CHAPTER-I

INTRODUCTION

FINANCIAL STATEMENT ANALYSIS

Financial statement is an organized collection of data according to logical and
consisted accounting procedures. Its purpose is to convey an understanding of
some financial aspects of a business form. It may reveal a series of activities over
a given period of time, as in the case of an income statement.
The focus of the financial analysis is on key figures in the financial statements and
the significant relationships exist between them. The analysis of financial
statements is a process of evaluating relationships between component parts of
financial statements to obtain a better understanding of the firms position and
performance.

Financial Analysis:
Financial analysis is the process of identifying the financial strengths and
weakness of the firm by property establishing relationships between the item of
the balance sheet and the profit and loss account. Financial analysis can be
undertaken by management of the firm, or by parts outside the firm.

USERS OF FINANCIAL ANALYSIS:

Management
Trade creditors
1

 Investors
Government
Others
Management:
Management of the firm would be interested in every aspect of the financial
analysis. It is their overall responsibility to see that the resources of the firm are
used most effectively and efficiently and that the firms condition is sound.
Trade Creditors:
The trade creditors are to be paid in a short term solvency of the concern. The
current ratio and acid test ratio will enable the creditors to assets the short term
solvency position of the concern.
Investors:
The Investors are interested their money in the firms shares, are not concerned
about the firms earnings. They restore more confidence in those firms that show
steady growth in earnings. As such, they concentrate on the analysis of the firms
present and future profitability. They are also interested in the firms financial
structure to the extent it influences the firms earning ability and risk.
Government:
The financial statements are used to asss tax liability of business enterprise. These
statements enable the government to find out whether the business is following
various regulations or not.
Others:
Trade associations, stock exchange and public at may also analyze the financial
statements to judge the financial position of different concerns.
Definition

According to Myres Financial statement analysis is largely is a study of the

Relationship among the various financial factors in a business as disclose by a
single set of statement and a study of the trend of these factors as show in a series
of statements.
Financial statements are indicators of the two significant factors:
1. Profitability
2. Financial Soundness
Analysis and interpretation of financial statements therefore refers to such a
treatment of the information contained in the income statement and the 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. The term interpretation means explaining the meaning and
significance of the data so simplified.
Types of financial Analysis
Financial analysis can be classified in to different categories depending on the
basis of materials used. According to this basis financial analysis can be of two
types.
a) External Analysis
Those who are outsider for the business do this analysis. The outsiders include
investors, credit agencies. Government agencies and other creditors who have no
access to the internal records of the company. These persons mainly depends upon,
the published financial statements. Their analysis serves only a limited purpose.
The position of this analysis has improved in recent times on account of increased
governmental control over companies and governmental regulations requiring
3

more detailed disclosures of information by the companies in their financial

statements.
b) Internal analysis: This analysis is done by persons who have access to the
books of account and other information to the books of accounts related to the
business. Executives and employees of the organization or by officers appointed
for this purpose by the government or the court under powers vested in them can
therefore do such an analysis. The analysis in done depending upon the objective
to be active depending upon the objective to be achieved through this analysis.
On the basis of modus operandi according to this, financial analysis can also be
two types:
a) Horizontal Analysis
In case of this type of analysis financial statements for a number of years are
reviewed and analyzed. The current years figures are compared with the standard
or base year. The analysis statement usually contains figures for two or more years
and the changes are shown regarding each item from the base year usually in the
form of percentages. Such as analysis given the management considerable insight
into levels and areas of strength and weakness. Since this type of analysis is based
on the date from year to year rather than on one date, it is also termed as Dynamic
Analysis?
b) Vertical Analysis: In case of this type of analysis a study is made of the
quantitative relationship of the various items in the financial statements on a
particular type, such an analysis is useful in comparing the performance of several
companies in the same group, or divisions or departments in the same company.
4

Since this analysis depends on the data for one period, is nor very conductive
financial position. It is also called Static Analysis as it frequently used to ratios
developed on one date or for one accounting period. Tools or Techniques used for
Analysis:
1. Ratio Analysis
2. Method of least Squares (Trend Values)
3. Comparative statement Analysis.
These are explained in bring as follows.
1. Ratio Analysis:
Ratio Analysis is widely used tool of financial analysis. It is defined as the
systematic use of ratio to interpret the financial statements so that the strength and
weakness of a firm as well as its historical performance and current financial
condition can be determined. The term ratio refers to the numerical or quantitative
relationship between two items/ Variable. This relation can be expressed as.
a. Percentages
b. Fractions
c. Proportion of numbers.
Accounting ratios showed the relationship in mathematical terms between two
interrelated accounting figures. This is the most important tool available to
financial analysis for their work.
Ratio analysis is a process of identifying the financial strengths and weakness of
the firm. This may be accomplished either through a trend analysis of the firms
ratios over a period of time or through a comparison of the firms ratios with its
nearest competitors and with the industry averages. The four most important
financial dimensions which a firm would like to analyze are: liquidity, Leverage,
Activity and Profitability.
Nature of Ratio Analysis:
5

