities

Quick Ratio
Quick Assets Current Liabilities
Year Ratios
Rs. Rs.
2014 7,50,917 53,34,424 0.141
2015 2,31,45,421 1,42,28,321 1.627
2016 3,40,97,964 1,55,72,754 2.190
2017 6,73,07,968 4,94,16,171 1.362
2018 8,89,40,804 6,20,50,277 1.433

Quick Ratio
2.5

1.5

Quick Ratio
1

0.5

0
2014 2015 2016 2017 2018

Interpretation:
Generally, a quick ratio of 1 to 1 is considered to represent a satisfactory current financial
condition. Although the quick ratio is more penetrating test of liquidity than the current ratio it
should be used cautiously. The quick ratio is increased from 2013 to 2015 from 0.141 to 2.190; it
is decreased from 2015 to 2016 from 2.190 to 1.362, since the increment in current liabilities, it
is increased from 2016 to 2017.
ACITIVITY RATIO
Inventory Turnover Ratio

Sales Average Inventory

Year Ratios
Rs. Rs.

2014 2,34,000 19,99,488 0.117

2015 10,53,98,345 37,48,034 28.121

2016 15,08,27,610 57,71,576 26.133

2017 17,42,08,899 58,34,446 29.859

2018 24,17,91,946 81,71,275 29.590

ACITIVITY RATIO
35

30

25

20

ACITIVITY RATIO
15

10

0
2014 2015 2016 2017 2018

Interpretation:
In 2013, the inventory turnover ratio is 0.117, because the sales are very low from 2015 to 2016
the inventory turnover ratio is increased continuously from 28.121 to 29.590.
2. Debtors Turn over and Collection period ratio:
Debtors turn over =Total sales / Debtors
Debtors Turnover Ratio
Sales Debtors
Year Ratios
Rs. Rs.

2014 2,34,000 2,43,360 0.962

2015 10,53,98,345 2,16,53,018 4.868

2016 15,08,27,610 2,80,95,495 5.368

2017 17,42,08,899 3,12,81,173 5.569

2018 24,17,91,946 3,49,32,122 6.922

Debtors Turnover Ratio

8

4
Debtors Turnover Ratio
3

0
2014 2015 2016 2017 2018

Interpretation: The higher the value of debtor’s turnover the more efficient is management
of assets. The ratio is increased continuously from 2013 to 2016.
3. Average collection period ratio:

Average collection period = Days in a year = Debtors x Days in year

------------------- ----------------------------
Debtors turn over Sale

Average Collection Period

Debtors
Year Days in a year Turnover Days
Ratio
2014 365 0.962 380
2015 365 4.868 75
2016 365 5.368 68
2017 365 5.569 66
2018 365 6.922 53

Debtors Turnover Ratio

8
7
6
5
4
Debtors Turnover Ratio
3
2
1
0
2014 2015 2016 2017 2018

Interpretation: The average collection period ratio measures the quality of debtors since it
indicates the rapidity or slowness of their collectability. In EXEL Rubber Ltd., the average
collection is stable on whole, but in 2013 the average collection period is 380 days, so much
higher than that of 2017 which is 53, EXEL made a big turn around by substantially reducing the
average collection to 53 days, because of rise in sales on cash are higher than that of credit sales.
4. Fixed Assets Turn over Ratio:
Fixed assets turn over = Sales
------------------
Net fixed assets

Fixed Assets Turnover Ratio

Sales Fixed Assets
Year Ratios
Rs. Rs.
2014 2,34,000 1,93,94,550 0.12

2015 10,53,98,345 1,82,15,082 5.786

2016 15,08,27,610 1,84,23,241 8.187

2017 17,42,08,899 1,69,29,970 10.290

2018 24,17,91,946 1,53,29,174 15.773

Series 1
5

2 Series 1

0
2014 2015 2016 2017 2018

Interpretation:
In EXEL Rubber Ltd., the fixed asset turnover ratio is very low in 2013 that is 0.012 and it is
increased to 15.773 in 2017. A high fixed asset turnover ratio indicates efficient utilization of
fixed asset in generating sales. While the low ratio indicates inefficient utilization of fixed assets.
5. Total Assets Turn over Ratio:

Total assets turn over ratio = Sales

--------------------
Total Assets

Total Assets Turnover Ratio

Sales Total Assets
Year Ratios
Rs. Rs.
2014 2,34,000 2,26,44,955 0.3

2015 10,53,98,345 4,68,57,083 2.249

2016 15,08,27,610 5,87,82,002 2.566

2017 17,42,08,899 8,85,20,729 1.968

2018 24,17,91,946 11,63,29,737 2.079

Total Assets Turnover Ratio

3

2.5

1.5
Total Assets Turnover Ratio
1

0.5

0
2014 2015 2016 2017 2018

Interpretation: In 2014, sales are very low, when compared to the other years. In 2016, it is
very high in 2017, it is decreased due to the high increment in tangible assets
6. Proprietary Ratio:
Formula: Proprietor’s fund

Proprietary ratio = Total assets

OR

Shareholders fund

Proprietary ratio = Fixed assets + current assets

Proprietary fund Total Assets

Year Ratios
Rs. Rs.
2014 49,804.26 2,26,44,955 0.72

2015 63,967.13 4,68,57,083 0.73

2016 81,448.60 5,87,82,002 0.77

2017 126,372.97 8,85,20,729 0.66

2018 166,272.97 11,63,29,737 0.68

Proprietary ratio
0.78
0.76
0.74
0.72
0.7
0.68 Proprietary ratio
0.66
0.64
0.62
0.6
2014 2015 2016 2017

Interpretation: It is observed from the above chart that in the year 2016 the proprietary ratio of
Excel rubber ltd has increased and again it is observed to have a downfall in the year 2018
7. Stock Working Capital Ratio:
Formula: Stock
Stock working capital ratio = Working Capital

Stock Working
Year Ratios
Capital Rs.
2014 10,119.82 3149.15 3.21

2015 4352.93 4352.93 2.78

2016 12,522.70 12,522.70 1.13

2017 10,622.38 10,622.38 1.39

2018 124,272.97 11,632.737 0.68

Stock Working Capital Ratio

3.5

2.5

1.5 Stock Working Capital Ratio

0.5

0
2014 2015 2016 2017 2018

Interpretation: It is observed from the above chart that in the year 2014 the stock working
capital ratio of Excel rubber ltd had the high ratio and again it is observed to have a downfall
gradually in the upcoming years. It has an increase in the year 2017 and again reduced in the
year 2018
8.Capital Gearing Ratio:

Formula:
Preference capital+ secured loan
Capital gearing ratio = Equity capital & reserve & surplus

Capital
Secured loan Equity capital &
Year reserves & surplus gearing
Rs.
Rs. ratio
2014 7,664.90 49,804.26 16%

2015 9,569.12 63,967.13 15%

2016 6,600.17 81,448.60 8.2%

2017 10,697.92 126,372.97 8.5%

2018 166,272.97 131,632.93 8.7%

Capital gearing ratio

18%
16%
14%
12%
10%
8% Capital gearing ratio
6%
4%
2%
0%
2014 2015 2016 2017 2018

Interpretation: It is observed from the above chart that in the year 2014 the capital gearing ratio
of Excel rubber ltd had the high ratio and again it is observed to have a downfall gradually in
the upcoming years. It has an increase in the year 2017 and 2018
9. Debt Equity Ratio:

Formula: Total long term debt

Debt equity ratio = Total shareholders fund

Debt
Long term debt Shareholders fund
Year Equity
Rs. Rs.
Ratio
2014 21,865.61 49,804.26 0.44

2015 27,825.73 63,967.13 0.44

2016 36,479.68 81,448.60 0.45

2017 73,904.48 126,372.97 0.66

2018 166,272.97 11,63,29,737 0.59

Debt Equity Ratio

0.7
0.6
0.5
0.4
0.3 Debt Equity Ratio

0.2
0.1
0
2014 2015 2016 2017 2018

Interpretation: It is observed from the above chart that in the year 2014, 2015, 2016 the debt
equity ratio of Excel rubber ltd had the lowest ratio and again it is observed to have a rasied
gradually in the upcoming years. It has an increase in the year 2017 and a slight downfall in the
year 2018
10. Gross Profit Ratio:

Formula:
Gross profit
Gross profit ratio = Net sales ×100

Gross
Gross profit Net sales
Year profit
Rs. Rs.
Ratio
2014 18345.48 80,877.79 22.7

2015 25,439.43 111,699.03 22.7

2016 30,086.28 133,805.78 22.4

2017 25,758.2 141,959 18.14

2018 166,272.97 163,29.73 18.68

Gross profit Ratio

25

20

15
Gross profit Ratio
10

0
2014 2015 2016 2017 2018

Interpretation: It is observed from the above chart that in the year 2014, 2015, 2016 the gross
profit ratio of Excel rubber ltd had the high ratio and again it is observed to have a downfall
gradually in the upcoming years 2017 and 2018
FINDINGS
1. The current ratio has shown non fluctuating trend as 0.516,2.013,2.592,1.449 and 1.628 during

2014, 2015, 2016, 2017, 2018

2. The quick ratio is also in non fluctuating trend throughout the period. The Company believes

in high profitability and low liquidity position.

