Manda project1

A
PROJECT REPORT
ON
FINANCIAL ANALYSIS OF RATNAMANI TECHNO-CAST
LTD
SUBMMITED FOR
PARTIAL FULFILLEMENT OF THE REQURMENT OF THE TWO YEAR FULL
TIME MASTER OF BUSINESS ADMINISTRATION, (M.B.A)

SUBMMITED BY
MANDAKINI.P.PATEL
M.B.A.
ACADEMIC YEAR 2010-12

SUBMMITED TO
GUJARAT TECHNOLOGICAL UNIVERSITY, AHMEDABAD.

VJKM INSTITUTE OF MANAGEMENT& COMPUTER
STUDIES,VADU.
Affiliated With Gujarat Technological University, Ahmedabad.
Ta-Kadi, Dist-Mehsana, Pin: 382705(North Gujarat).

VJKM Institute of management & computer studies vadu. Page 1

PREFACE

MBA. is a Two years Degree Course namely a degree in “master of
Business Administration”. Candidate from the degree of M.B.A. need to have passed the
graduation conducted by the examination of any university at examine body recognizes as
equivalent.

Now a day‟s management has got a much wider scope among the many
other different fields. Gujarat state is an industrially developed state.

To fulfill this gap at practical knowledge university expects each
student to visit a unit where he or she spends some hours. In MBA. each student has to visit
any industry and study any one department at that industry.

Having full information and details at any one department the students
materialized them in a report, which is of his or her visit.

I am also among one of the luckiest student who get an opportunity. I
visited “Ratnamani Techno-cast ltd” at Chhatral‟‟ in this year. The result of my visit has
taken the shape of a report.


ACKOWLEDGEMENT

It would really difficult for me to complete the marketing research project
without getting co-operation of certain people. In other words there are so many external
thankful who directly or indirectly helped me in my marketing research project.

I as specially thankful to my director DR, B.S.Agrawal sir to give such kind of
opportunities to get practical knowledge about marketing research.

I would like to express my gratitude to Mr. Chanduji.P.Thakor. Our Head
of department who gave me a good opportunity to learn about industrial environment during
industrial visit. The task would have been difficult for me without guidance of our Professor.

Ms. Hetal Joshi

We are very thankful to the Manager of Ratnamani Techno-cast ltd. Mr.
Ashokbhai who gave me permission to do this Marketing research report in their organization
and helped me by giving all required information. I am also thankful to my friends who
helped me and guided me regarding the source of information related to particular industries.
In other words there are so many external thankful who directly or indirectly helped me in my
marketing research project.


EXECUTIVE SUMMARY

This is epitomized in Corporate Philosophy: "Excel in whatever you do" and
"Prosperity through performance”.

This report is based on industrial visit at RATNAMANI TECHNO CAST LTD,
Chhatral. Ratnamani Techno cast Ltd., now popularly known as "RATNAMANI", came into
existence in the year 1985. The genesis of RATNAMANI's birth and growth is:
ACCEPTING CHALLENGES. The planned growth has transformed two separate units-one
for welded ss pipes & tubes and the other for seamless SS pipes & tubes- into a multi-
product, multi-location public company. RATNAMANI has carved a niche as the preferred
single-point source for a wide range of casting products like valves and pumps.

RATNAMANI's Quality Management System conforms to ISO9001:2000, PED,
ADW2, EXPORT HOUSE, BOILER, API5L/2B. More over products undergo various
stringent inspection and testing stages, at the up-to- date in-house facilities, such as
Hydrostatic, tensile and various other Mechanical Tests, Non Destructive Tests, Chemical &
Corrosion Tests before they are released for the customers. This assures high value quality of
Products.

The prices are very competitive in the overseas markets as well and as a result
RATNAMANI is exporting its products to customers in U.S.A., Germany, France, Vietnam,
UAE, Kuwait, Switzerland, Netherlands, Malaysia, South Africa, Israel, UK, Indonesia,
South Korea, Belgium, Iran, Egypt, Australia.

The human resource base of RATNAMANI is dedicated and motivated team
employees, who are well qualified and trained to ensure quality and timely delivery to meet
the requirements of the Customers. RATNAMANI's goal is to reach sales turnover of Rs.
5000 million by 2006-07,by becoming a GLOBAL PLAYER who is committed to
satisfaction of stakeholders.


CONTENT
SR No. Particulars Page No.
2
PREFACE
3
ACKNOWLEDGEMENT
4
EXECUTIVE SUMMARY
8
1 HISTORY OF METAL CASTING INDUSTRY
11
2 INTRODUCTION ABOUT RTCL
13
2.1 Name & Addresses
15
2.2 Board of Director
17
2.3 Products
20
2.4 Organization Chart
21
2.5 Quality Assurance
22
2.6 Quality Policy
24
2.7 Manufacturing Process
26
3 FINANCIAL DEPARTMENT
28
3.1 Financial Goal of The Company
29
3.2 Objectives of the financial Analysis
32
3.3 Sources Of Information
34
3.4 Techniques of Financial Statement Analysis
35
3.5 Financial Statement
36
3.6 Common Size Statement
42
4 Trend Analysis
46
5 Ratio Analysis


65
6 Du Pont analysis
68
7 Problems in Financial Statement Analysis
70
8 Findings & Suggestion
73
9 Limitations of the Analysis
74
10 Conclusion
75
11 Bibliography
76
12 Annexure


History of Metal Casting

The oldest preserved cast parts - weapons and cult objects made of copper -
originate from the Middle East and India. They date back to the period around 3.000 BC. It is
possible that metal casting technology, using moulds originated in the Middle East. However,
there are suggestions that this process may have been developed in India and China.

The melting ovens of the early Iron Age can partly be traced back to ceramic
burning ovens. The model and mould building was mastered very well from the beginning.
Lost moulds made of loam and clay, wax models, single piece-work as well as permanent
moulds made of stone and metal for the serial production of casting parts were already used.
The production of hollow spaces by using cores, has already been proved by the oldest
casting parts discovered.

First machines were developed for " line-o-type " printing using Lead alloys.

Die casting machines for engineered parts was developed in USA by Doehler. Patented in 1905.

First machines were hand operated, often using compressed air directly on the metal, lead or zinc.

Modern machines use hydraulics to develop high pressures (several thousand psi ) & very fast fill
times.


Cold chamber machines were developed for high melting point alloys Al, Mg, Brass,

Stainless steel & Uranium.

Shortly after the dark ages in Europe, the industrious sculptor and goldsmith began to make
use of the lost wax method of casting. He learned this process from the writings of the monk
Theophilus Presbyter (circa 1100) whose Schedula Divers arum Artium is the earliest known
foundry text. In Cellini's autobiography, considered to be one of the classics of literature, he
describes in great detail the casting of his famous Perseus and the Head of Medusa. This three
and a half ton statue was completed in 1554 and was unveiled at the Loggia dei Lanzi in
Florence, Italy, where it stands to this day.

During World War II, with urgent military demands overtaxing the machine
tool industry, the art of investment casting provided a shortcut for producing near net shape
precision parts and allowed the use of specialized alloys which could not be readily shaped
by alternative methods. The investment casting process was found practical for many
wartime needs--and during the postwar period it expanded into many commercial and
industrial applications where complex metal parts were needed. It was in this period that the
Hitchiner Manufacturing Company was founded at the Amoskeag Mill yards of Manchester,
NH.

