A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore

ABSTRACT Sandfits Foundries Private Limited one of the leading foundries in South India was started in 1962 at Coimbatore, primarily to cater to the captive needs of the local industry. Early in our inception, we carved a unique business model to success. With state of the art infrastructure, a team of qualified technical pool and a wide range of products and with excellent quality solutions, we have emerged as a Castings Solution provider to a diverse industrial clientele. To-day we are a well established entity with an emerging global presence.

STATEMENT OF THE PROBLEM The company current ratio analysis faces a slight decrease occurred in the year 2008-2009 and all the current ratio figures are not well about the fixed ratio. They are slowly recovering from such as verse condition and aim at becoming financially stable in future. Therefore, a detailed study is necessary to find the present financial condition and future scope for improvement in financials. Hence this study on financial performance of the company was undertaken to find the present financial condition of the company with a special emphasis on weakness in financials. This may benefit the management in evaluating the companys performance and take required action for a sustainable existence.

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore

OBJECTIVE OF THE STUDY PRIMARY OBJECTIVE :1.To analyze the financial performance of Sandfits Foundries India Private Limited,Coimbatore 2. To give suggestion for improving the financial performance of the company

SECONDARY OBJECTIVE : 1. To analyze the liquidity position of the firm. 2. To find out the profitability of the firm. 3. To identify how effectively and efficiently the companys resource are being utilized. 4. To understand the long term solvency position of the firm.

RESEARCH METHODOLOGY
INTRODUCTION
Methodology is a systematic way to solve a research problem, it includes various steps that the generally adopted by a researcher in studying the problem along with the logic behind them. The present study was conducted at SANDFITS FOUNDRIES INDIA PRIVATE LIMITED, the study depends mainly on the secondary date namely the annual report of the company. Five years annual reports were collected from the company.

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore

NEED FOR THE STUDY

The business world today is marked by stiff competition and innovation. Enhancing the competitive advantage is a must to win in the market, which requires a systematic appraisal of the performance of the company in term of parameters like return on assets, economic value added etc.

RESEARCH DESIGN
Research design stands for the frame work of research. Since the study aims to analyses the financial statements of the SANDFITS FOUNDRIES INDIA PRIVATE LIMITED . There are three types of research designs; they are exploratory research, descriptive research and hypothesis testing research. The research design utilized in the study is descriptive research. The following procedures have been undertaken: Based on the information and past records analysis and interpretations have been made.

SOURCES OF DATA
For the purpose of analyzing the financial performance of the company, the study relied only on the secondary data that was available in the company.

SECONDARY DATA
For the purpose of study secondary data have been use of which is collected from the published financial statement viz, trading, profit and loss account and balance sheet contained in the annual report of the company.

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore PERIOD OF STUDY For the purpose of conducting the study in SANDFITS FOUNDRIES INDIA PRIVATE LIMITED, the researcher had taken the past five year records to analyze the performance of the company starting from the year April 2006-March 2011. The study was carried out for a period of six weeks. TOOLS USED FOR THE ANALYSIS 1. Ratio analysis 2. Comparative Balance Sheet 3. Common Size Statement LIMITATIONS OF THE STUDY 1) The study is only for a particular company, inter firm comparison was rendered impossible. 2) The period of study was limited up to 5 years

ANALYSIS AND INTERPRETATION

RATIO ANALYSIS Analysis and interpretation of financial statements with the help of ratios is termed as ratio analysis ratio analysis involves the process of computing, determining and presenting the relationship of items or group of items of financial statements. Ratio analysis was pioneered by Alexander wall who presented a system of ratio analysis in the year 1909. Alexander contention was that interpretation of financial statements can be made easier by establishing quantitative relationships between various items of financial statements.

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore Ratio analysis is one of the important tools for financial analysis. Ratios are relationship expressed in mathematical terms between figures, which are connected with each other in some manner. A ratio is defined as the the indicated quotient of two mathematical expression. In financial analysis, a ratio is used as a bench mark for evaluating the financial performance of a firm. MEANING OF RATIO Ratios can be defined as relationships expressed in quantitative terms, between figures which have caused and cause and effect relationships or which are connected with each other in some manner or the other. SIGNIFICANCE OF RATIOS Ratios are exceptionally useful tools with which one can judge the financial performance of the enterprise over a period of time. The efficiency of the enterprise can also be judged against the industry averagely. In vertical analysis, ratios help the analyst to form a judgment whether performance of the firm at the point of time is good, quantitative or poor. At time, the investment decisions are based on the condition revealed by certain ratios, in this way, it serves as a land maid to the management. CLASSIFICATION OF RATIOS Ratios can be classified into different categories, depending upon the basis of classification has been on the basis on the financial statement to which the determinants of a ratio belong. On this basis the ratios could be classified as 1. solvency ratio Current ratio, liquidity ratio, etc. 2. Activity / performance ratio Capital turnover ratio, fixed asset turnover ratio, etc. 3. profitability ratio Net profit ratio, gross profit ratio, etc.

