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A STUDY ON

RATIO ANALYSIS
With reference to
SRI RAMADAS PAPER BOARDS PRIVATE LIMITED
RAJAHMUNDRY.

Project report submitted to Andhra University, Visakhapatnam in partial
Fulfillment for the Award of the Degree in
MASTER OF BUSINESS ADMINISTRATION
By
ALLANKI KUMAR
(Regd.No. 112254802001)

Under the esteemed guidance of
SRI . P.SURESH (MBA)
ASST PROFESSOR
DEPARTMENT OF MANAGEMENT STUDIES
G.B.R DEGREE COLLEGE (P.G COURSES)
(Affiliated to Andhra University)
ANAPARTHI
2012-2014




DECLARATION
I hereby declare that this project entitled RATIO ANALYSIS
with reference to SRI RAMADAS PAPER BOARDS PRIVATE
LIMITED, RAJAHMUNDRY is the original work done by me and
submitted to DEPARTMENT OF MANAGEMENT STUDIES, G.B.R DEGREE
COLLEGE(P.G COURSES) in partial fulfillment of the requirement for the
award of the degree of MASTER OF BUSINESS ADMINISTRATION and this
has not been submitted to any other university or publication any time .


PLACE: ANAPARTHI
DATE: (A. KUMAR)
















ACKNOWLEDGEMENT


I would like to express my deep sense of gratitude to Sri B.RATNA
REDDY, Director PG courses for giving me an opportunity to undergo
this project.
I am thankful to Sri RAJENDRA PRASADOrganization Head & staff of
Dept of HR/MKTG/FIN)__________________________ for giving me
the permission to do the project in this organisation and for his whole
hearted co-operation during the period of study.
I express my gratitude to Sri Dr.P.Lakshmanna M.Com,Ph.D Head
of the Department-MBA for his encouragement and co operation
given to me during my studies.
It is an immense pleasure to acknowledge my sincere thanks
and respect to my project guide Sri (_________________) for valuable
guidance and encouragement extended to me in bringing out this report.
Last but not least, I would thank my parents & family
members, and friends who have extended their support directly or
indirectly during the course of this project.

Place : ANAPARTHI (_________________________)
Date : Name



CONTENTS
CHAPTER-I

INTRODUCTION
FINANCE FUNCTIONS
SIGNIFICANCE OF FINANCIAL MANAGEMENT
OBJECTIVES OF THE STUDY
NEED OF THE STUDY
METHODOLOGY
LIMITATIONS
CHAPTER-II

INDUSTRY PROFILE

CHAPTER-III

COMPANY PROFILE

CHAPTER-IV

THEORETICAL ASPECTS OF RATIO ANALYSIS
CHAPTER-V

DATA ANALYSIS AND INTERPRETATION
CHAPTER-VI

FINDINGS & SUGGESTIONS
BIBLIOGRAPHY







CHAPTER-I











INTRODUCTION
Finance holds the key to be human activity Financial Management & that
managerial activity which is concerned with the planning and controlling of the firms
financial resources. The subject of financial management & of immense interest of both
academicians and practicing managers. Finance is one of the most important activities of a
business firms. Though it was a branch of economics till 1890, as a separate activity or
disciplines it of recent origin.
Financial information in required for financial planning, analysis and decision-
making. Accounting system of a firm in the main source of financial information. The
according system helps to accumulate measure and communicate financial information to
various uses for making economic decisions. The users of financial information include
owners creditors, managers, employees, customers, suppliers, government and society.
Financial analysis is the process of identifying the financial strengths and weaknesses
of the firm by properly establishing relationships between the items of the balance sheet
and the benefit and loss account- no business activity can ever be proceed without financial
support. The major part of any corporate plan must be expressed on financial terms.
Finance and other functions:
There exits an inseparable relationship between finance on the one hand and
production, marketing and other functions on the other. Almost all kinds of business
activities, directly or indirectly, involve the acquisition and use of funds. For example,
recruitment and promotion of employees in production is clearly a responsibility of the
production department; but it requires outset that shareholders are made better off by a
finance decision, which payment of wages and salaries and other benefits, and thus,
involves finance. Similarly, buying a new machine or replacing and old machine for the
purpose of increasing productive capacity affects the flow of funds. Sales promotion policies
come within the purview of marketing, but advertising and other sales promotion activities
require outlays of cash, and therefore, affect financial resources. Where then is the
separation between production and marketing functions and the finance function of making
money available to meet the costs of production and marketing operations?
Where do production and marketing functions end and the finance functions begin?
There are no clear-cut answer to these questions. The finance function of raising and using


money although has a significant effect on other functions, yet it need not necessarily limit
or constraint the general running of the business. A company in a tight financial position
will, of course, give more weight to financial considerations, and devise its marketing and
production strategies in the light of the financial constraint. On the other hand,
management of a company, which has regular supply of funds, will be more flexible in
formulating its production and marketing policies. Infect, financial policies will be devised to
fit production and marketing decisions of the firm in practice.
Finance functions:
Although it may be difficult to separate the finance function from production,
marketing and other functions, yet the functions themselves can be readily
identified. The functions of raising funds, investing them in assets and distribution
returns earned form assets to shareholders respectively known as financing,
investment and dividend decisions. While performing these functions, a firm
attempts to balance cash inflows and outflows. This is called liquidity decision
and we add it to the list of important finance decisions or functions.
Finance functions or decisions include:
a) Investment or long-term asset-mix decision.
b) Financing or capital-mix decision.
c) Dividend or profit allocation decision.
d) Liquidity or short-term asset-mix decision
A firm performs finance functions simultaneously and continuously in the normal
course of the business. they do not necessarily occur in a sequence. Finance functions call
for skillful planning, control and execution of firms activities. Let us note at the increases
value of their shares. Thus while performing the finance functions, the financial manager
should strive to maximize the market value of shares.




Investment decision:
Investment decision or capital budgeting involves the decision of allocation of
capital or commitment of funds to long-term assets, which would yield, benefits in
future. Its 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 certainty, because of the uncertain future.
Capital budgeting decision involved risk. Investment proposals should,
therefore be evaluated in terms of both expected return and risk. Besides the
decision to commit funds in new investment proposal; capital budgeting also
involves decision of recommitting funds when an asset becomes less productive or
non-profitable.
Financing decision:
Financing decision is the second important function to be performed by the financial
manager. Broadly, he must decide when, where and how to acquire funds to meet the firms
investment needs. The central issue before his is to determine the proportion of equity and
debt. The mix of debt and equity is known as the firms capital structure. The financial
manager must strive to obtain the best financing mix or the optimum capital structure for
his firm.
Dividend decision:
Dividend decision is the third major financial decision. The financial manager
must decide whether the firm should distribute all profits, or retain them, or
distribute a portion and retain the balance. Like the debt polity, the dividend policy
should be determined in terms of its impact on the shareholders value.
The optimum dividend policy is one, which maximizes the market value of the
firms shares. Thus, if shareholders are not indifferent to the firms dividend policy,
the policy, the financial manager must determine the optimum dividend-pay our
ratio.



Liquidity decision:
Current assets management, which affects a firms liquidity, is yet another important
finances functions, in addition to the management of long-term assets. Current assets
should be managed efficiently for safeguarding the firm against the dangers of insolvency.
Investment in current assets affects firms profitability, liquidity and risk. A conflict exists
between profitability and liquidity while managing current assets.
If the firm does not invest sufficient funds in currents asset, it may become illiquid.
But it would lose profitability, as idle current asset, would not earn anything. Thus, a proper
trade-off must be achieved between profitability and liquidity. In order to ensure that
neither insufficient nor unnecessary funds are invested in current assets, the financial
manager should develop sound techniques of managing current assets and make sure that
funds would be made available when needed.
Working capital is the firms holdings of current assets such as Cash, receivables,
inventory and marketable securities. Every firm required working capital for its day to day
transaction such as purchasing raw material, for meeting salaries, wages, rents rates,
advertising etc. But there is much disagreement among various financial authorities(financial
manager, accountants, businessmen and economists) as to the exact meaning of the term
working capital.
SIGNIFICANCE OF FINANCIAL MANAGEMENT:
The importance of financial management is known from the following aspects:
APPLICABILITY:
The principles of finance are applicable wherever there is cash flow. The concept of cash
flow is one of the central elements of financial analysis planning, control and resource
allocation decisions. Cash flow is important because financial health of the firm depends on
its ability to generation sufficient amount of cash to pay its employees suppliers, creditors
and owners. Any organization, whether motivated with earring of profit or not, having cash
flow requires to be viewed from the angle of financial disciple. Therefore, financial
management is equally applicable to all forms of business like sole traders, partnerships,