The solid mold technique was first utilized because a technology to
successfully remove the wax patterns from a shell without causing it to collapse, crack or
burst had not yet been devised. In the solid mold technique, a wax was placed in a steel
casing and surrounded by a setting slurry. The drawbacks of the solid mold technique were
extremely long pre-heat, size limitations and poor dimensional tolerances.

The first successful shell technology was the Metal cast Process, which used
solidified mercury as a pattern material. Mercury patterns were very heavy but extremely


accurate. This was a very difficult process as all pattern production and shell building had to
be done at temperatures below minus 39 degrees Celsius--the melting temperature of
mercury! This process is no longer used due to high costs and the health hazards involved in
handling this toxic element.

Over 4,000 years ago, between the Tigrus and Euphrates Rivers in a land known as
Mesopotamia, ancient artisans produced idols and ornaments using natural beeswax for
patterns, clay for molds and manually operated bellows for stoking furnaces. Today,
precision components for spacecraft and jet engines are investment cast using the latest
advances in computer technology, robotics and counter gravity casting techniques


INTRODUCTION OF COMPANY

RATNAMANI TECHNO CASTS LTD. (RTCL) is born to a family of
reputed industrial pedigree – RATNAMANI Metal & Tubes Ltd. RTCL is the establish on
the year of the 2001. RTCL is one of the most reputed manufacturers of Stainless Steel Tubes
& Pipes and Carbon Steel Pipes.

RTCL manufactures Precision Investment Castings through “Lost Wax
Process”. RTCL is equipped with in-house facilities from Design and Manufacturing of Dies
/ Tools and Castings, all under one roof. We develop and manufacture castings of specified
quality level as per customer material specification, drawing, design and technical
requirements

The plant is geared to manufacture investment castings, from few grams to
60 Kgs. single piece weight in various grades Carbon Steel, Low Alloy Steel, High Alloy
Steel, Stainless Steel, Duplex Stainless Steel, Precipitation Hardening Steel; Nickel & Cobalt
base alloys etc

We cater to both indigenous and export requirements for various Industries /
OEM‟s like Pumps & Valve manufacturers, Automotive, Defense, General Engineering,
Aerospace application, Textile, Pipe Fittings, Architectural & Decorative Fittings, Chemical
and Food Processing. We export our castings to countries like USA, U.K., Italy,
Switzerland, France, Norway etc. RATNAMANI has carved a niche as the preferred single-
point source for a wide range of casting Products.

RATNAMANI's Quality Management System conforms to ISO9001:2000,
PED, ADW2, EXPORT HOUSE, BOILER, API5L/2B. More over products undergo various
stringent inspection and testing stages, at the up-to- date in-house facilities, such as
Hydrostatic, tensile and various other Mechanical Tests, Non Destructive Tests, Chemical &
Corrosion Tests before they are released for the customers. This assures high value quality of
Products.


The human resource base of RATNAMANI is dedicated and motivated team
employees, who are well qualified and trained to ensure quality and timely delivery to meet
the requirements of the Customers.

RATNAMANI's goal is to reach sales turnover of Rs. 5000 million by 2006-07,by
becoming a GLOBAL PLAYER who is committed to satisfaction of stakeholders.

OUR VALUES:

Integrity: Honesty in every action.
Commitment: Deliver on the promise.
Passion: Energized action
Seamlessness: Boundary in letter and spirit
Speed: One step ahead always.


NAME OF ENTERPRISE: RATNAMANI TECHNO CAST LIMITED

Address:-

Sstp Division:-

Ratnamani Techno Cast Limited
Survey No: 769,
Ahmadabad – Mehsana Highway
Near Chhatral – 382729, Gujarat (India)
Phone - +91-2764-232254 / 232263 / 233763;
Sp Division:-

Plot No: 3306 To 3309
GIDC Estate,
Chhatral Phase IV
Ahmadabad – Mehsana Highway,
Chhatral – 382715, Gujarat (India)
Phone - +91-2764-232234 / 233919 / 232409;
Mumbai Office:-

No. 9 Lion House, Dr. Deshmukh Lale,
Nanubhai Desai Road,
Mumbai – 400 004 India
Phone: +91-22-2380 2591 / 2 / 3 / 4
Regd. & sales office:-
17, ramugat society,
Naranpura char Rasta,
Ahmadabad – 380013, Gujarat (India)


INFORMATION ABOUT COMPANY

Ratnamani Techno Cast limited. As the name it suggests that it is a private limited
company. It lies in large scale industry. It was incorporated under company act 1956. The
organization manufacturing department is located at chhatral GIDC Gujarat (India) and
registered office of company is situated at ramugat society, Naranpura char Rasta,
Ahmadabad – 380013, Gujarat (India).

The firm was established with the objective to carry on business as buyer, seller,
supplier, agent, exporter, importer, manufacturers, developer, distributor, in all kind and types
of pares material and articles including of metals and tubes.

The way of performance at Ratnamani is by struggle, trial & error and learning by
experience. They struggled initially to raise financial resources, but have now managed the
same by way of equity of director and share holder.

The firm manufactures flexible laminates product, which are totally machinery
made. They are produced according to the specification and requirement of customer thus
with the increase in volume of business. It because necessary for the company to perform
marketing externally.


BOARD OF DIRECTORS:

Our Directors are experts in the diversified fields of engineering, human
resource development, business strategy, finance and economics. They review all information
relating to significant business decisions, including strategic and regulatory matters. Every
member of the board, including the non-executive directors, has full access to any
information related to the company.

Mr. Prakash Sanghvi – (Chairman Managing Director)

Mr. Prakash Sanghvi has vast business experience in the metal industry. He leads the
core team that is driving the company's growth and transformation from a company
predominantly selling Tubes & Pipes to achieving its vision of becoming a
technology-led global engineering company.
Mr. Sanghvi has played a vital role in the company's evolution. He has been the
architect of the company's projects and expansion strategy. He has helped create new
platforms of growth for Ratnamani – increasing shareholder and societal value while
decreasing the company's environmental footprint.

Mr. Jayanti Sanghvi – (Whole Time Director)

Mr. Jayanti Sanghvi is one of the key members of the core team responsible for
creation and setting up of Development Centre, Resources, Staffing & Training,
Facilities & Infrastructure Management and Administration.
Mr. Jayanti Sanghvi is constantly focused on process improvements for enhancing
productivity


Mr. Shanti Sanghvi – (Whole Time Director)

Mr. Shanti Sanghvi is a thought leader on marketing strategy and customer related
issues in India, helping organization develop marketing strategies. He is stationed at
Mumbai handling marketing activities.

Mr. D C Anjaria – (Director)

Mr. Anjaria is an independent professional Director on the Board of the company
having stupendous experience in the field of international finance and corporate
finance. Mr. Anjaria is an IIM – MBA, and has worked with Citibank and UTI.

Dr. Vinodkumar Agrawal – (Additional Director)

He is an independent non-Executive Director on the Board of the Company.
.

Bankers

Dena Bank
Punjab National Bank
State Bank of India
IDBI Bank Limited

Auditor

M/S Mehta Lodha & Co.
(Chartered accountants)


PRODUCTS:

Production / operation management is the process, which combine and transforms various
resources used in production / operation subsystem of the organization into value added
product / services in a controlled manner as per the policies of the organization.