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore

FINDINGS & SUGGESTIONS

6.1 FINDINGS Current ratio analysis shows a increasing trend though a slight decrease occurred 20082009 all the current ratio figures are not well about the fixed ratio of 2:1 the liquidity position is set to be the below satisfactory level

Quick ratio also registers a increase in trend except in 2008-2009.the ratio figures lower than the fixed ratio of 1:1. the acid test ratio of the concern is found to be below satisfactory.

Inventory turnover ratio that an increasing trend except in the 2008 2009 and 20092010.the ratio is not satisfied to the expected financial inventory turnover ratio.

Working capital turnover ratio registers an increase in trend except 2009-2010. It is projected that the concern is fully utilizing it working capital.

The total asset turnover ratio indicates a increasing trend from 2005-2006 to 20092010.so it is revealed that total asset net worth ratio of the concern is in the satisfactory level.

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore Receivable turnover ratio of a concern shows a fluctuating trend for the financial years from 2005-06 to 2009-10. it indicates that it is not satisfactory level.

The gross profit ratio shows a fluctuating trend for the financial years from 2005-06 to 2009-10.the gross profit ratio of the concern is in satisfactory level

The net profit ratio of the concern depicts an increasing trend except the financial year of 2007-08.the net profit ratio shows a increasing trend of during the period of study. It is concluded that net profit of the concern is in a satisfactory level.

6.2 SUGGESTION The liquidity position of the company is less than the standard norm and in future it must be increased Company should control the operating expenses to increase the profitability Current ratio is less than 2; it shows the more investment in current liabilities. it is not favor to the organization. Therefore the company should reduce the current liabilities in order to increase the profitability The working capital shows the companies idle investment. So, in future it must be maintained Debtors turn over ratio is not in the satisfactory level, so the concern should take the steps to collect the outside amounts.

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore

Conclusion :

The financial analysis of Sandfits Foundries India Private Limited, Coimbatore was conducted for the past 5 financial years starting from 2006-2007 to 2010-2011. The financial performance analysis is done by using the financial ratios, comparative balance sheet & Trend analysis. The firms strength and weakness can be understood with the help of financial ratios. The major strength of the company is its high liquidity position, its ability to raise long term funds and their effective utilization and the weakness is its very high rate of operating expense and its low profitability. This study reveals the impact of financial analysis in the profitability of the Sandfits Foundries India Private Limited. From the study it becomes clear that the overall financial position of the company have to be improved.

INTRODUCTION

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore In the economic environment prevailing today (particularly after the advent of the on going liberation process) the financial performance of companies has come into sharp focus in the country. The purpose of this particular study at SANDFITS FOUNDRIES INDIA PRIVATE LIMITED is an analyze the financial performance of the company, by scanning its financial statements from the year April 2006-March 2011 This analysis is a model attempt of throwing more light to the financial management statements and related aspects that affect the effective performance of SANDFITS FOUNDRIES INDIA PRIVATE LIMITED 1.2 FINANCIAL PERFORMANCE As long as accounting biases remain more or less the same over time, meaningful inferences can be drawn by examining trends in raw data and in financial Ratios. Since similar biases characterize various firms in the same industry, inter-firm comparisons are useful Experience seems to suggest that financial analysis works if one is aware of accounting biases and makes adjustments for the same. 1.3 FINANCIAL MANAGEMENT Financial management is concerned with the acquisition, financial and management of assets with it over all goals in mind. Financial management is the managerial activity, which is concerned with the planning and controlling of the firms financial resources. Though it was a branch of economic till 1890, as a separate activity or discipline it is of recent origin. Still, it has no unique body of knowledge of its own, and draws heavily on economics for its theoretical concepts even today. The subject of financial management is of immense interest both Academicians and practicing managers. It is of great interest to academicians because the subject is still developing, and there are still certain areas where controversies exist for which no unanimous solutions have