companies. It is also applicable to nonprofit organizations like trusts, societies, governmental
organizations public sector enterprises etc.
CHANCE OF FAILURE:
A firm having latest technology, sophisticated machinery, high caliber marketing and
technical experts, etc. may fail to succeed unless its finances are managed on sound
principles of financial management.
RETURN ON INVESTMENT:
The owners of business try to maximize their wealth. It depends on the amount of
cash flow expected to generate for the benefit of owners, the timing of these cash flows and
the risk attached to these cash flows. The greater the time and risk associated with the
expected cash flow, the greater is the rate of return by the owner The financial management
studies the risk return perception of the owners and the time value of money.
TECHNIQUES OF FINANCIAL MANAGEMENT:
The important techniques of financial management are as follows:
COMMON SIZE STATEMENTS:
The common size financial statements are those in which figures reported are converted
into percentage to some common base. Common size balance sheet and income statement
are prepared for vertical analysis and interpretation is done for identification of causes for
changes taken place over a period of time.
TREND RATIOS:
Trend rations are the index number of the movements of financial figures reported
in the financial statements for more than one accounting period. It is a statistical technique
adopted to reveal the trend of financial items which are used in analysis of behavior of
financial items and for preparation of projected financial statements. In preparation of tread
ratios, the base accounting period should be selected and the financial figures of that base
period should be given the index number of 100.




CASHFLOW ANALYSIS:
The preparation of cash flow statements has been made mandatory. A statement of
cash flow reports the cash receipts and cash payments and net changes in cash resulting
from operating, investing and financing activities of an enterprise during the period. They
reconcile the opening and closing balances of cash and cash equivalents for the reported
accounting period.
FUND FLOW ANALYSIS:
The fund flow analysis gives the details of changes in financial position of a concern between
two balance sheet dates. It based on net working capital concept which is termed as fund.
The fund flow statement contains the details of financial resources which have become
available during the accounting period and the ways in which those resources have been
used up. The flow of funds refers to movement of funds which cause a change in working
capital.
RATIO ANALYSIS:
Ratio analysis is used as an important tool in analysis of financial statements. Ratios are used
as an index or yardstick for evaluating the financial position and performance of a firm. Ratio
is the expression of one figure in terms of another. It is expression of the relationship
between mutually independent figures. Ratio analysis used financial report and data and
summarizes the key relationship in order to appraise financial performance.
CAPITAL BUDGETING TECHNIQUE:
Investment in long term assets for increasing the revenue of firm is called as capital
budgeting. It is a decision to invest funds in long term activities for future benefits that
increase the wealth of the firm thereby increases the wealth of the owners. Capital
budgeting refers to long term planning for proposed capital outlays and their financing. The
important techniques in this are as follows:
Payback period method
Accounting rate of return method
Net present value method
Internal rate of return method
Profitability index method


Discounting playback period etc.

WORKING CAPTIAL MANAGEMENT:
In the efficient working capital management some of the techniques like economic order
quantity, ABC analysis, fixation of inventory levels, cash management models are adopted.
CAPITAL STRUCTURE:
The finance manager has to decide an optimum capital structure to maximize the wealth of
shareholders. In capital structure decisions analysis of operating and financial leverages,
cost of different components of capital, EPS-EBIT analysis, ascertainment of EPS of different
financing alternatives, determination of financial breakeven point, indifference point
analysis and other mathematical models are used.
IMPORTANCE OF COST MANAGEMENT SYSTEM:
Cost management involves initiating and making decisions that improve the cost leadership
of an organization. The term refers to the generation of cost information, and its active use
to plan and control costs. This requires the provision of regular flow of reliable and relevant
cost information which can be clearly communicated to the concerned managers. The
information should relate costs both to cause and to the purpose of its incurrence. To be
effective, cost management has to be accepted as a policy by corporate management. It was
Japanese who first emphasized cost management are:
a) Focus on value added activities and eliminating non-value-added activities,
b) Reducing consumption of cost drivers in value-added activities
The guiding principles naturally are usefulness and timeliness. The major thrust is on
preproduction stages in a products life cycle. In this stage, key decisions on product design,
resourcing, and production technology are made. Up to 90% of a products total costs are
committed till them. The objective is to get cost right before of actual costs incurred after
production is underway. Some of the important techniques of cost management and their
basic ideas are:
1. Activity based costing
2. total quality management
3. Benchmarking


4. Life cycle costing
5. Target costing
6. functional analysis
7. Back flush costing
8. Reengineering














CHAPTER-II










INDUSTRY PROFILE
HISTORY OF THE PAPER:
Paper has a long history, beginning with the ancient Egyptians and
continuing to the present day. For thousands of years, hand-made
methods dominated and then, during the 19
th
century paper production
became industrialized .Originally intended purely for writing and printing
purposes, a wide variety of paper grades and uses are now available to the
consumers.
The first paper mill in the world was started in 1336 A.D. in
Germany. Later paper mills were started in 1586 in Switzerland and
Holland. Later it spread all over the world. Firstly in 1789 chlorine
was used for bleaching of the pulp, in 1799 Robert Nicholas the French
scientist, who designed the first paper machine to the world. In 1809
John Dickinson patented a cylinder Machine which resulted in better
with speed of learning and research work. Later on papermaking has
becomes a seed industry at every inch and fairish of the world.
INDIAN PAPER INDUSTRY:
Paper industry in India is the 15
th
largest paper industry in the
world. It provides employment to nearly 1.5 million people and
contributes rupees 25billion to the governments kitty. The government
regards the paper industry as one of the 35 high priority industries of the
country.
Unlike Iron and Steel, Textile and Sugar Industries the paper making
industry did not exist in ancient India. For writing purposes Bojapatra
(bank of trees) and Talpatra (leaves of Palm) were used some of our
oldest manuscripts preserved up to the present time were written on these
materials. The modern art papermaking came to India quite late and


perhaps the foundations of the modern paper Industry were laid about
1870.
The Titaghar Paper Mills was established in 1881 in Bengal and
since the Industry has been growing and spreading in different parts of
the Country. Industries which use coarse, heavy and weight-losing
materials like wood and timber where in a considerable loss of weight
takes place in the first stage may usually seek different locations in
different stages. The first stages of these industries are generally located
near the sources of supply of heavy materials were these material are
changed into half finished goods almost into materials.
The subsequent stages are located near the consumer markets
where half finished goods are given final shape by additional application
of labor. In the care of paper industry it is possible to prepare the wood
pulp near the forests and then turn into paper in industrial and popular
centers. Canada and the Baltic countries of Europe wish their extensive
soft wood forests of the Northern Hemisphere and cheap hydro electric
power are the homes of the most important wood pulp and paper
industries of the world. Wood pulp is manufacture the forests and is
supplied to the paper making centers inside their own country and is
exported to distant lands like Japan and India.
Perhaps in the beginning the Titaghar mills used cotton rage a first
class material for making the best varieties of paper. But subsequently
the Indian paper mills relied mainly on sabai grass available in Uttar
Pradesh and Nepal. For interiors yellow varieties of paper even the Munj
grass was used.