Maximum Linear Dimension up to 450 MM Maximum weight up to 60 Kgs


Application:

Pumps & Valves Components

Automotive Parts

Defense

General Engineering

Aerospace

Textile Machinery

Chemical and Food Processing

Pipe fittings

Architecture & Decorative Fittings

Standard Normal Tolerances

Normal linear +0.10mm to +/25mm for . +/- 0.10 mm for each addition of
25 mm thereafter Premium tolerances require additional operations. We can achieve very
close tolerances on functionally important dimensions. The tolerance achieved will depend on
the alloy and configuration of the castings. The same can be determined in consultation with
our Engineering Wing.

RTCL manufactures Precision Investment Castings through “Lost Wax
Process”. RTCL is equipped with in-house facilities from Design and Manufacturing of Dies
/ Tools and Castings, all under one roof. We develop and manufacture castings of specified
quality level as per customer material specification, drawing, design and technical
requirements

The plant is geared to manufacture investment castings, from few grams
to 60 Kgs. single piece weight in various grades Carbon Steel, Low Alloy Steel, High Alloy


Steel, Stainless Steel, Duplex Stainless Steel, Precipitation Hardening Steel; Nickel & Cobalt
base alloys etc.

We cater to both indigenous and export requirements for various
Industries / OEM‟s like Pumps & Valve manufacturers, Automotive, Defense, General
Engineering, Aerospace application, Textile, Pipe Fittings, Architectural & Decorative
Fittings, Chemical and Food Processing.

We export our castings to countries like USA, U.K., Italy, Switzerland, France, Norway etc.


ORGANISATION CHART

Managing director

Production manager Accountant

clerk

Assistant manager

Supervisor

Packing supervisor

Worker


QUALITY ASSUARANCE

Our goal is to not only to develop, manufacture and deliver castings of specified quality but
also timely delivery of the castings. Our Quality Management System is accredited to ISO
9001:2000, ADW 0 and PED under RWTUV.

Chemical Analysis:

“BAIRD” make Direct Reading Multi Matrix Spark Emission Spectrometer for instant
analysis of metal composition and melt control back up with complete facilities for Wet
Analysis Testing for Ferrous & Non Ferrous base alloys.

Mechanical Testing:

Universal Testing Machine, Brinell / Brinell & Rockwell Hardness Testers to measure
mechanical properties of castings viz. hardness, tensile strength, yield strength, elongation,
impact test, bend test.

Metallographic Examination: Biotech“Microscope for micro-structure analysis

Intergranular Corrosion Tests : As per ASTM A262 practice A, B, C, E

Measuring Instruments: Micrometers, Height Gauges, Digital Verniers, Surface roughness
measurement gauge.


Non Destructive Testing: Magnetic Particle Inspection, Dye Penetrant Examination,
Ultrasonic Testing and Radiography facility

CORPORATE AFFAIRS

Ratnamani‟s corporate office is strategically housed in its own modern building at
Ahmedabad, commercial capital of Gujarat which is one of the most industrialized states of
India.

Spread over an area of 655 square meter and has an Infrastructure for 60 Professionals
Training rooms and conferencing facilities
Canteen Facilities
Internet - 512 KBPS
Inter Unit Connectivity through RFID
15 voice lines
The corporate development, finance & accounting, marketing, purchase,
administration and company affairs functions operate from the corporate office

Quality Policy

Ratnamani aims to consistency supply product to the satisfaction of customer though
continuous improvement in methods, practices, systems and department of human resource.

Awarded

ISO 9001 : 2000 under LRQA.
Recognition as Export House – Issued by Government of India.
AD 2000 – merkblatt W 0 Certification Under RWTUV
Pressure Equipment Directive [PED] under LRQA.
“Well Known Pipe / Tube Maker” – Indian Boiler Regulations, 1950
License for API 5L and API 2B Monogram.

Manufacturing Process

Wax Section

Equipped with modern & semi automatic hydraulic system Wax Injection machines to
handleproductionofhighvolumewax.

Wax Pattern / Assembly shop is fully air-conditioned for controlled environment

Ceramic Molding

Centrally air-conditioned and humidity controlled shell room equipped with set of slurry
investment drums, sand faller machines to stucco the Wax Assemblies, the de-waxing system
and trays for reclaiming the melted wax.

Melting Section

Temperature controlled oil-fired shell / moulds firing & pre-heating furnaces; most
sophisticated High Frequency Induction Melting Furnaces having capacity of 200 kgs, 150
kgs, 100 kgs and 50 kgs. These different size crucible furnaces enable us to cater the castings
for high alloy, cobalt and nickel based alloys.


Heat Treatment

To undertake Annealing, Normalizing, Stress reliving, Hardening, tempering etc. for all types
of metals & Alloys. Heat Treatment furnaces calibrated as per API 6A having maximum
attainable Temperature up to 1200oC and are Equipped with time-temp. cycle recorder.

Fettling:- Specially designed Knock Out and Cut-off Equipments are used to clean and cut
castings from the tree. Grinding equipments are provided for accurate stock removal of
casting in-gates and pneumatic tools for finishing.

Reason for selecting the location:

For reducing the transportation cost of material.

Available of raw material, goods, water, electricity & road facility.

The mission of the unit:

To earn more foreign exchange.

To reduced the transportation cost of material receiving.

To providing more employment opportunities.

To get easy or current information from central point.

To have a good surroundings.

To supply quality pipes.

To the internationals market in bulk.


FINANCIAL DEPARTMENT

Managing director

Financial manager

Assistant of financial manager

Staff


FINANCIAL GOAL
The firm‟s investment and financing decision are unavoidable and continuous. In order
to make them rationally, the firm must have a good. It is generally agreed in theory that the
financial goal of the firm should be the maximization of owner‟s the shareholder‟s wealth by
as reflected in the market value of share.


FINANCIAL ANALYSIS

INTRODUCTION

The primary objective of financial reporting is to provide information to present and potential
investors and creditors and other in making rational investment, credit and other decisions.
Effective decision making requires evaluation of the past performance of companies and used
by investors, creditors, and professional analysis for analyzing and interpreting the
information contained in financial statements.

Any successful business owner is constantly evaluating the performance of his or her
company, comparing it with the company's historical figures, with its industry competitors,
and even with successful businesses from other industries. To complete a thorough
examination of your company's effectiveness, however, you need to look at more than just
easily attainable numbers like sales, profits, and total assets. You must be able to read
between the lines of your financial statements and make the seemingly inconsequential
numbers accessible and comprehensible.

OBJECTIVE OF FINANCIAL STATEMENT ANALYSIS
Financial statement analysis is the collective name for the tools and techniques that
are intended to provide relevant information to decision-makers. The purpose of
financial statement analysis is to assess a company‟s financial health and
performance. Financial statement analysis consists of comparisons for the same
company over period of time and comparisons of different companies either in the
same industry or in different industries.

Financial statement analysis enables investors and creditors to evaluate past
performance and financial position

The starting point in the analysis of a company is to look at the record. Information
about past performance is useful in judging future performance. For Example, trends
of past sales, earning, cash flow, profit margin, and return on investment provide a
basis for evaluating the efficiency of a company‟s performance and aid in assessing
its prospects. An assessment of current status will show where the company stands at


present, such as the company‟s inventories, borrowings, and cash position. To a large
extent, the expectation of investors and creditors about future performance are shaped
by their evaluation of past performance and current position.

Predication of future performance

Investors and creditors use information about the past to assess the prospects of a company.
Investors expect an adequate return from the company in the form of dividends and market
price appreciation. Creditors expect the company to pay interest and repay the principal in
accordance with the terms of lending. Therefore, they are interested in predicting the earning
power and debt-paying ability of the company.