A Financial ratio is a relationship between tow accounting numbers. Ratios help to

make a qualitative judgment about the firms financial performance.
Financial Ratio:
Financial Ratio is a relationship between two financial variables. It helps to
ascertain the financial condition of a firm.
Types of financial Ratios:
Liquidity ratios
Leverages ratios
Activity ratios
Profitability ratios
Liquidity Ratio:
Liquidity Ratio measures the firms ability to meet current obligations, and is
calculated by establishing relationships between current assets and current
liabilities.
Leverage ratio:
Leverage ratios measure the proportion of outsiders capital in financing the firms
assets, and are calculated by establishing relationships between borrowed capital
and equity capital.
Activity Ratio:
Activity ratio reflects the firms efficiency in utilizing its assets in generating sales
and is calculated by establishing relationships between sales and assets.
Profitability Ratio:
Profitability ratios measure the overall performance of the firm by deterring the
effectiveness of the firm ingenerating profit, and are calculated by establishing
relationships between profit figures on the one hard, and sales and assets on the
other.
Utility of Ratio Analysis
Assessment of the firms financial conditions and capabilities.
Diagnosis of the firms problems, weakness and strengths.
Credit analysis
Comparative analysis
6

 Time series analysis

Cautions in using ratio analysis
Standards of comparisons
Company differences
Prices level
Different definition
Changing situations
Past data
Standard of Comparison:
Time series analysis
Inter-firm analysis
Industry analysis
Preformed financial statement analysis
Advantages of Ratio Analysis:
1. It helps in analysis of the situation i.e. analysis on the financial situation and
performance.
2. Inter-firm and Inra-firm comparison is both possible on the basis of accounting
ratio
3. Accounting Ratio not only indicates the present position but they also indicate
the cause leading up to the position of a large extent
4. It helps in obtaining best result when ratios for a number of years are put in
tabular form so that the figure for one year can be easily compared with those
of other year
5. It indicates the trend of the change, which helps in preparation of estimates for
the future.
6. They provide simplicity to the complex accounting information presented by
the financial statements
7. They are very helpful to outsiders as well as for internal management
8. It is very helpful to internal managements, discharge of the basic managerial
functions.
9. It also helps in planning, policy making & controlling the activities.
10. They are helpful in establishing the standard casting system.
Limitations of ratio analysis
7

1. Ratio provides only guidelines to the management they are only the means.
However they scratch surfaces and raise question. The limitation of the ratio
may force the management to have detailed investigation of the situation under
question.
2. single accounting ratio is not useful at all unless it is studied with other
accounting ratios
3. They are based only on the quantitative information. Hence, qualitative
information puts limit on the ratios
4. Ratios are subject to arithmetical accuracy of the financial statements.
Moreover financial statement also includes estimated date like provision for
depreciation, bad and doubtful debts etc. hence, result revealed by ratios is
subject to such estimates.
5. Ratios are computed on the basis of financial statements which are historical in
nature.
6. Knowledge of ratios only is meaningless unless it is also found how it is made
up.
7. Lack of homogeneity of data, personal judgment lack of consistency etc. is the
factors which limit the conclusion to be derived on the basis of accounting
ratios.

2. METHODS OF LEAST SQUARES (TREND VALUES)

By the method of lease square, a straight line trend can be fitted to the given time
series of data. It is a mathematical, as well as, analytical method. With its help,
economic and business time series data can be fitted and this helps in forecasting
8

and predicting. The trend line is called the line of best fit. The sum of deviations of
the actual

values of Y and the trend value (Yuck) is 0 and sum of square of

deviations of the actual value and the trend value is the least.

(Y-Yc) = 0 and (Y- Yc) = least. So this method is called the least squares method
or the line of best fit.
The method of least squares cab is used to explain the linear and non linear trend
i.e. a straight line trend or parabolic trend.
The straight line trend or the first degree parabola is represented by the
mathematical equation.
Yc = a + bx
Yc = require trend value
X = unit of time

Here a and b are constants or unknowns.