Imported wood pulp, rages, and waste paper were some the other
material used besides coat for power and chemicals for bleaching and
other processes. Between 1925 and 1937, the processes of preparing the
paper pulp from bamboo were developed fully and the paper industry
began to really mostly on Bamboo as the main and basic fibrous material
for paper making. Nearly 2.38 tons Bamboo in an average is required for
making a tone of paper and it accounts for nearly 60% of the Indian raw
materials used in the paper Industry.
The consumption of Bamboo, sabai grass and softwood was
estimated in 1954 at 300000, 65000 and 250000 tons respectively. In
Eastern India (including East Pakistan) goods supplies of bamboo were
available in the Chittagung tracts of Bengal and in Catcher and sylhet
divisions of Assam. Most of the set forests are now parts of Eastern
Pakistan and Bangladesh, Sambalpur, Barpahar, Angul, Puri and
Ganajam divisions of Orissa and Bihar are the main sources of obtaining
now materials for the paper mills of Northern and Eastern India.
A brief discussion of the natural resources shows that the beginning when
sabi and other greases were the principal raw materials and coal the main
source of power. Neither Bengal nor Uttar Pradesh enjoyed and distinct
advantage, if the mills Bengal could enjoy the advantage of cheaper of
cheaper supplies of local coal, the Industry in Uttar Pradesh possessed
the advantage of grass.
But as only a little over 2 tons of raw material and nearly 4 tons
coal were required for every ton of finished paper, the Industry in Bengal
was better placed even after paying freight on the supplies of grass
obtained from long distance. Besides this the advantage of the paper
market at Calcutta was there. But with the introduction of Bamboos a


superiors raw material the Industry in Bengal was placed as constantly
advantageous position.
Thus supplies of bamboo and coal near at hand and a big market for
paper. Bengal continued to enjoy a position of great advantage for the
development of paper industry, Bihar, Orissa, U.P., and the Punjab came
next. After the development of hydroelectric power the position of other
bamboo producing regions in Kerala, Mysore and Hyderabad was also
considerably improved. The paper industry using Bamboo as raw
material was given the benefit of protective duties in 1925 and since then
the progress of industry has been fairly satisfactory. The development of
hydroelectric power in many regions of the country has considerably help
the inter-regional dispersion of the industry.
The influence of the advantage of raw material, power and markets are
very clearly visible in the regional distribution of the industry between
1925 and 1948. In the Bombay region the industry used rage or imported
wood pulp and was thus handicapped. In the Madras region also the
resource position was not helpful for the development of the industry. In
1951, there were 17 paper mills, and today there are about 515units
engaged in the manufacture of paper and paper boards and newsprint in
India. The pulp and paper industries in India have been categorized into
large scale and small scale. Those industries which have capacity above
24,000 tons per annum are designated as large scale industries.
Thus supplies of bamboo and coal near at hand and a big market for
paper. Bengal continued to enjoy a position of great advantage for the
development of paper industry, Bihar, Orissa, U.P., and the Punjab came
next. After the development of hydroelectric power the position of other
bamboo producing regions in Kerala, Mysore and Hyderabad was also


considerably improved. The paper industry using Bamboo as raw
material was given the benefit of protective duties in 1925 and since then
the progress of industry has been fairly satisfactory. The development of
hydroelectric power in many regions of the country has considerably help
the inter-regional dispersion of the industry.
The influence of the advantage of raw material, power and markets are
very clearly visible in the regional distribution of the industry between
1925 and 1948. In the Bombay region the industry used rage or imported
wood pulp and was thus handicapped. In the Madras region also the
resource position was not helpful for the development of the industry. In
1951, there were 17 paper mills, and today there are about 515units
engaged in the manufacture of paper and paper boards and newsprint in
India. The pulp and paper industries in India have been categorized into
large scale and small scale. Those industries which have capacity above
24,000 tons per annum are designated as large scale industries.













LIST OF THE PAPER UNITS: (in Metric Tons)

S. No. State No. of Units Installed
Capacity
Production
1 Andhra Pradesh 18 4.106 2.173
2 Assam 4 2.208 1.084
3 Bihar 8 0.915 0.024
4 Gujarat 45 2.743 1.67
5 Haryana 17 1.496 1.11
6 Karnataka 15 1.933 1.77
7 Jammu & Kashmir 1 0.033 0.009
8 Himachal Pradesh 13 0.094 0.213
9 Kerala 3 0.393 0.093
10 Madhya Pradesh 16 1.813 0.0991
11 Maharashtra 52 4.677 3.555
12 Nagaland 1 0.03 0.218
13 Orissa 7 2.136 1.207
14 Punjab 17 1.378 0.82
15 Rajasthan 9 0.433 0.064
16 Tamil Nadu 21 2.051 1616


Source: Govt. of India, New Delhi
STRUCTURE OF THE INDIAN PAPER INDUSTRY:
Paper industry in India can be broadly categorized into 3 major
segments
Segment based on recycled waste paper this segment covers
the medium and small paper mills using waste paper as a major raw
material and contributes nearly 35% of the Indian total production.

There are only 33 large pulps and paper mills based on forest based
raw materials with an installed capacity of 2.8 million tones. Since 8
of these mills are closed, operating capacity of these mills around 2.4
million tons of paper board and newsprint. This sector performed well
in the last financial year, snatching a capacity utilization of over 80%
on the total operating capacity.

The medium and small Agro based /waste paper based mills
produced nearly 3.6 million tons of paper, paper board and newsprint
against an operational capacity of nearly 5 million tones, indicating
capacity utilization around 70%.
Packaging accounts for nearly 50% market share, while writing and
printing has a market share of 32% and specialty and newsprint account
for the remaining 18% of the market share.
17 Uttar Pradesh 58 3.12 2.092
18 West Bengal 21 2.386 0.858
19 Chandigarh 1 0.03 0.016
20 Pondicherry 1 0.096 0.032



PRODUCT INFORMATION:
GLOBAL WISE:
The global paper industry can broadly divided as follows














PAPER INDUSTRY
Paper and paper board News print
Industrial & packaging Specialties Writing & printing



DOMESTIC WISE:
India is among the top 18 global paper producers and to 15 paper
dealers. Its paper industry can be broadly classified into:
PRODUCT CLASSIFICATION OF INDIAN PAPER INDUSTRY






EM


STANDARD GLASSED
PRINTING
MAPLITHO
PHOTO
COPIER
COVER
COLOR
PRINT
BOND
BOND
WRAPPING
POSTS
TEA
YELLOWS
MAMIA
APSR
STRAW
MILL GRAY
BROWN
DUPLEX FILE
TRIPLEXPULP
BOND
MICRO
TISSUE
AIRMAIL
GLASSINE
TWISTWRP
PAPER & PAPER
BOARD
NEWS PAPER
WRITING
CREAMMOVE
AZIRELIAD
CREAM LAID
BROWL
PACKING
CRAFT
MEDIA
LINEAR
SACK RAFT



EMPLOYMENT:
Paper Industry employees directly 23-30 persons per 1000 tons of annual
capacity and indirectly a vast labor force in forest and other related areas.
The employment potential residues are 50-75 per 1000 tons of annual
capacity.
PAPER INDUSTRY IN ANDHRA PRADESH:
Andhra Pradesh is the Second State, after Maharashtra producing
more than 2,500 tons of paper of paper per day. In Andhra Pradesh
totally there are 21 units with total installed capacity of 4, 48,320 TPA.
In Andhra Pradesh there are 4 big paper mills and the remaining are small
paper mills based as their installed capacity.
The four big Mills are:
1. The Andhra Pradesh Paper Mills Ltd.
2. Sirpur Paper Mills Ltd.
3. Sri Rayalaseema Paper Mills Ltd.
4. Bhadrachalam Paper Mills Ltd.
The production capacity of these mills in about 2.5 lakh tons. The
total production of Andhra Pradesh comes to about one fourth of Indias
total production which is really a great achievement.






LIST OF PAPER MILLS IN ANDHRA PRADESH (tons per
annum)
S.NO. NAME CAPACITY
01 THE ANDHRA PRADESH MILLS LTD 1,53,500
02 ITC BHADRACHALAM PAPER LTD 83,923
03 SIRPUR PAPER MILLS LTD 71,100
04 THE RAYALASEME PAPER LTD 42,000
05 COASTAL PAPER LTD 18,000
06 COASTAL CHEMICALS LTD 16,500
07 SRI LAKSHMI SARASWATHI LTD 15,500
08 A.P.BAGASSE PRODUCTS PVT.LTD 10,000
09 CIRCAR PAPER MILLS LTD 10,000
10 NAGARJUNA PAPER MILLS LTD 10,000
11 TELANGANA PAPER MILLS LTD 10,000
12 GARDIAN PAPER LTD 10,000
13 DELTA PAPER MILLS LTD 9,000
14 ADIVASI PAPER MILLS LTD 7,500
15 VAMSADHARA PAPER MILLS LTD 7,500
16 SURYA CHANDRA PAPER MILLS
LTD
6,000
17 PENNER PAPER MILLS LTD 4,950
18 SANDEEP PAPER MILLS LTD 4,200
19 SHREE PAPER MILLS LTD 4,000
20 CHARMINAR PAPER MILLS LTD 3,000
21 JYOTHI CELLOSE LTD 2700




INDUSTRY CHALLENGES:
Paper manufacturers have had to manage margins by cost
control, and this has limited fresh investments and growth
within the industry.
The industry needs large quantity of wood and water which
often face supply limitations and are subject to environmental
regulations.
Performance of the industry has also been constrained due to
high cost of production characterized by inadequate availability
and high cost of raw materials and power.
KEY INDICATORS FOR THE GROWTH OF PAPER INDUSTRY:
The long-term outlook for the paper industry in India looks distinctly
bright for a variety of reasons .Literacy rates are expected to go up as a
result of a dedicated fun arising out of the education for primary and
secondary education.



