For example, it is relatively easy to predict the future performance of electricity company
than that of a company that produces movies. Therefore, investors would be willing for a
relatively low return from the Electricity Company, while they would want a higher return in
the form of dividends and market price increases from the Movies Company. Loans to the
Movie Company would carry a higher interest rate than loans to the Electricity Company.

Past Performance of the Company:-

It is common for financial analysis to compare measure of performance
of the company over a period of time. Five or ten year summaries of selected financial data
appear in some annual report. Also, financial track records are cited in company prospectuses
and advertisements. A look at the past performance will show broadly whether the company
is improving or declining. Also, a study of past ratios and percentage may assist in
extrapolating them.

However, fundamental changes in the environment of a company, such as changes in
government regulation, changes in competition, and changes in the cost structure resulting
from technological advances, can make it difficult to project past trends into the future.
Changes in accounting methods would also affect comparability of the past figures. Further,
comparisons, with the company‟s own past can, at times, create an illusion of growth leading
to a sense of complacency. For example, an annual rise of 10 per cent in company‟s sales


may in itself sound good, but would not be considered adequate if the company‟s competitors
are increases.

Industry Standards:-

The performance of a company can be compared with that of other companies in the industry.
Comparisons with industry standard help overcome the limitations of historical comparisons.

For example, if a company has a debt-equity ratio of 2.5:1, while the average debt-equity
ratio in the industry is 1.5:1, the company can be said to have a higher leverage. Industry
comparisons are difficult for diversified companies that operate in several unrelated lines of
business.

For example, Hindustan Lever‟s lines of business include soaps, detergents, personal
products, and food. Comparing the company‟s performance with a firm that operates in soaps
or detergents would be highly misleading. Another problem with industry comparisons is that
companies often follow different accounting policies. Inventory valuation methods, useful
life estimates for fixed assets, and revenue recognition practices differ across companies. Yet
another difficulty is the lack of uniformity in financial years. Many companies follow the
twelve-month period ending March 31, while a few use other accounting years.


 SOURCE OF INFORMATION
Individual investors and creditors must often depend upon published sources of
information about a company. The most common sources of information about listed
companies are company reports, stock exchange, business periodicals, and information
services.

Company Reports:-

Every company publishes an annual report, which contains valuable
financial and other information about the company. Annual reports are the beginning and
ending points in obtaining information about individual companies.

The typical Indian Company includes the following documents in its annual report:
Directors‟ report
Financial statements
Schedules and notes to the financial statements
Auditor‟s report
In addition, some companies provide financial highlights and a summary of financial
performance for the past five or ten years. The annual report is sent to the shareholders of the
company, free of charge. Listed companies are also required to publish a quarterly statement
of financial results within one month from the end of the quarter. These statements are
typically not audited unlike the annual financial statements and are published in leading
newspapers.

Stock Exchanges:-
Listed companies must file copies of their annual reports, as well as additional documents
such as a statement of distribution of share ownership and the quarterly statement, with the
stock exchanges in which they are listed. The Bombay Stock Exchange (BSE) is the oldest
with it. The National Stock Exchange (NSE) is the other leading stock exchange in India.
Both BSE and NSE have number publications giving useful financial and other information
about companies. Listing agreements require that companies keep stock exchanges promptly
informed of major developments affecting them, such as change of management, bonus and
dividend decisions, strikes, and plant closures.


Business Periodicals:-

Business newspaper and magazines are important and, often, timely sources
of financial and business news. The Economic Times is the oldest and the most widely read
financial daily in the country. Business Line, Business Standard, and Financial Express are
the other leading financial dailies in India. Financial and business magazines such as
Business India, Business World and Business Today regularly carry studies of companies and
industries.

Information Services:-

In recent years, a number of information services have sprung up. Periodical
Company and industry studies are brought out by CRISIL and ICRA. These studies contain
condensed financial statements of companies as well as other information such as
management, foreign collaboration, major competitors, and industry overview. Several useful
studies of financial ratios are also available, notably the ones published by the Center for
Monitoring Indian Economy (CMIE).

Internet & intranet:

Search engines like Google go a long way in providing useful information
for such projects. Days have gone when you have to wait for hours to gather information
related to any particular topic. Information technology and Internet has brought the global
world at your fingertip. Local area networks are also key source of information now a day.
Increasing interdependence among the various sub units of the business has made LAN
networks a future to consider as a useful source of secondary information.

The quality of a company’s earnings may be affected by the following:

Accounting methods and estimates used.

Extraordinary items.

Prior period adjustments.


TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Very few numbers in financial statements are significant in themselves,
but meaning inferences can be drawn from their relationship to other amounts or their change
from one period to another. The tools of financial statement analysis help in establishing
significant relationships and changes. The most commonly used analytical techniques are:

COMMON SIZE STATEMENT
TREND ANALYSIS
RATIO ANALYSIS
DU PONT ANALYSIS


The common size statement is a one type of comparative analysis statement. Here his
particular statement deals with the all the item of profit & loss account of the company.

Here in this particular statement the sales is considered as 100% and than all the item are
compared with sales by assuring sales is 100 than what be the percentage of the other items.

Common size statement of Balance sheet as on 31st march 2011

Particular 2010-11 2009-10 2008-09

source of funds

shareholder‟s funds
15.68 14.67 13.03
Share capital
49.82 49.69 50.29
Reserve & surplus
10.74 13.00 15.00
Secured loan
9.34 8.27 8.42
Unsecured loan
14.42 14.37 13.26
Deferred tax liability
100 100 100
Total

Application of funds
70.26 68.90 65.88
Fixed Assets
2.17 1.62 1.28
Capital W-I-P
0.01 0.01 0.01
Investments
48.01 42.11 34.95
Inventories
15.61 25.38 21.76
Sundry debtors
6.99 5.85 7.01
Cash & bank balance
6.89 6.53 6.40
Loan & advances
77.50 79.87 70.12
total current assets
-49.93 -50.39 46.84
total current liabilities
27.57 29.48 23.28
Net current assets

0.01 0 0.001
Miscellaneou Expenditure
TOTAL 100 100 100

Liabilities

Liabilities 2008-09
Share capital Reserve & surplus Secured loan
Unsecured loan Deferred tax liability

13% 13%
9%

15%

50%

 Interpretation:- In the year of the 2008-09 the company share capital is 13%, reserve
and surplus is 50%, secured loan is 15%, unsecured loan is 9%, deferred liabilities is
13%. So that time the company is initially good position in the market.


Liabilities 2009-10
Share capital Reserve & surplus
Secured loan Unsecured loan

14% 15%

8%

13%

50%

 Interpretation:-

In the year of the 2009-10 the capital would be very good for the company position .Like the
share capital is 15%, secured loan is 13%, deferred tax liabilities are 14%, reserve and surplus
is 50%, unsecured loan is also 8%. So that the company position is very better and also
financial strength is very good.

Liabilities

Liabilities 2010-11
Share capital Reserve & surplus
Secured loan Unsecured loan

14% 16%

9%

11%

50%

 Interpretation: In the year of the 2010-11 the company is more growing because of
liabilities. share capital of this year is 16%, secured loan is 11%, differed tax


liabilities are 14%, reserve and surplus is 50%,unsecured loan is 9%. So that the
company situation is also good this year.