In the equation for the first degree parabola Yc = a + bx, the values of the
unknown or constants can be calculated by the following two normal equations.
Y

Na +bx

xY =

ax +bX2

the numbers or months for which data are given

When x = 0, the equation will take the form of

Y

Na
9

bx

xY =

bx2

bx2 =

By these equation we can know the values of a and b i.e.

a

Y/N and

xY / x2

the mean value of Y values

rate of change

3. COMPARATIVE STATEMENT ANALYSIS:

Comparative statement is those statements, which have designed in a way, so as to
provide time perspective to the consideration of the various elements of financial
position embodied in such statements. In such statements figures for two or more
periods are placed side by side to facilitate comparison. The two statements are
proposed for comparison. They are comparative income statement and
comparative Balance Sheet.
STATEMENT OF THE PROBLEM
Nowadays due to the policy of the changing government and also due to the
competition in the globalize era, the financial performance of the APS is not
appreciable. Though the company developed well, it could not earn much profit as
like the other private sectors company involved in similar business. There is no
proper instruction from the authorities and from the ministry. Further there is
considerable delay in implementing the new system because of more formalities to
10

change the existing system. The financial performance of the APS should be
analyzed well increase the profit and make the company to compete with others
doing similar business.
SIGNIFICANCE OF THE STUDY:
Every company must consider their liquidity position, profitability and
solvency position and also the main attention should be on smooth working
capital position.
For this analysis the ratios, working capital requirements for the next five
years period to enables meaningful planning for the future.
Researcher worked and applied various tables in relevant ratio from the
data collection in APS Technologies Pvt. Ltd. Researcher giving more
suitable idea to the management and developed the company in various
ways. Researcher analysis some table in statistical approaches of trend line.

11

CHAPTER-II
OBJECTIVES & SCOPES

OBJECTIVES OF THE STUDY:

The study has the following objectives.
To provide a strong theoretical framework for analyzing financial
statements.
To study the growth profile of the company during the study period.
To study the financial position of the company and operation of APS
Technologies Pvt. Ltd.
To appraise financial soundness of the company.
To offer suggestions for improvement in the company.

SCOPE OF STUDY:
The study mainly attempts to analyze the financial performance of the
company selected for the study. The financial authorities can use this for
evaluating their performance in future, which will help to analyze financial
statements and help to apply the resources of the company properly for the
12

development of the company and IT employees to bring overall growth. The

present study attempt to develop a trend analysis model for Sales and Working
Capital and Profit and Loss Accounts. There can be forecasting to evaluate the
overall performance of the APS Technologies Pvt. Ltd. in future.

LIMITATION OF STUDY
1. The Secondary data like annual reports of APS TECHNOLOGIES PVT.
LTD. Is collected from APS Trichy, hints the accuracy of the result of
the study will depends upon the accuracy of data provided by the
company.
2. The study covers only the period of 5 (2006 to 2011)
3. Various techniques, ratio statistical tools used in this study will have its
own limitation.

13

CHAPTER-III
METHODOLOGY
Methods of data collection;Secondary data
The secondary data is derived from the annual reports, Business line and
finance newspapers websites and the internal auditing books of APS
PERIOD OF THE STUDY:
The study covers the time period of 5 years from the financial year 2006-07 and
2010-11.
TOOLS AND TECHNIQUES USED:
To analyze and interpret the financial statements of the study unit the following
tools are used in the study.
1. Ratio Analysis.
2. Trend Analysis. (Least square Method)
3. Comparative statement Analysis
The interpretations are also printed graphically using trend line graphs and
sub-dividing bar diagram.

14

CHAPTER-IV
DATA COLLECTION & DATA ANALYSIS
In this chapter an attempt has been made to analysis how efficiently the
analysis of Financial statement is managed in Bharat Heavy Electricals limited.
Financial tools such as schedule of changes in ratio analysis, least squares,
comparative statements have been used for the purpose of analysis.
The financial statement involves recording classifying and summarizing of various
business transactions. It is prepared for the purpose of presenting a periodical
review or report of the progress made by the concern and deals with the state of
the investment, in the business and result achieved during the accounting period.
Financial statement, income statement and position statement are the outcome of
accounting process.
Ratio analysis is a technique of analysis and interpretation of financial statements.
It is used as a device to analysis and interprets the financial health of a firm.
Analysis of a financial statement with the aid of ratio helps to arrangements in
decision making control.

1) Current Ratio
15

Current ratio may be defined as the relationships between current assets and
current liabilities. It is the most common ratio for measuring liquidity. It is
calculated by dividing current assets by current liabilities. Current assets are those,
the amount of which can be realized within a period of one year. Current liabilities
are those amounts which are payable within a period of one year. A current ratio of
2:1 is considerable ideal.
Current Assets
Current Ratio =
Current liabilities

TABLE 4.1 Current Ratio

(In lacs)
Year
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

Current Assets
13343
16331
21063
27705
36901

Current liabilities
8446
10321
14420
19821
28333

Current Ratio
1.57
1.58
1.46
1.39
1.30

Source: secondary Data

Interpretation
Current ratio during the year 06-07 is the 1.57. In the next year 2007-08 it was
maximum 1.58 and in the year 2008- 09 it was 1.46. In the year 2009-10 the
current ratio is 1.39 and in the last year 2010--11 the current ratio decreased to
1.30.
16