CHAPTER-III












PROFILE OF SRI RAMADAS PAPER BOARDS PVT LTD
BRIEF HISTORY:
Nature of promotes and their background their
experience in the lime of activity SRI.N.VENKETA
REDDY is a well-qualified engineer. He is the field if
pulp and paper machinery and equipment manufacturing
industry since 1974.
Having experience in equipment and reputation
for manufacturing quality machines, he enthused himself
to promote the paper mill.
Sri ramadas paper boards private limited in
Jegurudupadu village, near Rajahmundry in the year
1994-95 with the financial assistance from state bank of
India, the paper mill was established as 6TPD mill
initially. However with has innovator ways and efficient
equipment the mill started manufacturing 10TPD by the
end of first year itself and further extended to 15TPD in
last year with this vast experience, he was forced to
expand the mill by adding 40TPD writing, printing and
eannercial production in the month of march,2002 and
expended further to 50TPD from last year and also the
mill is running well even since with good profits .


In addition to this, the company making profits on
sustained basis and the company is operating on sound
management policies and having good industrial relation
with the employees. The managing director of the
company SRI.N.VEKATA REDDY got BEST
ENTERPRENUER AWARD for the year 2000-01 by
government of Andhra Pradesh
Mr N.VEKATA REDDY is managing director of SRI
RAMADAS PAPER BOARDS PVT LTD and has
earned good reputation in the industrial circles in the
state.
SRI.G.MOHAN RAO is well qualified process
engineer with over 37 years experience in paper industry
and held senior AP paper mills limited.The siripur paper
mills limited etc.,
During his tenure, he worked in various sections
in pulp and paper mill including R7D.His works over a
dozen on pulping & bleaching of conventional and
unconventional raw material and paper making were
published in pulp &paper technical association
management.


He is fully conversant with various aspects of
pulp and paper industry and had rich experience in
administration experienced engineers, middle
management officers and large eartinment of workmen
has one of the directors of SRI RAMADAS PAPER
BOARDS PRIVATE LIMITED.
SRI .N. SRINIVAS
A graduate in mechanical engineering and M.S.
(VSA) , is an young and enthusiastic engineer in an
ameraan software company USA since last 10 years. His
inherent business qualities did not allow him to continue
in the job and promoted him to start a business and it
result to join himself in the group of sri ramadas paper
boards private limited,as one of the board of directors
(Director-Technical) the unit is doing exceedingly well
and working at 75 year capacity as against the projected
capability utilization of 60% for the first year Mr. N.
Srinivas is the executers directors of the present unit
1&2 at Jegurupadu . By assuming the vast potential for
the writing, printing, news print and kraft paper in future
years to come, he along with other promoters proposes to


setup expansion this project. His zeal and enthusiasm
will be an added asset to the project.
Organizational setup/particulars of present key
personal and the area supervised by them, change of key
personal in the recent part, in any:
WELL-EXPERIENCED DIRECTORS OF THE
COMPANY MANAGE THE UNIT
TECHNICAL ASPECTS :
(indicate the nature of process and also
arrangements made for pollution control, position
regarding salutary permissions obtained from pollution
control authorities)
The unit is an existing one and got all necessary
statutory approval. The process of basucakky divided
into three segments namely waste paper pulping, paper
making & finishing. The waste paper is charged to a
hydro pulps and then stored nin a chest. From there it
will pass through a combination of clearing and
screening system.
There addings like rosin alum and dyes added to
improve the strength and then it will passed to the second


stage of process. The pulp then promoted to a constant on
the wire part from a layer of wet sheet. It will then pass
through two press sections, then it is dried to remove
moisture in the sheet then reeled on a pope type realer.
Permission for the proposed unit expansion is sought
from pollution control board and feasibility certificate for
power supply from APTRANSCO is obtained
MARKETING ARRANGEMENTS:
The unit is good reputation in the market from
the starting of the unit and having dealers in Andhra
Pradresh, Tamilnadu, Pondicherry, Orrisa and Karnataka.
So no extra efforts are required for marketing.
Major developments if any that have taken place
in the company.
Increased the production capacity from 10 TPD to 65
TPD in the year 2002.areas of strength and weekness.
Since the company is being managed by well-
experienced promoters. The company is doing well right
from its inception the company is expected to do better in
the up-coming years.



BRIEF DATA (STAFF):
Mr. N.V. LAL RAJA SEKHAR(Senior Manager) is
having 19 years experience in pulp and paper industry
and held in senior positions in various paper mills like
M/S A.P. paper industries limited .
During his venture, worked in laboratory quality
control, research and development departments and
presently working in our organization as a senior
manager (quality and marketing)mills limited and
ballaspur
Ms. IRK SAI (paper machine incharge) is having 27
years experience in pulp and paper industry.
Experienced in paper machine section and worked in
various paper mills like A.P paper mills, sri rayalaseema
paper mills, Adivasi paper mills and presently working in
our organization as a paper machine incharge during his
venture dedicated his services to paper machine
developments.
Mr. A.V.V RAMANA (deinking plant incharge) is
having 35 years experience in pulp and paper industry.
Experienced pulp processing stock preparation and


deinking process. He worked in A.P paper mills, eluru
paper mills and various paper mills in out of the state.
Presently he is working in our organization as
deinking plant incharge.























CHAPTER-IV













RATIO ANALYSIS
INTRODUCTION:
Ratio analysis is a powerful tool of financial analysis.
A ratio is defined as the relationship between two
accounting figures, expressed mathematically is known
as a financial ratio (or) simply as a ratio.
Ratio help to summarize the large quantities of
financial data and to make quantitative judgement about
the firms financial performance.
A single ratio in itself does not indicate favourable
conditions. It should be compared with some standard.
Standards of comparison may consists of :
1. Past ratio : i.e., ratios calculated from the past
financial statements of the same firm.
2. Projected ratio : i.e., ratios developed using
the projected or performs financial statements
of the same firm.
3. Competitors ratio: ratio of some selected
firms especially the most successfully
competitors, at the same point in time.


4. Industry ratio : i.e., ratio of the industry to
which the firm belongs.
BASIC OF COMPARISION:
A. Time Series Analysis :when
financial ratios over a period of time
are compared it is known as the time
series on trend analysis. It directly
gives whether the firm financial
performance has improved remained
constant over period.
B. Pro-forma Analysis: Sometimes
future ratios are used as the standard
of comparison. Further ratios can be
developed from the projected on
pro-forma financial statements. If the
future ratios indicate weak financial
position corrective actions should be
indicated.
C. Cross-Sectional Analysis: another
way of comparison is to compare
ratios of the firms with selected firms
in the same industry at the same


point of time. This type of
comparison indicates the relative
financial position and performance of
the firm.
D. Industry Analysis: To determine the
financial condition and performance
of a firm, its ratio may be compared
with average ratios of the industry of
which the firms is a member. This
sort of analysis, known as the
industry analysis,help to ascertain the
financial standing and capability of
the firm VIS--VIS other firms in
the industry.
TYPES OF RATIO:
Several ratios calculated from the accounting
data, can be grouped into various classes according to the
financial activity on function to be evaluvated .
The parties interested in financial analysis:
Short-term and long term
creditors
Owerns and management.