Assets

Assets 2008-09
Fixed Assets Capital W-I-P
Investments Net current assets
Miscellaneou Expenditure
0%
26%
0%
1%
73%

 Interpretation: In the year of the 2008-09 the company financial strength is very
well. Totally fixed assets was 73%, capital in work in progress is 1% , net current
assets is 0%, investment was not done the company and miscellaneous expenditure is
o% for the company.

Assets 2009-10
Fixed Assets
Capital W-I-P
Investments
0%

29%

0% 69%

2%


 Interpretation:- In the year of the 2009-10 total fixed assets will be the 69%,
capital work in progress is 0%, investment will be also Neel and company net current
assets will be 29%.

Assets

Assets-2010-11
Fixed Assets
Capital W-I-P
Investments
Net current assets
0%

28%

0%
70%
2%

 Interpretation:-

In the year of the 2010-11 the financial position of the company is good. Fixed assets are the
70%. Capital in work in progress is 2.17,investment is almost 0, but the net current assets is
the company 28%.company is better position in this year.


Common size statement of the Profit and loss account at the year of the 2011.

Particular 2010-11 2009-10 2008-09

net: Income from sales &
operation 99.14
98.93 99.17
0.84
Generation 1.06 0.82
0.01
Other income 0.01 0.01
100
Total 100 100
Expenditure
66.44
Material cost 65.09 65.66

Emp. Remuneration And
benefits 4.31
3.73 4.28
Financial expense 1.74
2.21 2.14
Other expenses 20.94
21.29 19.63
2.60
Depreciation 2.61 3.00
Total Expenditure 96.02
-94.93 -94.72
3.98
Net profit 6.16 5.28
0.63
Less: Income 0.47 0.56
Less: Deferred tax liability 1.34
-1.76 -1.30
Profit after taxation 2.01
3.94 3.42

Interpretation:- In the common size statement of the profit& loss account the year ending of the 31st
march 2011 3.94 the company will be become a financial stable growing position and also
continuously growing for the above year.


Trend analysis on the balance sheet
Particular 2008-09 2009-10 2010-11
source of funds

shareholder’s funds
Share capital 100 124.52 155.78
Reserve & surplus 100 109.26 128.27
Total owned funds 100 112.40 133.93
Loan funds
Secured loan 100 95.82 92.70
Unsecured loan 100 108.48 143.59

Deferred tax liability 100
119.85 140.84

100
Total 110.57 129.48

Application of funds
Fixed Assets
Gross Block 100 105.75 124.14
Less: Depreciation 100 107.79 122.82
Net block 100 104.58 124.89
Capital W-I-P 100 126.54 199.20
Investments 100 113.04 117.39
Current assets, loan &
Advance
Inventories 100 120.48 160.86
Sundry debtors 100 116.64 84.01

Cash & bank balance 100
83.45 116.78
Loan & advances 100 102.07 126.10
Current liabilities, and
provision
Liabilities 100 107.02 123.86
Provision 100 126.94 158.81
Net current assets 100 126.65 138.68
Miscellaneous
Expenditure 100 0.00 271.43

TOTAL 100
110.57 129.48

SOURCES OF FUND

140
120
100
129.48
80
100 SOURCES OF FUND
60
40 110.57
20
0
2008-2009 2009-2010 2010-2011

 Interpretation:- In the above graph we can see that the sources of funds are increasing
in the year of 2009-10and also continuously increase the in 2010-11.

APPLICATION OF FUND

140
120
100
80
129.48 APPLICATION OF FUND
60 100 110.57
40
20
0
2008-2009 2009-2010 2010 -2011

 Interpretation:- in the above graph shows that the application of will be increasing in the
continuously for all the year. So that the company become good financial position.


Trend analysis on the profit & loss account

Particular 2008-09 2009-10 2010-11

Income
Sales & income from
Operations 100 116.60 151.48
Less: Excise Duty 100 126.33 179.31

100 115.42 148.11
Income from power
Generation 100 112.43 186.46
Other income 100 115.75 164.57

TOTAL 100 115.40 148.43
Expenditure
Material cost 100 114.06 143.88
Employee‟s Remuneration
And benefits 100 114.75 126.99
Financial expense 100 142.02 186.86
Other expenses 100 108.18 149.26
Depreciation 100 133.28 147.51

100 113.83 145.17
Net profit 100 153.17 227.23
Less: Income 100 103.62 109.33
Less: Deferred tax liability 100 112.05 192.65
Profit after taxation 100 195.87 286.80
Balance brought forward 100 115.35 237.33

100 158.63 263.92
Profit available for
Appropriation
Appropriation
Proposed dividend 100 118.23 147.92
Dividend tax 100 123.71 154.72
Transfer to general 100 118.83 148.67
Reserve 100 122.34 98.31
Balance carried forward 100 382.47 390.56
100 158.63 151.11


Earning per share (in Rs.) 100 194.40 249.57

sales &other income

160
140
120
100
80 148.43
sales &other income
100 115.4
60
40
20
0
2008-2009 2009-2010 2010-2011

 Interpretation:- In the year of the the 2008-2009 in the 100, also that will be
increase in 2009-2010 will 115.4, and also in the year of the 2010-2011 148.43. so
that it will be continuously increase for the year to year.

profit after tax

300

250

200

150 286.8 profit after tax
195.87
100

50 100

0
2008-2009 2009-2010 2010-2011

 Interpretation: in the year of the 2008-09in the 100, in the 2009-10 in to the that
will be increase 195.87, 2010-11 continuously growing 286.8.so that the financial
strength will be increase.


RATIO ANALYSIS

The relationship of one item to another expressed in simple mathematical form is known as
the ratio. A company keeps fit by ensuring that among another things, its various financial
propositions are kept healthy. Its business performance can be measured the use of ratio. A
ratio is quotient of two numbers. It must be interpreted against some standards. In assessing
the financial stability of firm, a management should apart from profitability, be interested in
relative figures rather than in absolute figures. In fact an analysis of financial statements is
possible only when figures are express as percentages or ratios. There is growing body of
evidence that ratio can be directly helpful as basis for making predication. A ratio is a
mathematical relationship between two quantities. It is of major important for financial
analysis. It engages qualitative measurement and shows precisely how adequate is one key
item in relation to another. To evaluate the financial condition and purpose of a firm the
financial analyst need certain yardsticks. The yardsticks frequently used are ratio or an index
relating to pieces of financial data to each other. Not only those who manage a company but
also its shareholders and creditors are interested in knowing about the financial position or
earning capacity of that concern.

ADVANTAGES:

I. Lee observed that the process of producing financial ratio is essentially
concerned with the identification of the significant accounting data
relationships, which give the decision makers insights into the company that is
assessed.

II. A ratio analysis involves the study of total financial picture. By basing
conclusions upon thorough understanding of the important of each ratio, the
analyst can recommend and indicate positive action with confidence.

III. One of the most fruitful areas for the use of traditional financial ratio seems to
be that of predication company failures.

IV. Ratio are tool which enables management to analysis business situation and to
monitor their performance as well as that of their competitors.

V. Ratio analysis helps the management to diagnose the situations, monitor the
performance and help plan forward.

VI. There are certain priority ratios for chief executives. These are related to key
areas, which are common to nearly all businesses and with which top
management is seriously concerned. These priority ratios enable the chief
executive to understand the relationship between his organization, at one end,
and the market, investors, suppliers and employees. He is also in a position to
watch how well is the organization using its assets and how well it is
providing for the future.

VII. There are ratios which help the marketing manager, the purchasing manager,
the financial manager and other representing the middle management to know
the what positions are like how to make a way in typical situations, from time
to time.