The ideal value of current ratio 2:1, but during the period of study, the current ratio
is lesser than the standard. This shows the current ratio to shows a do down ward
which indicates the inefficiency of the company to meet its current obligations.
CHART NO.1

2) Liquid Ratio:-

17

The term Liquidity refers to the ability of a firm to pay its short term
obligations as and when they become due. The term quick assets or liquid assets
refer current assets, which can be converted into cash immediately. It comprises all
current assets except stock and prepaid expenses. It is determined by dividing
quick assets by quick liabilities.
Liquid Assets
Liquid Ratio =
Liquid Liabilities

TABLE 4.2 Liquid Ratio

(in lacs)
Year
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

Current Assets
10427
12587
21021
27648
36823

Current liabilities
8446
10321
14420
19821
28333

Current Ratio
1.23
1.21
1.45
1.39
1.29

Source: Secondary Data

Interpretation
Liquid ratio during the year 2008-2009 it attains the maximum value of
5.20. In the above year it was slightly reduced to 2006 07 to 1.23. In the next
year, 2007-08 it further decreased to 1.21 and in the next year 2009-10 1.39. In the
last year decreased 20102011 to 1.29.

18

During the period of study, the value of liquid ratio is higher than the ideal value
which indicates the efficiency of the company to meet is immediate requirements.
The overall trend of liquid ratio shows up and down ward trend.

CHART NO.2

3) Proprietary Ratio:
Proprietary ratio relates to the proprietors funds to total assets. It reveals the
owners contribution to the total value of assets. This ratio shows the long time
solvency of the business. It is calculated by dividing proprietors funds by the total
tangible assets.
19

Proprietors Funds
Proprietary Ratio

------------------------------Total Tangible Assets

TABLE 4.3 Proprietary Ratios

(in lacs)

Year

Proprietary Fund

Total

Proprietary

6027
7301
8788
10774
12939

Assets
14483
17498
22354
29344
39528

Ratio
0.41
0.41
0.39
0.36
0.32

2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Source: Secondary Data
Interpretation

Proprietary ratio during the year 2006-07 and 2007-08 it attains the maximum
value of 0.41. In the year2006-07 the proprietary ratio was slightly reduced to
0.39. In the next year, 2009-10 it further reduced to 0.36. During the year 2010-11
it further decreased to 0.32.

CHART NO.3

20

4) Fixed Assets to Net Worth Ratio:

This ratio shows the relationship between fixed assets and proprietors funds. The
purpose of this ratio is to fend out the percentage of the owners fund invested in
fixed assets.
Fixed Assets
Fixed Assets to Net worth Ratio

=
21

-------------------------------

Proprietors funds
TABLE - 4.4 fixed assets to Net worth Ratio
(In lacs)

Year

Fixed asset

Proprietary

Fixed asset to Net

1140
1167
1291
1639
2627

Fund
6027
7301
8788
10774
12939

worth ratio
0.18
0.15
0.14
0.15
0.20

2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Sources: Secondary Data
Interpretation

Fixed asset to net worth Ratio during the year 2006-07 was 0.18. It was slightly
reduced to 0.14 in the 2006-07 year. In the next year 2007-08 and 2009-10 the net
worth ratio 0.15. The same is increased to a maximum of 0.20 in the year 20102011

CHART NO.4

22

5) Net Profit Ratio

Net Profit Ratio establishes a relationship between net profit (after taxes) and
sales. It is determined by dividing the net income after tax to the net sales for the
period and measures the profit per rupees of sales.
Net Profit
Net Profit Ratio

------------------------------- x 100
Sales

TABLE- 4.5 Net Profit Ratios

23

(In lacs)

Year

Net Profit

2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

953
1679
2415
2859
3138

Sales

Net Profit

10336
14,525
18739
21401
28033

Ratio
9.2%
11.6%
12.9%
13.4%
11.20%

Source: Secondary Data

Interpretation
From the table, it is found that the net profit has been fluctuating during the study
period. In the year 2006-07 the net profit ratio was 9.2%. In the year 2007-08 it
was increased to 11.6%. In the next year 2008-09 it was further increased 12.9%.
During the year 2009-10 there was a slight increase to 13.4%. During the year
2010-11 the net profit ratio was 11.20%.