OBJECTS:
1. Short term credits main interest in the liquidity
position or the short-term solvency of the firm.
2. Long term credits on other hand are more interested
in the long term solvency and profitability of the
firm.
3. Owners concentrate on the firms profitability on
financial conditions.
4. Management is interested in evaluating every aspect
of the firms performance. They have to protect the
interest of all the parties and see that the firm grow
and profitability.
TYPES OF RATIOS:
LIQUIDITY RATIOS
LEVERAGE RATIO/CAPITAL STRUCTURE
RATIOS
ACTIVITY RATIOS
PROFITABILITY RATIOS




1. LIQUIDITY RATIOS:
Liquidity ratio measure the firm ability to
meet current obligations, liquidity ratios
establishing a relationship between cash and
other current assets to current obligations,
provided quick measure of liquidity.
The failure of the company to meet its
obligations due to lack of sufficient liquidity
will result in a poor credit worthyness loss of
creditors confidence on even in legal tangles
resulting the closure of the company.
A high degree of liquidity is also bad in
idle assets earn nothing.
The most common liquidity ratios are:
CURRENT RATIO
QUICK RATIO/LIQUIDITY RATIO/ACID
TEST RATIO
ABSOLUTE LIQUIDITY RATIO/CASH
RATIO
NET WORKING CAPITAL RATIO


INTERNAL MEASURE/DEFENSIVE-
INTERVAL RATIO

2. CURRENT RATIOS:
The current ratio is calculated by dividing current
assets/current liabilities.
CURRENT ASSETS
CURRENT RATIO = ----------------------------------
CURRENT LIABILITIES
Current assets : cash, marketable sec., debtors,
stock, prepaid expences, B/R

Current liabilities : credit, B/P, Accuredexpences, short
term bank loan income tax.
Liquidity and long term debt
maturing in current year.





3. QUICK RATIO (OR) LIQUIDITY RATIO
(OR) ACID TEST RATIO:
Current assets prepaid expence,inventories
QUICK RATIO = -------------------------------------
Current liabilities
Although quick ratio is a more pertaining test of
liquidity than the current ratio.

4. CASH RATIO / ABSOLUTE LIQUIDITY
RATIO/ SUPER LIQUIDITY RATIO:

Cash + marketable securities
A.L.R = --------------------------------------
Current liabilities
NET WORKING CAPITAL RATIO:
The difference between current assets and
current liabilities excluding short term borrowing is
called NWC.


Note: NWC however, measures the firms potential
survivor of funds. It can be related to net assets or capital
employed.
Net working capital
N.W.C = ------------------------------------------
Net Asstets

CAPITAL EMPLOYED = Total assets currents liabilities
CAPITAL EMPLOYED = total debt net worth
NET WORTH = Equity share holders fund + retaining profits

INTERNAL MEASURE:
The ratio which assesses a firms ability to meet it
regular cash expence is interval measure.

Internal measure relates liquid assets to average
daily operating cash out flows.



THERE ARE EQUAL TO: cost of goods sold =
selling, admn,expences (less) Depreciation (and other
cash drop/360)
LEVERAGE RATIO:
The long term solvency of a firm can be
examined by leverage or capital structure ratio.
There are thus two aspects and of the long term
solvency of a firm.
1. Ability to repay the principles when due.
2. Regular payment of the interest there ratios indicate
mix of funds provide by owners and lender when
the firm earns a rate of return on the total capital
employed higher than the interest rate on the
borrowed funds. The process of magnifying the
share holders return through the employement of
debt is called Financial Leverage or Trading on
Equity.;
If the cost of debt is higher than the firm over all
rate of term, the earning and of S.H will be reduced
there in a threat of insolvency.


Leverage ratio and may be calculated from the
B/S items determine the propositions of debt in total
financing:
(These are form B/S )
Dept-Equity and total dept equity ratio
Dept-Assets ratio
Equity-assets ratio
COVERAGE RATIOS: there are from P & L a/c
Interest coverage ratio
Divided coverage ratio
Total fixed charges coverage ratio
Cash flow coverage ratio
Dept service coverage ratio
A. DEBT-EQUITY RATIO: The
relationship between borrowed funds and
owners capital is popular measure of the
long term financial solvency of a firm.
The relation ship describing the lenders
contribution for cash rupee of the owners
contribution is called debt. Equity ratio


Long term debt (total debt-CL )
Debt Equity Ratio = ------------------------
Share holder equity
SHARE HOLDERS EQUITY = equity and performance
share capital, share premium, P & L, General Reserve,
Development.

LONG TERM DEBT: Fixed bearing securities
deberntures, secured and unsecured loan.

SHARE HOLDER EQIUTY: Net worth
Capital Employed
Debt-Equity Ratio = --------------------------------
Net Worth
B.TOTAL DEBT EQUITY RATIO : The firm may
know the portion of the interest bearing debt (also
called funded debt) in the capital structure.
Total debt
D.E RATIO = ----------------------------------------------
Capital employed



Total debt
(Total liability net worth) = ------------------------
N.W.+TOTAL DEBT

TOTAL LIABILITIES
C. total liabilities to total assets ratio = ---------------------
TOTAL ASSETS

LONG TERM DEBT
D. LONG TERM DEBT RATIO = ------------------------
NET WORTH

NET WORTH
E. PROPERTY RATIO = ----------------------------------
TOTAL ASSETS

FIXED ASSETS
F. FIXED ASSETS TO NET WORTH = -------------------
NET WORTH


CURRENT ASSETS
G. CURRENT ASSETS TO NET WORTH = -------------------
NET WORTH

LONG TERM DEBT
H. LONG TERM DEBT TO NET WORKING CAPITAL = ---------------------------------
WORKING CAPITAL
CURRENT LIABILITY
I.CURRENT LIABILITY TO NET WORTH = -----------------------
NET WORTH
TOTAL LIQUIDITY
J.TOTAL LIQUIDITY = -----------------------------------------
NET WORTH

FIXED INTEREST BEARING
SECURITIES
K.CAPITAL GEARING RATIO = --------------------------
NET WORTH

FIXED ASSET
L.FIXED ASSETS TO LONG TERM FUND = ------------------------------------------
LONG TERM FUND


COVERAGE RATIO:
The 2
nd
category of leverage ratios are coverage
ratios . Those ratios are computed from P & L a/c.
The claims of Creditors:
Interest on loan
Preference divided
Amortization of principal
Repayment of the installment of loans
Redemption of preference capital
These ratios show the relationship between
operating profits and claims of the out sides.
E.B.I.T
M.INTEREST COVERAGE RATIO = ---------------------
INTEREST
PROFIT AFTER TAX
N. PREFERENCE DIVIDEND COVERAGE RATIO = ---------------------
PREFERENCE





OPERATING RATIO:
These ratio calculated to show the variation of different expenditure in
the operating costs. Generally these are expressed as percentage to net
sales.

COST OF GOODS SOLD + O.P
OPERATING RATIO = ------------------------------------------ X 100
NET SALES
EACH ITEM OF EXPENDITURE OF NET SALES
EXPENSES RATIO = ----------------------------------------------- X 100
NET SALES
ACTIVITY RATIO OR TURN OVER RATIO:
Activity ratio involves a relationship between sales and assets. Activity
ratio can be calculated to judge the effectiveness of assets utilization. This
is also indicates the speed with which assets and is being converted or
turn over into sales.
COST OF GOODS
P.STOCK TURNOVER RATIO STOCK = -----------------------------------
AVERAGE STOCK
This is ratio indicates the efficiency of the firm in selling its product.
Industrial standard of this ratio is 6 or 7.
OPERATING
CLOSING AVERAGE INVENTORY = --------------------------------------
2


AVERAGE INVENTORY
DAY OF INVENTORY HOLDINGS = ----------------------------------X 2
COST OF GOODS SOLD

DEBTORS TURNOVER RATIO :
It shows the collection period of firms debtors the liquidity position of the firms depends
on the quality of debtors.

CREDIT SALES
DEBTORS TURNOVER RATIO = ----------------------------------------------------------
AVERAGE DEBTORS

AVERAGE DEBTORS
AVERAGE COLLECTION PERIOD = ----------------------------------------------------X 12
CREDIT SALES

The average number of days for which books debts remain outstanding is called the average
collection period.

ASSETS TURNOVER RATIO :
Assets are used to generate sales. Therefore, a firm should be manage its efficiently to
maximize sales.

SALES
NET ASSETS TURNOVER RATIO = --------------------------------------------------------
CAPITAL EMPLOYED




SALES
TOTAL ASSTES TURN OVER RATIO = ------------------------------------------------------
TOTAL ASSETS

This ratio shows the firms ability in generating sales from all financial resources
committed to total assets.