3. The proprietary ratio has shown a non fluctuating trend. The proprietary ratio is decreased

compared with the previous years.

4. The stock working capital ratio decreased from 3.21 to 0.68 in the year 2014 – 19.

5. The capital gearing ratio is decreased form 2014– 19 (0.16, 0.15,0.82,0.85) and increased in

2019 to 0.87.

6. The debt-equity ratio increased from 0.44-0.59 in the year 2014-19.

7. The gross profit ratio is in fluctuation manner. It decreased in the current year compared with

the previous year from 23.1% to 18.97%.

8. The net profit ratio is also decreased in the current year compared with the previous year from

14.54% to 10.78%.
Chapter-5
Suggestion & Recommendation

1. Liquidity refers to the ability of the concern to meet its current obligations as and when these

become due. The company should improve its liquidity position.

2. The company should make the balance between liquidity and solvency position of the

company.

3. The profit ratio is decreased in current year so the company should pay attention to this

because profit making is the prime objective o every business.

4. The cost of goods sold is high in every year so the company should do efforts to control it.

5. The long term financial position of the company is very good but it should pay a little

attention to short term solvency of the company.

CONCLUSION:

The company’s overall position is at a very good position. The company achieves sufficient
profit in past four years. The long term solvency position of the company is very good. The
company maintains low liquidity to achieve the high profitability. The company distributes
dividends every year to its share holders. The profit of the company decreased in the last year
due to maintaining the comparatively high liquidity. The net working capital of the company is
maximum in the last year shows the maximum liquidity.
 Bibliography
REFERENCE BOOKS –

 FINANCIAL MANAGEMENT

 Theory, Concepts & problems

 R.P.RUSTAGI

 FINANCIAL MANAGEMENT By- M.R. Agrawal

ANAUAL REPORTS OF RELIANCE INDUSTRIES LIMITED

 Balance sheet as at 31st march 2014

As at 31-03-2013 As at 31-03-2014
Equity and liabilities:
Share holders’ funds:
Share capital 4,42,57,840 2,36,36,840
Reserves and surplus 1,77,25,067 4,25,09,624
2,65,32,773 1,88,72,784
Non current liabilities:
Long term borrowings 15,31,94,961 14,61,13,287
Deferred tax liabilities 10,87,17,961 15,88,100
16,40,66,757 15,77,01,387
Current liabilities:
Short term borrowings 5,04,32,760 7,94,96,518
Trade payables 1,84,92,695 3,34,41,968
Other current liabilities 1,32,75,066 1,04,31,164
Short term provisions 9,48,572 14,25,096
8,31,49,093 12,47,94,746
TOTAL 27,37,48,623 26,36,23,349
Assets:
Non current assets:
Fixed assets 17,48,25,348 16,48,69,629
Long term loans and advances 36,24,057 38,82,624
17,84,49,405 16,87,52,253
Current assets
Inventories 3,97,84,281 3,15,07,937
Trade receivables 4,89,40,208 5,58,03,607
Cash and cash equivalents 18,86,735 38,22,389
Short term loans and advances 46,87,994 37,37,163
Total 9,52,99,218 9,48,71,096
27,37,48,623 26,36,23,349
 Balance sheet as at 31st march 2015