CHART NO.5

24

6) Stock Turnover Ratio:

This ratio Indicates whether investment in inventory is efficiently used or not. It
explains whether investment in inventories in within proper limits or not. It also
measures the effectiveness of the firms sales efforts. The ratio is calculated as
follows.
Cost of goods sold
Stock Turnover

------------------------------Average Stock

Cost of goods sold =

Sales- Gross Profit

25

Average stock

Opening stock + Closing stock

-------------------------------------2

TABLE 4.6 STOCK TURNOVER RATIO

(In lacs)
Year

Cost of goods

Average

Stock

sold
8673
11902
14960
16936
23153

Stock
2919
3653
4971
7097
9350

Turnover Ratio
2.97
3.25
3.00
2.38
2.47

2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Source: Secondary Data
Interpretation

From the table, it is found that the stock Turnover ratio has been fluctuating during
the study period. In the year 2006-07 it was 2.97, it increases during the year
2007-08 was slightly to 3.25. In the year 2008-09 it was 3.00 and decreases to 2.38
in the year 2009-10 and during the year 2010-2011 it was increased to 2.47.
CHART NO.6

26

7) Debtors turnover ratio

The purpose of this ratio is to discuss the credit collector power and policy of the
firm. This ratio is established between account receivable and net credit sales of
the period. The debtors turnover ratio is calculated as follows.
Credit Sales
Debtors Turnover Ratio

-------------------------------

Average Account receivables

Average account receivables

=
27

Total Debtors and B/R

TABLE No.4.7 Debtor Turn over (Rs in lacs)

Year

Sales

Sundry debtors Debtors turnover ratio

2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

Rs
10336
14525
18739
21401
28033

Rs
5972
7168
9695
11975
15976

1.73
2.02
1.93
1.78
1.75

Sources: Secondary Data

Interpretation
From the table, it is found that the Debtor Turnover ratio has been fluctuating
during the study period. In the year 2006-07 it was 1.73, it increases during the
year 2007-08 was slightly to 2.02. In the year 2008-09 it was decreased to 1.93
and decreases to 1.78 in the year 2009-10 and during the year 2010-2011 it was
further decreased to 1.75
CHART NO.7

28

8) Average debt collection period

The average number of days that lapsed between the receipt of the invoice by
customers and the actual payment of the invoice. When measured against the
credit terms obtained from suppliers, average the account period shows the length
of time during which the firm is financing the account receivable either with its
own funds or borrowed funds. The radio may be calculated as follows:

Debtors B/R
Average debt collection period

------------------------------Net Credit sales

29

ABLE - 4.8 Debt Collection Period

(In lacs)
Year
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

Debtors
5972
7169
9695
11975
15976

Credit Sales

Debt Collection

10336
14525
18739
21401
28033

Period
210 days
180 days
188 days
204 days
208 days

Source: Secondary Data

Interpretation
Debt Collection period ratio in the year 06-07 was 210 days. In next year 07-08 it
further reduced to 180 days. In the next year 08-09 it was 188 days. In the next
year 2009-10 it was 204 days. During the years 2010-11 it was 208 days.
From the above it is inferred that the debt collection period shows a fluting
trend, which indicates quick recovery of money from debtors and also indirectly
shows that the management in highly efficient in collecting debts promptly.

CHART NO.8

30

9) Creditors turnover ratio:

It indicates the number of times on the average that the creditors turnover each
year. Creditors turnover ratio indicates the number of items the accounts payable
rotate in a year. It signifies credit period enjoyed by the firm in paying its
creditors. Account payable includes traded creditors and bills payable.
.

Credit Purchases
Creditors Turnover Ratio

------------------------------Average account payable

31

TABLE 4.9 Creditor Turnover Ratios

(In lacs)
Year

Credit Purchase

Average Account

Creditor

payable
2100
284
3538
4424
5852

Turnover ratio
2.32
24.17
2.87
2.67
3.0

2006-2007
4892
2007-2008
6866
2008-2009
10182
2009-2010
11821
2010-2011
17620
Source: Secondary Data

The creditor Turnover ratio during the year 06-07 was 2.32. In the year 07-08 it
was increased to 24.17. In the year 08-09 creditors turnover ratio slightly reduced
to 2.87. In the year 07-08 it was reduced to 2.67. During the year 2010-2011 it was
increased to 3.0
From the above it in inferred that the creditors turnover ratio shows an
upward trend which indicates that the company is highly efficient in making.
Speedy settlements of debts to its creditors.

CHART NO.9

32

10) Average Payment period:

The radio gives the average credit period enjoyed by the firm from its creditors. It
can be computed as follows.
Creditors + B/P
Average Payment period

------------------------------- X 365 (in

days)
Credit Purchase
33

Lower Ratio shows that the creditors being paid promptly. The amount payable
depends upon the purchase policy, the quantum of purchase and suppliers credit
policy.
TABLE 4.10 Average Payment Periods
(In lacs)

Year
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

Credit

Average

Average Payment

Purchase

Creditors

period

4892
6866
10182
11821
17620

2100
284
3538
4424
5852

156 days
15 days
126 days
136 days
121 days

Sources: Secondary Data

The average payment period during the year 2006-07 was 156 days. From the year
2007-08 it was heavily decreased 15 days. In the year 2008-09 average payment
period was 126 days. In the year 2009-10 it was 136 days. This last year 20102011 it was 121 days.