Liquidity Ratio:s
This ratio measures the firm‟s ability to meet current obligation. A firm ensures that it
does not surer from lack of liquidity and also does not have excess liquidity. The failure of a
co. to meet its obligation due to lack of sufficient liquidity will result in a poor credit
worthiness loss of creditor‟s confidence or even in legal tangle resulting in the closure of the
company.
Current ratio: -

PARTICULARS 2008-09 2009-2010 2010 -2011
CURRENT ASSETS 4300.75 4898.81 5566.39
CURRENT LIABILITY 2872.95 3090.55 3586.31
CURRENT RATIO 1.49 1.59 1.55

1.6
1.58
1.56
1.54 1.59
1.55
1.52
1.5
1.48 1.49
1.46
1.44
2008-2009 2009-2010 2010-2011

Interpretation: This current ratio measures the firms ability to meet it current
obligation. Generally 2:1 ratio is preferable here the current ratio is high because
of high current that represent the first high ability to meet it‟s current obligation.
In year 2008-09 was 1.49, 2009-2010 and 2010-2011 are 1.59 and 1.55
respectively.


Quick ratio

PARTICULARS 2008-2009 2009-2010 2010-2011
CURRENT ASSETS 2157.21 2316.18 2118.33
CURRENT LIABILITY 2872.95 3090.55 3586.31

Ratio

0.75 0.75
0.8
0.7 0.59
0.6
0.5
0.4 Ratio
0.3
0.2
0.1
0
2008-2009 2009-2010 2010-2011

Interpretation: Quick ratio represents the company ability to meet its
immediate obligation. Here the ratio is whole year the ratio excludes the inventory
and bank over draft. Here the ratio the year 2008-09, 2009-2010 and 2010-2011
are 0.75, 0.59 and 0.55 respectively.


Net working capital ratio
Net working capital means the different between current assets & current liabilities:
excluding short term bank borrowing is called net working capital or are as firms
liquidity.

Net Working Capital: - Current Assets – Current Liabilities

Net Assets: - Fixed Assets + Current Assets – Current Liabilities

PARTICULARS 2008-2009 2009-2010 2010-2011
1427.8 1808.26 1980.08
5547.6 6133.18 7182.60

Ratio
0.29
0.29
0.28
0.28

0.27
0.26
Ratio
0.26

0.25

0.24
2008-2009 2009-2010 2010-2011

Interpretation:- The ratio shows the proportion of the working capital in net
assets. If the ratio is high than the more proportion of working capital in total
assets. If the ratio is for the higher than the working capital remain idle and the
ratio is lower than the it is bad for the company. Here the ratio for year 2008-09,
2009-2010 and 2010-2011 are0.26, 0.29 and 0.28 respectively.

Leverage Ratio
To judge the long-term financial position of the firm financial leverage of capital
structure ratio are calculated. The process of magnify the share holder return through the
use of debt is called “Financial leverage” or “Financial gearing” or “Trading on equity”.

Leverage ratio are calculates of measure the financial risk and the firm‟s ability if using debts.

Debts equity ratio: TOTAL DEBTS
NET WORTH

Total Debts = Secured Loan + unsecured loan + Sundry Creditor

Net worth = Share Capital + Reserve & Surplus

PARTICULARS 2008-2009 2009-2010 2010-2011
TOTAL DEBT 2434.24 2861.20 2563.74

NET WORTH 3512.28 3947.66 4704.12

DEBT EQUITY RATIO 0.69 0.72 0.54

Ratio

0.8
0.7
0.6 0.72
0.69
0.5
0.4 0.54 Ratio
0.3
0.2
0.1
0
2008-2009 2009-2010 2010-2011


 Interpretation:- The debt equity ratio describes lenders contribution for each rupee of
the owner‟s contribution. Here the debts equity ratio for the year 2008-2009, 2009-
2010 and 2010-2011 are 0.69, 0.72 and 0.54 respectively.

Debts ratio

The some type of debts may be used analysis the large term solvency of a firm. The total
debt will include the short term and long term borrowing from financial justitution,
debenture, differed payment agreement for laying capital equipment bank borrowing
public deposit and other interest-bearing loan.

Total debts

Debts ratio = Net assets

PARTICULARS 2008-2009 2009-2010 2010-2011
TOTAL DEBT 2434.24 2861.2 2563.74
NET ASSETS 5547.19 6133.18 7182.60
DEBTS RATIO 0.44 0.47 0.36

Ratio

0.5

0.4

0.3
0.44 0.47 Ratio
0.2 0.36

0.1

0
2008-2009 2009-2010 2010-2011


 Interpretation:- Here by looking this figures debts ratio. We that there is gradual
change in the level of propriety funds rashers than vendors contribution on year 2008-
2009, 2009-2010 and 2010-2011 the debts ratio of 0.44, 0.47 and 0.36 respectively.

Activity ratio

The activities ratio are employed to evaluate the efficiency with the firm manager utilize
its assets. Their ratio are also called “Term over ratio” the reason is because they indicate
the opened with which assets are counter or turn over into sales. Thus this ratio shows the
relationship between share assets. Sales

Net assets turn ratio = Net assets

PARTICULARS 2008-2009 2009-2010 2010-2011
SALES 11437.09 13336.07 17325.35
NET ASSETS 5547.19 6133.18 7182.60
NET ASSETS TURN OVER 2.06 2.17 2.41
RATIO

Ratio

2.5
2.4
2.3
2.2
Ratio
2.1
2
1.9
1.8
2008-2009 2009-2010 2010-2011


Interpretation:- Net assets turn over measures the company ability of sales for a
given level of assets. A firm‟s ability to produce a large volume of sales for a given
amount of net assets is the most important aspects of its operating performance. Here
this ratio is high in year2008-2009 i.e.2.06 2009-2010 i.e. 2.17 and in year 2010-2011
i.e. 2.41 respectively.

Total assets turn over ratio

Total assets turn over ratio is computed on the total assets turn over in addition to or
instead of assets turn over. This ratio shows the firm‟s ability in generation sales from all
financial resources committed total assets.

Sales

Total assets turn over ratio = Total assets

Total assets = Current assets + Fixed assets

PARTICULARS 2008-2009 2009-2010 2010-2011
SALES 11437.09 11336.07 17325.35
TOTAL ASSETS 8419.7 9223.73 10768.91
TOTAL ASSETS 1.36 1.45 1.61
TURNOVER RATIO


Ratio

1.65
1.6
1.55
1.5
1.45
Ratio
1.4
1.35
1.3
1.25
1.2
2008-2009 2009-2010 2010-2011

Interpretation:- The ratio indicated the relationship between sales & total assets.
This ratio that how much sales in generated by company with given of level of total
assets. This ratio for year of 2008-2009, 2009-2010 and 2010-2011 are 1.36, 1.45 and
1.61 respectively.

Fixed assets turn over ratio

The fixed assets turn over is established relationship between company‟s fixed assets with
its sales

Sales

Fixed assets turnover ratio= Fixed Assets

PARTICULARS 2008-2009 2009-2010 2010-2011
SALES 11437.09 13336.07 17325.35
FIXED ASSETS 4118.95 4324.92 5202.52
FIXED ASSETS TURNOVER 2.77 3.08 3.33
RATIO


Ratio

3.5
3
2.5
2
Ratio
1.5
1
0.5
0
2008-2009 2009-2010 2010-2011

Interpretation:- The fixed assets turn over shows the sales of accompany for a
given level of fixed assets means. How much a sale generated by a company has a
good performance. The ratio for year 2008-2009, 2009-2010 and 2010-2011 are 2.77,
3.08 and 3.33 respectively.