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore been reached as yet practicing manager are interested in this subject because among the most crucial decisions of the firm are those which relate to finance, and an understanding of the theory of financial management provides them with conceptual and analytical insights to make these decisions skill fully. 1.4 IMPORTANCE OF FINANCIAL MANAGEMENT Financial management is applicable to every type of organization, Irrespective of its size, kind or nature. Thus it is important and useful for all type of its size, kind or nature. Thus it is important and useful for all type of ownership organizations where there is a use of finance; financial management is helpful way. So this subject is acquiring a universal applicability. It is indispensable in any organization as it helps in: Financial planning and successful promotion of an enterprise Acquisition of funds and when required at the minimum possible cost Proper use and allocation of funds Taking sound financial decisions Improving the profitability through financial controls Increasing the wealth of the investors and the nation Promoting and mobilizing individual and corporate savings

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore

2 COMPANY PROFILE

Please Visit www.sandfits.com

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore

REVIEW OF LITERATURE

3.1 INTRODUCTION: Once a topic has been decided upon, it is essential to review all relevant material, which has a bearing on the topic. In fact, of review of literature beings with a search for a suitable topic and continues throughout the duration of research project work. Since a research report, either is a dissertation or a thesis, is supposed to be a study in depth aiming contribution to knowledge, a careful check should be made that the proposed study has not previously been carried out. Since the related review about the topic under research is limited, an attempt was made to compile the views given by various people relating to the study. 3.2 REVIEW OF LITERATURE 1.Arthur Srourn, David Scon, john martin and William petty(1985) through their study on basic financial management have found that managing firms liquidity and managing the firms investment in current assets and its use of current liabilities are the important problems of working capital management. Each of these problems was shown to involve risk in trade. The study revealed that by investing in Current assets, a firm could reduce its risk of liquidity but at lower overall rate of return on its liquidity, reduce the rate of return on its assets. 2.Balakrishnan, G. in his study entitled financing small scale industries in India analyzed the financial performance of joint stock companies in the small scale sector and found that these had a low profit earning capacity due to higher cost of production and higher rate of interest. 3.Bears, W.H. (1966) was among the ones who focused on the ability of ratios to predict failure. Failure was defined as the liability of a firm to pay its financial obligations as the motive. He took 30 financial ratios and observed that some ratios were useful indicators of failure of the firm at least 5 years prior to failure

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore 4.Chandrasekaran. N. in his study had measured the performance of cement companies through profitability efficiency and growth. He had also found out that external finance and cash flows are the important determinants of investment in the cement industry. 5.George Gallingar (2000) has examined the framework of financial statement analysis in five years. The part of his study has focused on return on asset performance. It has examined the profitability of Solton Company. He has examined the components related to return on sales and assets management in depth. According to him, inefficient asset management will result in destroyed market value of the company and will probably cause financial distress problems, which may even result in bankruptcy. He has also opined that if the weighted average cost of capital on a before tax basis exceeds the return on sales or increased asset turnover or both. 6.Helfert, in his study Ratio analysis guide and does especially spotting bonds towards better or poor performance and finding out significant deviations from any average or relatively applicable standard. 7.Jayamala (2002) in her study, financial performance analysis A study with reference to sakthi Finance Ltd. Observed that the profitability of sakthi finance ltd. was satisfactory and the financial soundness in respect of short term liquidity and long term financial strength was also satisfactory. 8.Kanchana Devi (1998) in her study, A comparative study on the financial performance of sakthi finance Ltd., and annamalai Finance Ltd., focused mainly on growth and related problems in finance companies. In her study she has observed that financial companies should maintain proper plan and adequate efforts must be made to overcome the difficulties through better performance. 9.Dr.kaveri in her study entitled, financial ratios as predictors of borrowers health with special reference to small scale industries in India carried out, and she examined the predictive ability of the ratios keeping in mind the banker-borrower relationship. The study has developed a

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore discriminate model for predicting the borrowers health. This model is of much use to the bankers in managing their accounts of small industrial units. 10.Latha (1998) in he restudy, A study on the financial performance with special reference to seshayee paper boards limited, mainly focused on the performance of the company. The study has concluded that overall financial trend viewed from the point of liquidity, profitability, activity and leverage trend were satisfactory. 11.Paul j. Fitz Patrick (1932) conducted a study about ratios and observed that the network to debt and net profits to network were the best indicators of failure among the ratios used. 12.Sastry. K.S. Had developed organizational index combining financial and non-financial performance measures to evaluate the performance of public enterprises. 13.Sherly Roselin (1994) in her study financial performance appraisal a case study of associated cement companys ltd., focused on the performance appraisal of associated cement companys ltd. The study has provided reliable financial information about economic resources and other needed information about changes in such resources and obligations.

A Study on Financial Performance of Sandfits Foundries India Private Limited, Coimbatore