CHART NO.10

34

11) Fixed assets turnover Ratio:

The ratio indicates that extent to which the investments in fixed assets contribute
towards sales. If compared with a previous year, it indicates whether the
investment in Fixed assets has been judicious or not. The ratio is calculated as
follows.
Sales
Fixed assets turnover ratio =

------------------------------Fixed assets
35

TABLE 4.11 fixed asset Turnover ratio

(In lacs)
Year
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Source: Secondary Data

Sales
10336
14525
18739
21401
28033

Fixed asset

Fixed asset

1140
1167
1291
1639
2627

Turnover
9.06
12.44
14.51
13.05
10.67

Interpretation

The fixed asset turnover ratio during the year 2006-07 was 9.06. It is found that
the fixed asset turnover ratio has been fluctuating during the study period. In the
year 07-08 it was 12.44. In the year 08-09 it was 14.51. During the year 2007-08
the fixed asset turnover ratio was 13.05. This, last year 2010-2011 it was decreased
to 10.67.
CHART NO.11

36

12) Capital Turnover Radio:

Managerial efficiency is also calculated by establishing the relationship between
cost of sales or sales with the amount of capital invested in the business. Capital
turnover Ratio is calculated with the help of the following formula.
Sales
Capital turnover ratio

--------------------------------------

Net worth (Or) Proprietors fund

37

TABLE 4.12 Capital Turnover ratios

(in

lacs)
Year

Net worth (or)

2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

Proprietors fund
6027
7302
8789
10775
12939

Sales

Capital Turnover

10336
14525
18739
21401
28033

ratio
1.71
1.98
2.13
1.98
2.16

Sources: Secondary Data

Interpretation
It is inferred from the above table the capital turnover ratio for the year 06-07 was
1.71. In the year 07-08 it was 1.98. Where as in the year was 2008-09 it was
increased to 2.13. In the year 2009-10 it was slightly decreased to 1.98. But during
the year 08-09 it was increased further to 2.16.
CHART NO.12

38

13) Return on total assets:

Profitability can be measured in terms of relationship between net profit
and total assets. It measures the profitability of investment. The overall
profitability can be known by applying this ratio.

Net Profit
Return on total Assets

-------------------------- X100
Table assets
39

TABLE 4.13 return on Total assets

Year

Net Profit

2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

1582
2564
3736
4430
4849

Total asset

Return on Total

14482
17497
22354
29344
39528

assets
10.92
14.65
16.71
15.09
12.26

Source: Secondary Data

Interpretation
From, the above table, it was found that the return on total asset has been
fluctuating during the study period. In the year 2006-07 it was 10.92. In the year
2007-08 it was increased to 14.65. In the year 2008-09 was increased further
increased to 16.71 and in the year 09-10 it was reduced to 15.09. During the year
2010-11 it was slightly decreased to 12.26.

CHART NO.13

40

14) Operating Ratio

Operating ratio is an indicative of the proportion that the cost of sales bears to
sales. Cost of sales includes direct cost of goods sold as well as other operating
expenses. It is an important ratio that is used to discuss the general profitability of
the concern. It is calculated by dividing the total operating cost by net sales.
Cost of goods sold + Net operating expenses
Operating ratio

----------------------------------------------------- X100
Sales

Cost of goods sold = sales = gross profit.

41

TABLE 4.14
TABLE 4.14 operating ratio
(In lacs)
Year

Cost of goods

Sales

Operating ratio

10336
14525
18739
21401
28033

83.9
81.9
79.8
79.1
82.5

sold + operating
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

expenses
8673
11902
14960
16936
23153

Source: Secondary Data

Interpretation
The above table clearly reveals that the Operating ratio for the year 06-07 was
83.9. But in the year 07-08 it was slightly reduced to 81.9 and in the year 08-09 it
was further reduced to 79.8. In the year 09-10 it was 79.1. During the year last
year 2010-2011 it was increased to 82.5.