Debtors turn over ratio
Sales

Fixed assets turn over ratio =

Average debtors

Opening stock + Closing stock

Average DEBTORS

2

PARTICULARS 2008- 2009-2010 2010-2011
2009
SALES 11437.09 13336.07 17325.35
AVERAGE DEBTORS 1071.77 1466.79 2376.32
FIXED ASSETS TURNOVER RATIO 10.67 9.09 7.29


Ratio

7.29
10.67 2008-2009
2009-2010
2010-2011

9.09

Interpretation:- Debtors turn over indicator the number of times debtors turn over
each year. Debtor‟s turn over is more than more efficient is the management of credit
by company. In year 2009-2010, the ratio is more i.e. 9.09 times so the efficiency of
management is more in credit management by this company generally this ratio is
high in all other year.

Current assets turn over ratio

The current assets turn over means the relationship firm‟s current assets with the sales

Sales

Current assets turn over ratio =

Current assets

PARTICULARS 2008-2009 2009-2010 2010-2011
SALES 11437.09 13336.07 17325.35
CURRENT ASSETS 4300.75 4898.81 5566.39
CURRENT ASSETS 2.65 2.72 3.11
TURNOVER RATIO


Ratio

3.2

3

2.8

2.6 Ratio

2.4

2008-2009
2009-2010
2010-2011

Interpretation:- Here by looking the graph of current assets turn over ratio by
finding that there is a working or having some sort of increasing decreasing tired in
the graph which may clear that the current assets of firm are when increase than sales
deviate or when sales increase that current assets decreases. In the above shows the
graph in the year 2008-2009 ratio was 2.65, 2009-2010 in the ratio is the 2.72 and also
the year 2010-2011 in the ratio is 3.11.

The current assets turn over ratio of any firm shows the relationship between the company
sales with its. Current assets. Here by looking the figures of current assets turn over ratio
we find that there is a continuity of ratio, which may the positive impact of company‟s
sales or the maintaining of the company‟s current assets as what the company is required.

Profitability ratio

in simple language profit means a different between revenues & expenses over a period of
time profit is an ultimate out of company. no future if it is fails to make sufficient profits.

Generally two types of profitability ratio.
Profitability in relation to sales.
Profitability in relation to investment.


Gross profit margin ratio

The gross profit margin ratio of firm is the ratio of company
gross profit divided by sales.

Gross profit

= 100

Sales

Gross profit = Sales – Cost of good sold

Cost of good sold = opening stock + purchase +purchase Exp – Closing stock

PARTICULARS 2008-2009 2009-2010 2010-2011
GROSS PROFIT 4460.46 6134.59 9182.64
SALES 11437.09 13336.07 17325.75
GROSS PROFIT MARGIN RATIO 39 46 53


Gross Profit Margin Ratio

60

50

40

30 gross profit margin ratio
20

10

0
2008-2009 2009-2010 2010-2011

Interpretation:- The gross profit margin ratio reflect the efficiency with which
management product each unit of products. If the ratio is high the management is
more efficiency the low gross profit margin ratio indicates the lower cost of goods
sold due to inability of management. In purchasing a raw material and inefficient of
utilization. Gross profit margin ratio is the year of the 2008-2009 in 39,2009-2010 in
46and also the 2010-2011 in the 53.


Net profit margin ratio

The net profit margin ratio is show the company‟s profit position we derived the formula
of net profit margin ratio.

Profit after tax

= 100

Sales

PARTICULARS 2008-2009 2009-2010 2010-2011
PROFIT AFTER TAX 207.26 405.97 594.53
SALES 11437.09 13336.07 17325.35
NET PROFIT MARGIN 1.81 3.04 3.43
RATIO

Ratio

22%

41% 2008-2009
2009-2010
20010-2011

37%

Interpretation:- This ratio expresses the companies over all ability of generation
each rupees of profit is a sales. It expresses the company‟s ability of manufacturing,
administrating and selling the product. The ratio for 2008-2009 is high income


company has a more profit in relation to sales. The ratio is low year 2008-2009
i.e.1.81 so the company‟s has a more expenses in year. So the net profits decreases.

Return on equity:-

The return on equity means the rate of return on equity share by the holder of the share.
The return on equity is calculated to see the profitability of owner‟s investment
Profit after tax

= 100

NET WORTH

PARTICULARS 2008-2009 2009-2010 2010-2011
PROFIT AFTER TAX 207.26 405.97 594.53
NET WORTH 385.61 611.70 582.71
RETURN ON EQUITY 53.74 66.37 102.02

Ratio

120
100
80
60
40 Ratio
20
0
Ratio
2008-2009
2009-2010
2010-2011


Interpretation:- Return on equity shows the earning of equity shareholders, this
shows that how much rate of return shareholder get. Return on equity is higher in all
the year. But somewhat high year 2010 -2011 i.e. 102.02

Rate of return on investment = profit after tax

Total assets

PARTICULARS 2008-2009 2009-2010 2010-2011
PROFIT AFTER TAX 207.26 405.97 594.53
TOTAL ASSETS 8419.7 9223.73 10768.91
RETURN ON INVESTMENT 24.87% 44.63% 55.43%

RATIO

55.43
60
44.63
50

40
24.87
30 RATIO
20

10

0
2008-2009 2009-2010 2010-2011

Interpretation:- in the above data shows that the company rate of return will be in the
year of the 2008-09 in the 24.87%, 2009-2010in the 44.63%,2010-2011 in the 55.43%. so
that theit will become the good position to the company.


DU PONT ANALYSIS:
The Du Pont analysis is carried out for the last year, explanation is described by each and every phase.

The du Pont company of the U. S. pioneered a system of financial analysis which has relied
wide spread reorganization and acceptances. A useful system of which considering important
relationship base on information found in financial statement. It has been adopted many
firm‟s in some firms or other.

The earning power or the 1201 ratio is a central measure of the over all profitability and
operational efficiency of a firm. It‟s shows international of the profitability and activity of
ratio. It implies that the performance of a firm can be improved either by generation more
sales volume per rupee of investment or by increasing the profit margin per rupee of
investment or by increasing in the profit margin per rupee of sales.

2008-2009 Du Pont chart

RETURN ON INVESTMENT
24.78%

PROFIT MARGIN TOTAL SALES TURNOVER
×
6.36% 3.89 times

EBIT NET SALES
738.40 ÷ 11437.09

FIXED ASSETS
4040.53 NET WORKING CPTL INVESTMENT
1427.8 0.23

SALES OPERATING EXP.
11437.09 9610.84

TOTAL FIXED ASSETS ACCUMULATED DEP CURRENT ASSETS CUR. LIB. + PROV.
6357.65 2317.12 4300.75 2872.95

2009-10

44.63 %

×
9.41% 4.74 times

EBIT ÷ NET SALES
983.23 13336.07

FIXED ASSETS NET WORKING CPTL INVESTMENT
4225.69 1808.26 0.26

13336.07 10888.28

6723.21 2497.52 4898.81 3090.55


2010-2011

55.43%

×
13.22 4.19 times

EBIT ÷ NET SALES
1342.41 17325.75

NET WORKING CPTL INVESTMENT
FIXED ASSETS
1980.08 0.27
5046.31

17325.35 13945.53

7892.24 2845.93 5566.39 3586.31


PROBLEMS IN FINANCIAL STATEMENT ANALYSIS
Financial statement analysis can be a very useful tool for understanding a firm‟s performance
and condition. However, there are certain problem and issues encountered in such analysis,
which call for care, circumspection, and judgment in such an exercise.