As at 31-03-2014 As at 31-03-2015
Equity and liabilities:
Share holders’ funds:
Share capital 2,36,36,840 2,52,86,840
Reserves and surplus 4,25,09,624 4,16,50,678
1,88,72,784 1,63,63,838
Non current liabilities:
Long term borrowings 14,61,13,287 17,33,65,142
Deferred tax liabilities 15,88,100 1,18,22,430
15,77,01,387 18,51,87,572
Current liabilities:
Short term borrowings 7,94,96,518 8,35,02,080
Trade payables 3,34,41,968 3,09,85,086
Other current liabilities 1,04,31,164 2,71,85,614
Short term provisions 14,25,096 19,83,974
12,47,94,746 14,36,56,754
TOTAL 26,36,23,349 31,24,80,488
Assets:
Non current assets:
Fixed assets 16,48,69,629 15,99,14,014
Long term loans and advances 38,82,624 43,24,124
16,87,52,253 16,42,38,138
Current assets
Inventories 3,15,07,937 3,67,08,044
Trade receivables 5,58,03,607 10,60,30,230
Cash and cash equivalents 38,22,389 12,44,074
Short term loans and advances 37,37,163 42,60,002
Total 9,48,71,096 14,82,42,350
26,36,23,349 31,24,80,488
 Balance sheet as at 31st march 2016
As at 31-03-2015 As at 31-03-2016
Equity and liabilities:
Share holders’ funds:
Share capital 2,52,86,840 4,81,15,310
Reserves and surplus 4,16,50,678 3,99,93,899
1,63,63,838 81,21,411
Non current liabilities:
Long term borrowings 17,33,65,142 14,73,07,842
Deferred tax liabilities 1,18,22,430 1,17,22,775
18,51,87,572 15,90,30,617
Current liabilities:
Short term borrowings 8,35,02,080 8,81,45,995
Trade payables 3,09,85,086 4,73,94,679
Other current liabilities 2,71,85,614 4,01,71,110
Short term provision 19,83,974 20,60,595
14,36,56,754 17,77,72,379
TOTAL 31,24,80,488 34,49,24,407
Assets:
Non current assets:
Fixed assets 15,99,14,014 15,80,94,225
Long term loans and advances 43,24,124 52,63,994
16,42,38,138 16,33,58,219
Current assets
Inventories 3,67,08,044 5,69,99,236
Trade receivables 10,60,30,230 11,70,82,611
Cash and cash equivalents 12,44,074 32,24,135
Short term loans and advances 42,60,002 41,60,206
Total 14,82,42,350 18,15,66,188
31,24,80,488 34,49,24,407
 Balance sheet as at 31st march 2017

As at 31-03-2016 As at 31-03-2017
Equity and liabilities:
Share holders’ funds:
Share capital 4,81,15,310 24,81,15,310
Reserves and surplus 3,99,93,899 1,54,10,479
81,21,411 3,27,04,831
Non current liabilities:
Long term borrowings 14,73,07,842 19,89,93,150
Deferred tax liabilities 1,17,22,775 1,18,03,722
15,90,30,617 21,07,96,872
Current liabilities:
Short term borrowings 8,81,45,995 10,05,09,094
Trade payables 4,73,94,679 4,53,72,339
Other current liabilities 4,01,71,110 1,08,36,734
Short term provision 20,60,595 21,19,782
17,77,72,379 15,88,37,949
TOTAL 34,49,24,407 10,28,39,652
Assets:
Non current assets:
Fixed assets 15,80,94,225 17,98,53,692
Long term loans and advances 52,63,994 53,10,105
16,33,58,219 18,51,63,797
Current assets
Inventories 5,69,99,236 6,16,17,952
Trade receivables 11,70,82,611 14,68,07,389
Cash and cash equivalents 32,24,135 31,96,475
Short term loans and advances 41,60,206 55,54,039
Total 18,15,66,188 21,71,75,855
34,49,24,407 40,23,39,652
 Balance sheet as at 31st march 2018

As at 31-03-2017 As at 31-03-2018
Equity and liabilities:
Share holders’ funds:
Share capital 24,81,15,310 6,81,15,310
Reserves and surplus 1,54,10,479 2,42,95,462
3,27,04,831 4,38,19,848
Non current liabilities:
Long term borrowings 19,89,93,150 15,63,69,534
Deferred tax liabilities 1,18,03,722 1,11,62,000
21,07,96,872 16,75,31,534
Current liabilities:
Short term borrowings 10,05,09,094 13,45,53,510
Trade payables 4,53,72,339 5,48,10,420
Other current liabilities 1,08,36,734 1,24,73,856
Short term provisions 21,19,782 25,96,187
15,88,37,949 20,44,33,973
TOTAL 10,28,39,652 41,57,85,355
Assets:
Non current assets:
Fixed assets 17,98,53,692 19,15,55,420
Long term loans and advances 53,10,105 43,67,992
18,51,63,797 19,59,23,412
Current assets
Inventories 6,16,17,952 7,40,93,342
Trade receivables 14,68,07,389 13,83,17,550
Cash and cash equivalents 31,96,475 43,40,734
Short term loans and advances 55,54,039 31,10,317
Total 21,71,75,855 21,98,61,943
40,23,39,652 41,57,85,355