SALES
FIXED ASSETS TURNOVER RATIO = ------------------------------------------------------
FIXED ASSETS


SALES
CURRENT ASSETS TURNOVER RATIO = --------------------------------------------------
CURRENT ASSETS


CREDIT PURCHASES
CREDITORS TURNOVER RATIO = ---------------------------------------
CREDITORS



CREDITORS
AVERAGE PAYMENT PERIOD = -----------------------------------------
CREDIT PURCHASES


PROFIT ABILITY RATIO:
Profits are essential creditors and owners are also interested in
the profitability of the firm. Creditors want to get interest and repayment
of debt regularly. Owners want to get reasonable return on their
investment.
Generally two major types of profitability ratio are calculated.
a) Profitability in relation to sales.
b) Profitability in relation to investment.
Note : Operating profit is nothing but E.B.I.T

GROSS PROFIT
a. GROSS PROFIT PERIOD = -----------------------------------X100
SALES

NET PROFIT
b. AVERAGE PAYMENT PERIOD = --------------------------X100
SALES

E.B.I.T
c. AVERAGE PAYEMENT PERIOD = ------------------------X100
SALES
PROFIT BEFORE TAX
d. RETURN ON INVESTMENT = ------------------------------------
CAPITAL EMPLOYED


E.B.I.T
e. EARNING POWER RATIO = ---------------------------------X100
TOTAL ASSETS
P.A.T
f. EARNING POWER RATIO = --------------------------------X100
NET WORTH
P.A.T
g. RETURN TO TOTAL EQUITY = ---------------------------X100
NET WORTH
P.A.T-PREFERENCE DIVIDEND
h. EARNING PER SHARE = ---------------------------------
NO. OF EQUITY SHARES

DIVIDEND DECLARED
i. DIVIDEND PER SHARE = ---------------------------------
NO. OF EQUITY SHARES
D.P.S
j. DIVIDEND PAY OUT RATIO = ---------------------------X100
E.P.S
M.P.S
11. DIVIDEND PAY OUT RATIO = ----------------------X100
E.P.S



D.P.S
12. DIVIDEND PAY OUT RATIO = -----------------------X100
M.P.S
E.P.S
13. DIVIDEND PAY OUT RATIO = ------------------------------X100
M.P.S
INTRODUCTION TO FINANCE:
Finance is a specialized functional field found under the general
classifications of business administration. The term finance can be
defined as the management of the plant money, through an organization
whether it is a corporation bank, government agency etc., Finance
concern itself it the actual finance can be differentiated from accounting
and economics. Accounting is concerned with the recording, reporting
and measuring of business transactions, where as finance uses the
information provided by accounting system it make decisions to help
organization to achieve the allocation of resources in a society. It studies
transactions among people involving goods and services with or with out
exchanges of money

Individual business face problems dealing with acquisition of
funds to carry on their activities and in the determination of optimum
methods of employing funds, in comparative market place, businessmen
must actively manage their funds to achieve their goods. The financial
tools help the manager determine which source offer the lowest cost of
funds and which achieve will provide the greatest return on investment


capital. A successful business manager uses a good orientated financial
structure.

The financed performs certain tasks that help to achieve its operating
objectives the important goals of financial management are:

WEALTH MAXIMIZATION OF SHARE HOLDERS
LIQUIDITY PROFITABILITY OF THE FIRM.
FUNCTIONS OF FINANCIAL MANAGEMENT:
In the content of achieving the goals like maximization
of risk, liquidity profitability, wealth maximization ,
financial managers perform several tasks in several area.
The total functions of finance or financial management
can be divided into four different groups.
Liquidity functions
Profitability functions
Managing functions
Managing assets





I. Liquidity Functions:
In seeking sufficient liquidity to carrying the
firms activities, the financial manager
performs the following tasks.
FORE CASTING CASHFLOW : Successful day
to day operation require the firm to be able to forecast the resource
and timing of inflow from customers and use them to pay its creditors
and suppliers.
RAISINGFUNDS: A firm can receive its finance
from a variety of sources. A financial manager
identifies the amount available from each
source and the periods when the funds are
needed and they the manager takes steps to
ensure that the funds actually be available and
committed to the firm.
Managing the flow of internal funds: A large
firm has a number of different bank accounts
for various operating divisions or for special
purposes. The money that flows among these
internal a\c s should be carefully monitored by
continuously checking the cash levels in the
headquarters and each operating divisions,


accounts, the manager can achieve a high
degree of liquidity with minimum borrowing.
II. PROFIT ABILITY FUNCTION:
With respect to profitability important financial functions
are:
Cost control: a firm should have detailed cost accounting
system to monitor expenditure in the operational of areas of
the firms. Data are feed into the system on a daily basis and
computer report containing important information activity
are printed. The financial manager monitors and measures
the amount of money spent or committed by the company.
The philosophy and approach to the pricing policy are
critical elements in Cos marketing effort, image and sales
trend. Determination of appropriate profit is the joint
decision of marketing and finance managers. The marketing
manager provider information on how differing prices will
effect demand in the market and the firms competition
position. The financial manager supply important
information about cost changes in cost at varying levels of
production and the profit, managers need to carry on the
business successfully.
To estimate profits from future sales, the firm should be
aware of current costs, likely increases in costs and likely
changes in the ability or the firm to sell its products at


planned prices. Hence costs and sales are forecast, the data is
arranged in a financial format to calculate the expected
profits. Before funds are committed to new projects, the
expected profits must be determined and evaluated to know
whether the profits justify the initial expenditure.
III. MANAGEMENT FUNCTIONS:
The management functions of a financial manager include.
Managing assets: Assets are the resources by which the
firm is able to conduct business. The functions of asset
management recognize the decision making role of financial
manager asset management includes to know the total
amount of the asset needed by the firms to carry out its
operation. To determine in the composition of min of assets
that will help the firm to achieve its goals. This suit of
efficient assets management results in converting idle
equipment to cash improves liquidity. Reducing costs
improving profitability.
Managing funds: Funds may be viewed as the liquid asset
of firms. The team includes cash held by the firm money
borrowed by the firm. The money gained from purchases of
common and preferred stock. The financial manager is
responsible for having sufficient funds for the firm to
conduct its business and bills and must locate money to
finance receivables and inventories make arrangements for


the purchase of assets and identify the source of long term
financing cash must be available to pay dividends. The
management of funds has both liquidity and profitable
aspects. If the firms funds are inadequate the firm makes
default on repayment principals of bill interest and debt are
repayment of principle when loan is due. If a firm does not
carefully choose its financing methods. It may pay excessive
interest cost with a sub solvent decline in profits.
Financial statement analysis:
Meaning of financial statement
Financial statements (also know as financial reports,
financial accounts, financial (financial accounts, published
accounts or annual accounts) an organized collection of
financial an organized collection or financial data. Under
taken according to logical and consistent accounting
produced, for the purpose of presenting a periodical firm,
such as the operating results (i.e. profits) of the firm for a
particular moment of time. In the other purpose of depicting
the financial health of a business in terms of profits, position
and prospects as in a certain data remain short, they are
statements prepared on a certain data for giving an
accounting picture of a firms operations and financial
positions.


The term finance statement assured in according
includes at least two basic statements they are:-
The position statement or the balance sheet prepared by a
concern at the end of every financial year.
Income statement or profit and loss statement or profit and
loss a\c is, generally considered to be the at most useful at all
the financial statements. It is a statement which explain what
has happened to a business as a result of operations between
two balance sheet (i.e., compares) or the revenue (i.e. sales
and then earnings) of a concern with the cost incurred in
earning these revenues (i.e. cost of goods sold,
administration selling and distribution and other expenses )
and there by reveals the net profit (i.e. the excess or
revenues) of the enterprise for an accounting year . in short,
it is a statement which includes the results of the operations
(i.e., the net profit or net loss ) of an enterprise for a year.
A balance sheet on a position statement is a statement which
indicate the financial position of a business as on particular
data, i.e., as on the last data of the accounting year. In short,
it is a statement of assets and liabilities of business as at the
end of a financial year. As a business as at a specified the
financial position of a business as at a specified moment of
times (i.e., as on a particular dates us all, on the last date of
the accounting year). It can be regarded as a snapshot of


financial position of the business has at a particular moment
of time.
Analysis and interpretation of financial statements.
Financial statements are indicates of two significant, factors
profitability Financial soundness.
Analysis and interpretation of information continued in
analysis and interpretation of information continued in the
income statement and balance sheet so as to afford full
diagnosis of the profitability and financial soundness of the
business. The term analysis means methodical
classification of the data, given in the financial statements
will not help one unless they are put in a simplified form, the
term interpretation means explaining the meaning and
significance of the simplified data. However, the both
analysis and interpretation are complementary to each other.
According to Myers Financial statements Analysis is
largely a study of the relationship among the various
financial factors in a business as disclosed by a single set of
statement and a study of the trend of these factors as shown
in a series of statement.