HEURISTIC AND INTUTIVE CHARACTER :-Most of the ratios found in the traditional
literature on financial statement analysis have been proposed in a some what heuristic or
intuitive fashion. As Horrigan says: “From a negative viewpoint, the most striking aspect of
ratio analysis is the absence of an explicit theoretical structure. Under the dominant approach
of „pragmatically empiricism „, the user of ratio is required to rely upon the authority of an
author‟s experience.

DEVELOPMENT OF BANCHMARKS:

Many firms, particularly the larger ones, have operations spanning a wide range of industries.
Given the diversity of their product lines, it is difficult to find suitable benchmarks for
evaluating their financial performance and condition. Hence, it appears that meaningful
benchmarks may be available only for firms, which have a well-defined industry
classification. Even for such firms, at least in India, the financial analyst may run into a
difficulty.

WINDOW DRESSING: Firms may resort to window dressing to project a favourable
financial picture. For example, a firm may prepare its balance sheet at a pint when its
inventory level is very low. As a result, it may appear that the firm has a very comfortable
liquidity position and a high turnover of inventories.

PRICE LEVEL CHANGES: Financial accounting, as it is currently practiced in India and
most other countries, does not take into account price level changes. As a result, balance
sheet figures are distorted and profits misreported. Hence, financial statement analysis can be
vitiated.

VARIATION IN ACCOUNTING POLICIES: Business firms have some latitude in the
accounting treatment of items like depreciation, valuation of stock s, research and


development expenses, foreign exchange transactions, installment sales, preliminary and pre-
operative expenses, provision of reserves, and revaluation of assets.


FINDINGS:
At the end of the financial analysis of the company the following are the various
findings:

The current ratio of the company is quite satisfactory. Although there is a decline but
still the company is maintaining a ratio far greater than the ideal ratio. However in
such case the quality of the current assets is necessary to be analyzed.

Considering the liquidity position the major contributors to the company current
assets are the debtors and the inventories. So a high current ratio or quick ratio does
not mean that the company has sufficient liquidity. The company needs to focus more
on the cash and other current assets.

Considering the liquidity position there is a decline in the interval measure by
almost 50 percent which indicates the tight liquidity position of the company.

Since the last financial year there appears to be a reduction in the use of the debt
funds in the working capital financing of the company

.Considering the capital structure of the company almost 60-70 percent financing of
the company is carried out through the debt funds while the equity financing
contributes to only 25-30 percent of the financing.

The total liabilities of the company constitutes about 60-70 percent of the company
total assets. However in the present financial year this ratio has decreased due to
increase in the use of equity financing by the company.

The company has the ability to match the expenses of interest as well as the fixed
charges well with their earnings. This ratio is quite consistently high for the company.

In the last two financial years the inventory holding periods and the debtors collection
period for the company has increased which has a direct impact on the current ratio of
the company.


SUGGESTIONS:
The company needs to plan its strategy regarding the current assets utilization.

The company needs to manage the inventories well because over the last two
financial years there is a constant rise in the inventory holding periods. This
could lead to reduced profit margins and reduction in the liquidity position.

There is also a get-out observed in the debtors‟ collection policy which
indicates that the company needs to collect its debt well. Moreover there is a
constant rise in the debtors‟ quantity which is a matter of concern for the
company.

The company prefers debt financing over equity financing. However the
company needs to be careful in selecting an optimum mixture of the debt and
equity. This can have an effect on the solvency of the firm.

There is a constant rise in the operating expenses of the firm. So the company
needs to plan an effective cost reduction strategy to reduce the operating
expenses and thereby improve the net profit margins.

The company needs to have a closer watch particularly on the additional
expenses and the manufacturing expenses. In additional expenses also the
administrative expenses seems to be troublesome.


LIMITATIONS OF THE ANALYSIS:
This financial analysis carried out does not consider the effect of the opportunity cost
of money. It ignores the present value and the future value of money.

The standards for comparison data of the other companies are not available easily. So
an overall view of the analysis cannot be brought about through this analysis.

No information related to the effects of the external factors on the business conditions
and the company policy can be obtained through this analysis.

The analysis carried out is based only on the past information. No one can
successfully predict the future conditions and strategies based on this data.

Moreover at times there exists a confusion to record some of the expenses or financial
terms into both different categories. So one cannot be 100 percent accurate in such
analysis.

The do Pont company of the U. S. pioneered a system of financial analysis which has
relied wide spread reorganization and acceptances. A useful system of which
considering important relationship base on information found in financial statement. It
has been adopted many firm‟s in some firms or other.

The earning power or the 1201 ratio is a central measure of the over all profitability
and operational efficiency of a firm. It‟s shows international of the profitability and
activity of ratio. It implies that the performance of a firm can be improved either by
generation more sales volume per rupee of investment or by increasing the profit
margin per rupee of investment or by increasing in the profit margin per rupee of
sales.


At last, I conclude my report that “Ratnamani Techno Cast ltd.” Is a good company in case
of financial. There are some problems taking by it but overall the position of “Ratnamani
Techno Cast ltd.” Is good.

During my project training I saw that the entire office staff are well-organized responsibility.
Thus office management of the company has improved. Also I found during the training that
““Ratnamani Techno Cast ltd.” Is welcoming to all the comers in ““Ratnamani Techno Cast
ltd.”.”

So, I wish that the company will have delight and bright future for coming year and wish all
the best for solving every problem performing to the company.

The most important which I have learn in unit training is “Industrial discipline”. I cardinally
thanks to all the officers and member of the unit who assign their precious time to me for
providing the training in aspect.


BOOKS:

Marketing Management PHILLIP KOTLER
Financial Management I. M. PANDEY
Financial Management PRASANNA CHANDRA
Financial Management KHAN & JAIN
Marketing Research NARESH K MALHOTRA
MAGAZINES:

Successful Marketing Research: the complete guide to getting and using essential
information by Edward i. Hester
Marketing Research: text and cases by W. Bruce Wrenn
Review of Marketing Research by Naresh K Malhotra

WEB SITE
www.ratnamanitechnocast.com

1) http://www.ratnamanitechnocasts.com/profile.htm

2) http://www.ratnamanitechnocasts.com/products_view.htm

3) http://www.ratnamanitechnocasts.com/manufacturing_facilities.htm

4) http://www.ratnamanitechnocasts.com/quality_assurance.htm

SEARCH ENGINE:-

Google


PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31ST MARCH 2011

Particular 2010-2011 2009-2010 2008-09
(Rs. in lakh) (Rs. in lakh)

Income
Sales & income from

Operations 17325.35 13336.07 11437.09

Less: Excise Duty 2219.21 1563.57 1237.65

15106.14 11772.50 10199.44

Income from power

Generation 161.77 97.54 86.76

Other income 2.09 1.47 1.27

TOTAL 15270.00 11871.51 10287.47

Expenditure

Material cost 9833.24 7795.37 6834.54

Employee‟s Remuneration

And benefits 562.72 508.47 443.13

Financial expense 333.88 253.77 178.68

Other expenses 3215.69 2330.67 2154.49

Depreciation 394.31 356.27 267.31

14339.94 11244.55 9878.15

Net profit 930.10 626.96 409.32

Less: Income 70.32 66.65 64.32


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