CHART NO.14

42

15) Assets Turnover Ratio

This ratio is also called as Investments Turnover Ratio. It expresses the
relationship between cost of goods sold / net sales and assetsand investments of a
firm. The figure of net sales can be used where information regarding cost of
goods sold is not available. There are many variants of this ratio accordingly as
there are differences in the concept of assets employed.
Total Assets
Assets Turnover Ratio = ------------------------------43

Sales
TABLE 4.15 Asset turnover ratios
(in lacs)

Year

Fixed

Current

Total

assets

assets

assets

13343
16331
21063
27705
36901

14481
17496
22353
29343
39528

2006-2007
1139
2007-2008
1166
2008-2009
1291
2009-2010
1639
2010-2011
2627
Source: Secondary Data

Sales

Assets
Turnover

10336
14525
18739
21401
28033

ratio
1.4
1.2
1.1
1.3
1.4

Interpretation
From the table, it is understood that the Asset turnover ratio for the 2006-07 was
1.4. In the year 2007-08 it was reduced to 1.2. In the year 2008-09 it was further
reduced to 1.1. In the year 2009-2010 there is slight increase to 1.3.while in the
year 2010-2011 it was slightly increased to 1.4

CHART NO.15

44

16) Gross Profit Ratio:

Gross Profit ratio measures the relationship of gross profit to net sales and is
usually represented as a percentage. This ratio plays an important role in two
management areas. In the area of financial management, the ratio serves as a
valuable indicator of the firms ability to utilize effectively outside sources of
fund. Secondly, this ratio also serves as important tool in shipping the pricing
policy of the firm. This ratio is calculated by dividing gross profit by net sales.
Gross Profit
Gross Profit Ratio

-------------------------- X 100
Net Sales
45

Table 4.16 Gross Profit ratios

(In lacs)

Year

Gross profit

Sales

Gross Profit

2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

1663
2623
3779
4465
4880

10336
14525
18739
21401
28033

Ratio
16.0%
18.0%
20.1 %
20.8 %
17.4 %

Source: Secondary Data

The above table shadows that the Gross profit Ratio during the year 200607 was 16.0%. In the year 2007-08 it was increased to 18.0%. In the following
year 2008-09 increased to 20.1 %. In the year 2009-10 there was slight increases
to 20.8 %. In this last year was 2010-11 the gross profit ratio was 17.4 %

CHART NO.16

46

TABLE 4.17
Comparative Statement for the year
2006-07 to 2007-08
(In lacs)
Particulars

2006-07

2007-08

Absolute
change

Assets:
47

% of change

Fixed Asset
Current asset
Total
Liabilities :

1140
13343
14483

1167
16331
17498

27
2988
3015

2.36
22.39
20.81

Current

7120

8808

1688

23.70

Liabilities
Others
Total

1325
8445

1512
10320

187
1875

14.11
22.20

Sources: Secondary Data

Interpretation
From this table, it is found that the comparative statement for the year has been
fluctuating during the study period. In the year 2006-07 to 2007-08 having fixed
assets was 2.36 & current asset was increased to 22.39. And in the year 2006-07 to
2007-08 current liabilities increased 23.70 and other liabilities it was 14.11.

CHART NO.17

48

TABLE 4.18
Comparative Statement for the year
49

2007-08 to 2008-09
(In lacs)
Particulars

2007-08

2008-09

Absolute

% of change

Assets:

1167

1291

change
124

10.62

Fixed Asset
Current asset
Total
Liabilities :

1633
17498
8808

21063
22354
11898

4732
4856
3090

28.97
27.75
35.08

1512
10320

2522
14420

1010
4100

66.79
39.72

Current
Liabilities
Others
Total

Sources: Secondary Data

Interpretation
From this, table was comparative statement for the year has been fluctuating
during the study period. In the year 2007-08 fixed assets was increased by 10.62.
Current assets were 28.97. And the current liabilities were 35.08.
CHART NO.18

50

TABLE 4.19
51

Comparative Statement for the year

2008-09 to 2009-10
(In lacs)

Particulars

2008-09

2009-10

Absolute

% of
change
26.95

Assets:

1291

1639

change
348

Fixed Asset
Current asset
Total
Liabilities :

21063
22354
11898

27705
29344
16576

6642
6990
4678

31.53
31.26
39.31

Current Liabilities
Others
Total

2522
14420

3244
19820

722
5400

28.62
37.44

Sources: Secondary Data

Interpretation
In the year comparative statement from the 2008-09 to 2009-10. The fixed assets
was increased by 26.95 while the Current assets was increased by 31.53 and
current liabilities by 39.31.

CHART NO.20

52

TABLE 4.20
53

Comparative Statement for the year

2009-2010 to 2010-2011

Particulars

2009-10

2010-11

Absolute

% of change

Assets:

1639

2627

change
988

60.28

Fixed Asset
Current asset
Total
Liabilities :

27705
29344
16576

36901
39528
23357

9196
10184
6781

33.19
34.70
40.90

3244
19820

4976
28333

1732
8513

53.39
42.95

Current
Liabilities
Others
Total

In the year comparative statement from the 2009-2010 to 2010-2011. The above
table clearly reveals that the was tremendous increase in the fixed asset to 60.28.
In the same year current asset was increased by 33.19 and the current liabilities
were by 40.90.