Types of financial analysis:
Financial Analysis can be classified into different
categories depending upon:-
The material used.
The modus operandi of analysis.
On the basis of material used.
According to this, financial analysis can be of two type:
a) .External Analysis:-
This is performed by outsides to firm, such as creditors,
stockholder et., it makes use of existing financial
statement and involves limited access to confidential
information.
b) .internal analysis:-
The corporate financial accounting department
performs this, which is more detailed then external
analysis. These departments are able to produce a
more accurate and timely analysis of the firms
strength and weakness.





2. On the basis of modus operand:-
According to this mode financial can be
horizontal analysis:
a. Horizontal analysis:
In this case, financial statements for a
number of years in reviewed and
analyzed. The current year figures are
compared with standard or base year. The
analysis statement usually contained
figures for two or more years and changes
an shown regarding each item from the
base year, usually in the form of
percentage which gives the management
considerable insight into levels and areas
of strength and weakness.
b. Vertical analysis:-
It is known as state analysis as it is
frequently used for referring to ratios
developed on the data for the accounting
period. In case of this type of analysis a
study is made in respect of the
quantitative relationship of various items
in the financial statements on a particular


data. For example, the ratios of different
item of costs for a particular period such
analysis is useful in comparing the
performance of several companies in the
same group or divisions or divisions in
the same company.
TOOLS OF FINANCIAL ANALYSIS:
The following are the important tools or
methods of financial analysis.
1. Comparative financial statements:
Comparative financial statements are those statements,
which have been designed in such as way so as to provide
time perspective to the consideration of various elements
of financial position, embodied in such statements. In
those statements figures for two or more periods are
placed side by side to facilitate comparison. Both the
income statement and balance sheet can be prepared in the
form of comparative financial statements.
2. Common size financial statements
Common size financial statements are those in which
figures are converted into percentage to same common
basis. In the income statement the sale figures assumes to


be 100 and all the figures are expressed as a percent of
sales. Similarly in the balance sheet the total of assets of
liabilities in taken as 100 and all figures are expressed as a
percent of his total.




















CHAPTER-V









LIQUID RATIOS:
CURRENT ASSETS
CURRENT RATIO = -------------------------------
CURRENT LIABILITIES

YEAR CURRENT
ASSETS
CURRENT
LIABILITIES
RATIO
2007-2008 151561962 32756141 4.62
2008-2009 121220056 34442496 3.51
2009-2010 165831152 37476822 4.42
2010-2011 203786650 65106421 3.13
2011-2012 221393111 79964713 2.76

INTERPRETATION:
The above table shows current ratio during the year
2007-08 to 2011-12.
In the year 2007-08 the ratio was 4.62 and decrease
to 3.51 in the year 2008-09 thereafter increase up to 4.42
in 2009-10 in the year 2010-11 decrease to 3.13 and a
little bit decreased in the year 2011-12 is 2.76.













0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2007-08 2008-09 2009-10 2010-11 2011-12
CURRENT RATIO GRAPICAL REPRESENTATION
CURRENT RATIO


QUICK RATIO:
QUICK ASSETS
QUICK RATIO = -----------------------------
CURRENT LIABILITIES

YEAR QUICK
ASSETS
CURRENT
LIABILITIES
RATIO
2007-2008 114678372 32756141 3.50
2008-2009 84228928 34442496 2.44
2009-2010 123273772 37476822 3.28
2010-2011 124773149 65106421 1.91
2011-2012 135011715 79964713 1.68

INTERPRETATION:
The above table shows quick ratio during the year 2007-08 to
2011-12.
In the year 2007-08 the ratio was 3.50 and decreased to 2.44 in
the year 2008-09 thereafter increase up to 3.28, in the year 2009-10 then
decrease to 1.91 in the year 2010-11 and again decreased to 1.68 in the
year 2011-12.






YEARS








0
0.5
1
1.5
2
2.5
3
3.5
4
2007-08 2008-09 2009-10 2010-11 2011-12
QUICK RATIO GRAPICAL REPRESENTATION
QUICK RATIO


ABSOLUTE LIQUIDITY RATIO:

CASH+MARKETABLESECURITIES
ABSOLUTE LIQUIDITY RATIO = ---------------------------------
CURRENT LIABILITIES

YEAR
CASH AND
MARKETABLE
SECURITIES
CURRENT
LIABILITIES
RATIO
2007-2008 30084960 32756141 0.91
2008-2009 9677420 34442496 0.28
2009-2010 16964810 37476822 0.45
2010-2011 8432820 65106421 0.12
2011-2012 14571273 79964713 0.18

INTERPRETATION:
Though receivables are generally more liquid than inventories there
may be debts having doubts regarding their real stability in time. So to get
idea about the absolute liquidity of a firm, both receivables and
inventories are excluded from current assets only absolute liquid assets
such as cash in hand, cash in bank and realizable securities are taken into
consideration the desirable norm for this ratio is 1:2.






YEARS








0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2007-08 2008-09 2009-10 2010-11 2011-12
ABSOLUTE LIQUIDITY RATIO


DEBT EQUITY RATIO :
TOTAL DEBT
DEBT EQUITY RATIO = --------------------
SHARE HOLDER EQUITY
YEAR TOTAL
DEBT
SHARE
HOLDERS
DEBT
RATIO
2007-2008 252860703 123386128 2.04
2008-2009 336720486 143286568 2.34
2009-2010 370890084 175279066 2.11
2010-2011 378648190 187472324 2.01
2011-2012 329281843 187472324 1.75

INTERPRETATION:
The above table shows debt equity ratio during the year 2007-08 to
2011-12.
In the year 2007-08 the ratio was 2.04 and increase to 2.34 in the year
2008-09 thereafter decrease up to 2.11 in the year 2009-10 and the year
2010-11 little bit decrease to 2.01 and again decreased to 1.75 in the year
2011-2012.








YEARS









0
0.5
1
1.5
2
2.5
2007-08 2008-09 2009-10 2010-11 2011-12
DEBT EQUITY RATIO


PROPRIETARY RATIOS:
OWNER FUNDS
PROPRIETARY RATIO = --------------------------
TOTAL ASSETS

YEAR OWNER
FUNDS
TOTAL
ASSETS
RATIO
2007-2008 123386128 435310173 0.28
2008-2009 143286568 544170251 0.26
2009-2010 175279066 613251473 0.28
2010-2011 187472324 668417093 0.28
2011-2012 187472324 663359720 0.28

INTERPRETATION:
The above table shows current ratio during the year
2007-08 to 2011-12.
In the year 2007-08 the ratio was 0.28 and decrease to
0.26 in the year 2008-09 thereafter increase up to 0.28 in the
year 2009-10 and the year 2010-11 and 2011-12 on change.





YEARS










0.25
0.255
0.26
0.265
0.27
0.275
0.28
0.285
2007-08 2008-09 2009-10 2010-11 2011-12
PROPRIETARY RATIOS


INVENTORY TO WORKING CAPITAL RATIO:
INVENTORY
INVENTORY TO WORKING CAPITAL RATIO = ----------------------------------------------
WORKING CAPITAL
YEAR INVENTORY WORKING
CAPITAL
RATIO
2007-2008 36883590 118805821 0.31
2008-2009 36991128 86777560 0.42
2009-2010 42557380 128354330 0.33
2010-2011 79013501 138680229 0.56
2011-2012 86381396 141428398 0.61

INTERPRETATION:
The above table shows inventory working capital ratio
during the year 2007-08 to 2011-12.
In the year 2007-08 the ratio was 0.31 and increase to 0.42
the year 2008-09 thereafter decrease up to 0.33 in the year 2009-
10 and in the year 2010-11 increase to 0.56 and a little bit
increased to 0.61 in the year 2011-12.








YEARS








0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2007-08 2008-09 2009-10 2010-11 2011-12
INVENTORY TO WORKING CAPITAL RATIOS


FIXED ASSETS TO NET WORTH RATIO:
FIXED ASSETS
FIXED ASSETS TURNOVER RATIO = -----------------
NET WORTH

YEAR FIXED
ASSETS
NET
WORTH
RATIO
2007-2008 283748211 123386128 2.29
2008-2009 422950195 143286568 2.95
2009-2010 447420321 175279066 2.55
2010-2011 464630443 187472324 2.47
2011-2012 441966609 187472324 2.35

INTERPRETATION:
The above table shows fixed assets turnover ratio
during the year 2007-08 to 2011-12.
In the year 2007-08 the ratio was 2.29 and increase to
2.95 in the year 2008-09 thereafter decrease up to 2.55 in
the year 2009-10 in the year 2010-11 little bit decrease to
2.47 and again decreased to 2.35 in the year 2011-12.




YEARS










0
0.5
1
1.5
2
2.5
3
3.5
2007-08 2008-09 2009-10 2010-11 2011-12
FIXED ASSET TO NET WORTH RATIOS


CURRENT ASSETS TO NET WORTH:
CURRENT ASSETS
CURRENT ASSETS TO NET WORTH = ---------------
NET WORTH


YEAR CURRENT
ASSETS
NET
WORTH
RATIO
2007-2008 151561962 123386128 0.12
2008-2009 121220056 143286568 0.84
2009-2010 165831152 175279066 0.94
2010-2011 203786650 187472324 1.08
2011-2012 221393111 187472324 1.18

INTERPRETATION:
The above table shows current ratio during the year 2007-08
to 2011-12.
In the year 2007-08 the ratio was 0.12 and increase to 0.84 in the
year 2008-09 thereafter increase up to 0.94,in the year 2009-10 in the
year 2010-11 increase to 1.08 and a little bit increased in the year 2011-
12 is 1.18.







YEARS








0
0.2
0.4
0.6
0.8
1
1.2
1.4
2007-08 2008-09 2009-10 2010-11 2011-12
CURRENT RATIO GRAPHICAL
REPRESENTATION


DEBT TURNOVER RATIO:
TOTAL SALES
DEBT TURN OVER RATIO = ----------------------------
CLOSING DEBTS

YEAR TOTAL
SALES
CLOSING
DEBTS
RATIO
2007-2008 382407105 29511501 12.95
2008-2009 464092335 38665202 12.00
2009-2010 669604507 62552967 10.70
2010-2011 858364608 65060968 13.19
2011-2012 1172759908 86234970 13.59

INTERPRETATION:
The above table shows debt equity ratio during year 2007-08
to 2011-12.
In the year 2007-08 the ratio was 12.95 and decrease to 12.00
in the year 2008-09 thereafter decrease to 10.70 in the year
2009-10 and the year 2010-11 increase to 13.19 and a little bit
increased to 13.59 in the year 2011-12.





YEARS









0
2
4
6
8
10
12
14
16
2007-08 2008-09 2009-10 2010-11 2011-12
DEBT TURN OVER RATIO


NET TURN OVER RATIO:
TOTAL SALES
NET TURN OVER RATIO = ------------------------------
\ NET ASSETS


YEAR TOTAL
SALES
NET
ASSETS
RATIO
2007-2008 382407105 123386128 3.09
2008-2009 464092335 143286568 3.23
2009-2010 669604507 175279066 3.82
2010-2011 858364608 187472324 4.57
2011-2012 1172759908 205328892 5.71

INTERPRETATION:
The above table shows debt equity ratio during the year 2007-08 to
2011-12.
In the year 2007-08 the ratio was 3.09 and increased to 3.23 the year
2008-09 thereafter increase up to 3.82 in the year 2009-10 and year
2010-11 increase to 4.57 and again increased to 5.71 in the year 2011-12.






YEARS









0
2
4
6
8
10
12
14
16
2007-08 2008-09 2009-10 2010-11 2011-12
NET ASSETS TURN OVER RATIO


WORKING CAPITAL TURNOVER RATIO:
SALES
WORKING CAPITAL TURNOVER RATIO = ----------------------------
WORKING CAPITAL


YEAR SALES NET
WORKING
CAPITAL
RATIO
2007-2008 382407105 118805821 3.21
2008-2009 464092335 86777560 5.34
2009-2010 669604507 128354330 5.21
2010-2011 858364608 138680229 6.18
2011-2012 1172759908 141428398 8.29

INTERPRETATION:
The above table shows working capital turnover ratio during the
year 2007-08 to 2011-12.
In the year 2007-08 the ratio was 3.21 and increased to 5.34 in
2008-09 thereafter decrease up to 5.21 in the year 2009-10 and the year
2010-11 increase to 6.18 and increase to 8.29 in the year 2011-12.








YEARS






0
1
2
3
4
5
6
7
8
9
2007-08 2008-09 2009-10 2010-11 2011-12
WORKING CAPITAL TURN OVER RATIO


NET PROFIT RATIO:
NET PROFIT
NET PROFIT RATIO = ---------------------X100
SALES


YEAR NET
PROFIT
SALES RATIO
2007-2008 5236531 382407105 0.01
2008-2009 7530440 464092335 0.01
2009-2010 4202298 669604507 0.006
2010-2011 4518258 858364608 0.005
2011-2012 18484568 1172759908 0.01

INTERPRETATION:
The above table shows net profit ratio during year 2007-08 to
2011-12.
In the year 2007-08 the ratio was 0.01 and same in 2008-09
thereafter decrease to 0.006 in the year 2009-10 and the year 2010-11
little bit decrease to 0.005 and increased to 0.01 in the year 2011-12.








YEARS






0
0.002
0.004
0.006
0.008
0.01
0.012
2007-08 2008-09 2009-10 2010-11 2011-12
NET PROFIT RATIO


FIXED ASSETS TURNOVER RATIO :
SALES
FIXED ASSETS TURNOVER RATIO = -----------------
FIXED ASSETS


YEAR SALES FIXED
ASSETS
RATIO
2007-2008 382407105 283748211 1.34
2008-2009 464092335 422950195 1.09
2009-2010 669604507 447420321 1.49
2010-2011 858364608 464630443 1.84
2011-2012 1172759908 441966609 2.65

INTERPRETATION;
The above table shows fixed assets turnover ratio during year 2007-
08 to 2011-12.
In the year 2007-08 the ratio was 1.34 and decreased to 1.09 the year
2008-09 thereafter increase up to 1.49 in the year 2009-10 and in the year
2010-11 little bit increase to 1.84 and again increase to 2.65 in the year
2011-12.









YEARS






0
0.5
1
1.5
2
2.5
3
2007-08 2008-09 2009-10 2010-11 2011-12
FIXED ASSETS TO NET WORTH RATIO









CHAPTER-VI













FINDINGS
1. In the current year the companys current assets
position exceeds the ideal position. The company
need not maintain this much of current assets
(favourable C.A Ratio 2:1)
2. The companys cash reserves are very low when
compared with industrial standards.
3. According to the Debt Equity ratio I came to
conclusion that the company is not utilizing outside
debt in other words the companys Debt Equity
ratio is not optimum, which increase market value
of the firm and decrease cost of capital, outside
funds are more that the capital employed.
4. According to the proprietary ratio the companys
outside debt are reduced year by year.
5. The companys attitude towards credit sales are
favourable.
6. During the year losses took place due to decrease in
sales and heavy fixed expenses.
7. Every company has to finance its current assets at
least 25% from fixed capital sources. This company


did not fulfill Tandon Committee
recommendations.
8. During the year the company achieved its budget
and estimates.
9. All the accounts are maintained according to
provisions.
10. The power consumption per unit of production
is reduced during the year when compared with
previous year.
11. The company has set up a research and
development laboratory and the technology utilized
is the most latest available in the industry.










SUGGESTIONS
1. The company has to reduce current assets to
release debt capital. Because the current assets
earn nothing, with this amount the company can
make a good investment project.
2. To meet day to day obligations the company has
to maintain certain level of cash reserves.
3. The company has to utilize Financing Decision
to optimize debt equity ratio.
4. Current assets are higher than the current liability
the favourable current assets ratio is 2:1.
5. To avoid losses the company has to adopt.
a) Cost control technique at various cost
centers (or) at key positions.
b) The company has to change sales
strategies and to adopt advertisement
policies.
6. The company has to install a new stand by
generation equipment to utilize the power in the
most efficient manner.



BIBILOGRAPHY

1. FINANCIAL MANAGEMENT
- KHAN & JAN
2. FINANCIAL MANAGEMENT
- I.M.PANDEY
3.PRINCIPLES OF FINANCIAL MANAGEMENT
- N.MAHESWARI
4.ANNUAL REPORT OF S.R.P.B.(P) Ltd
RAJAHMUNDRY