CHART NO.20

54

Method of Least square:

TABLE 4.21
55

Fitting the straight Line Trend To sales (Rs. In Lacs)

Year
2006-07
2007-08
2008-09
2009-10
2010-11
N=S

Y (Sales)

X (year

4136
5034
5541
6471
7750
y=28932

codes)
-2
-1
0
1
2
x=0

X2
4
1
0
1
4
2
x =10

Xy

values Yc
-8272
953.4
-5034
3369.9
0
5786.4
6471
8202.9
31000
10619.4
zy= 24165 yc=28932

Interpretation
The equation of straight Line Trend is
yc

= a+ lex

since x = 0
a= Y/N

le = x7/x2
xy=24165 N=5 x2=10

y = 28932

Substituting the values, we get

A

28932/5

5786.4

24165/10

2416.5

The Linear trend for sales by the method of least squares is

For 2009-10 x would be 3
Hence y 2010

For 2010 11

5786.4 + (2416.5 (3)

5786.4 + 7249.5

13035.9 (in Lacs)

x would be 4
56

Trent

Hence y 2011=

5786.4 + (2416.5 (4) )

=

5786.4 + 9666

15452.4 (in lacs)

Forecasted value
Year
Sales

2012
13035.9

2013
15452.4

(In Lacs)

CHAPTER-V
FINDINGS
FINDINGS
Current ratio shows a document trend indicating the company not able to fulfill
current obligations furthers this also indicate that liquidity position of the company
is less satisfactory.
57

In all the five years the current ratio is less than the ideals of 2. Creditors term
over ratio shows an upward trend and indicates better credit management.
In all the five years the liquid ratio is higher than the ideal ratio of 1 Common size
financial statements clearly shoes the firm allocates half of the total current assets
to debtor.
The firms debt collection period have more than 180days it increased the debt
collection period year by year. It shows firms liberal debt collection policy.
2. Fixed assets turnover was 11% in the year 2010-11.
3. Capital turnover ratio was 2.16 in the year 2010-11.
4. Return on total assets that decreased from 15.09 in the year 2009-2010 to 12.26
in the 2010-2011.
5. Operating ratio has increased from 79.1 in the year 07-08 to 82.5 in the year
2010-11
6. Asset turnover ratio was 1.4 in the year 2010-11.
7. Gross profit ratio has come down from 21% in year 2009-2010 to 17% in
2010-11.
8. Sales show the increasing trend at the rate in every year.

58

CHAPTER-VI
RECOMMENDATIONS
The current ratio of the company is below the standard ratio in all the 5 years
under study, Hence it should be improved at least to the standard.
The debt collection period is more than 180 days which is to be reduced or the
debt collection policy of the company is to be changed.
59

Suitable training may be imparted to all the executives including laborers as and
when they are recruited.
The gross profit of APS has to be increased; this can be done by taking steps to
reduce the cost of sales, which have its own affect over the gross profit. As the
consumption of raw materials holds a wider part in the cost of sales. Researcher
who is in the hands of the company to adopt consistent pricing policy regarding
raw materials which ultimately reduce the cost of sales & which in turn improves
the gross profit in the subsequent years.
The company may take one of the measures for improving more profits; sale
should be enhanced from into end through innovative marketing techniques. In a
competitive business world, unless & other wise aggressive it is very difficult to
achieve its required sales.
The concern must take measures to avoid dead stock which has an adverse.
Effect over the liquidity of the concern. The concern is required to develop an
effective inventory management system.
Sales are to be increased to keep with increased in fixed Assets in order improve
its fixed Assets turnover ratio.

60

CHAPTER-VII
CONCLUSION
APS Technologies units buying in India come under the purview of
NAVARATNA units. There are 14 more APS Technologies units / divisions. Of
this APS Technologies limited Delhi is one the unit and it earns more profit for
every year continuously.

61

The company has been successful in meeting the demanding requirements of not
only in India but also international markets in terms of complicity of work as well
as Technology etc. APS has over the year established its reference in to700
countries across the world. This unit gives more employment i.e. to thousands and
thousands of workers. It gives more protection and safety to the staff working in it
besides more concentration to the welfare of the workers.
APS is developing corporate social responsibility such as self Employment
generation, Environment protection, Education Health management and medical
aids and so an. Its focus attention is on 56 adopted villages having nearly 80000in
habitations in addition to financial assistance.
Finally, I pray God requesting to develop the unit more and in day by day. APS
should run in successful manner in future also.

62