A

PROJECT REPORT
ON

RATIO ANALYSIS

FOR

ICON INFOTECH LTD.

Mr. PRATIK VIRAJ KHATU

Under the guidance of

Prof. Mrs. ANAGHA GOKHALE

Submitted to
 ACKNOWLEDGMENT

It is my greatest pleasure to acknowledge sincere gratitude towards Mr. S.

R. Deshmukh (HR Manager) who gave me a good opportunity to do my project in the

ICON INFOTECH ltd.

I am also grateful to Mr. Nilesh Jangam (HR Officer), Nitin Jathar

(Commercial Manager) and other officers who are working in accounts department for

their valuable advice, cooperation and support in completion of my project.

I am thankful to Prof. Mrs. Anagha Gokhale madam for helping me to make this

project.

I am also thanks to VSIM College who helped me to making this project.

Regards
 CERTIFICATE

This is to certify that Mr. has submitted the Summer Internship Report

titled RATIO ANALYSIS completed at ICON INFOTECH LTD. as per requirements

of the two years full time Master of Management Studies (MMS) course of Mumbai

University for III Semester of the academic year 20010-11.

Date:-

Dr. Prof. Mrs. Anagha Gokhale

(Director VSIM) (Project guide)

 TO WHOM SO EVER IT MAY CONCERN

This is to certify that Mr . student from GRD

In our factory from 17th May 2010 to 30th June 2010, he has completed his training

successfully.

During his entire training period he was found to be sincere, hardworking and punctual.

We wish his success in his future assignments.

 INDEX

Sr. Page
Particulars
Number Number

1 Executive Summary 1

4 Need for the study 19

5 Objective of study 20

6 Research Methodology 21 22

7 Introduction to Ratio Analysis 23 37

8 Data collection and Interpretation 38 63

9 Findings 64 65

10 Suggestions and Conclusion 66 67

11 Limitations 68

Bibliography

EXECUTIVE SUMMARY

This project is specially designed to understand the subject matter of Financial

Statement Analysis through various ratios in the company. This project gives us
information and report about companys Financial Position. Throughout the project

the focus has been on presenting information and comments in easy and intelligible

manner.

The purpose of the training was to have practical experience of working in an

organization and to have exposure to the various management practices in the field of

Finance. This training has also given me an on the job experience of Financial

Management.

This project is very useful for those who want to know about company and financial

position of the company.

NEED FOR THE STUDY

The study has great significance and provides benefits to various parties whom

directly or indirectly interact with the company.

 It is beneficial to management of the company by providing crystal clear picture

regarding important aspects like liquidity, leverage, activity and profitability.

The study is also beneficial to employees and offers motivation by showing how

actively they are contributing for companys growth.

The investors who are interested in investing in the companys shares will also get

benefited by going through the study and can easily take a decision whether to

invest or not to invest in the companys shares.

OBJECTIVES OF STUDY

The major objectives of the resent study are to know about financial strengths and

weakness of ICON INFOTECH through FINANCIAL RATIO ANALYSIS.

The main objectives of resent study aimed as:

To evaluate the performance of the company by using ratios as a yardstick to

measure the efficiency of the company.

To understand the liquidity, profitability and efficiency positions of the company

during the study period.

To evaluate and analyze various facts of the financial performance of the

company. To make comparisons between the ratios during different periods.

Secondary Objectives:

To study the present financial system at ICON INFOTECH .

To determine the Profitability, Liquidity Ratios.

To simplifies and summarizes a long array of accounting data and makes them

understandable.

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research

problem. it may be understood as a science of studying how research is done

scientifically. So, the research methodology not only talks about the research methods but

also considers the logic behind the method used in the context of the research study.

Research Design:

Descriptive research is used in this study because it will ensure the minimization

of bias and maximization of reliability of data collected. The researcher had to use fact

and information already available through financial statements of earlier years and

analyze these to make critical evaluation of the available material. Hence by making the

type of the research conducted to be both Descriptive and Analytical in nature.

From the study, the type of data to be collected and the procedure to be used for

this purpose were decided.

Data Collection:

The required data for the study are basically secondary in nature and the data are

collected from the audited reports of the company.

6.2.1 Primary Data:

Primary data are those data, which is originally collected afresh.

In this project, Questionnaire Method and Interview Method has been used for

gathering required information.

Sources of Data:
 The sources of data are from the annual reports of the company from the year

2012-17

Methods of Data Analysis:

The data collected were edited, classified and tabulated for analysis. The

analytical tools used in this study.

Analytical Tools Applied:

The study employs the following analytical tools:

Comparative statement.
Common Size Statement.
Trend Percentage.
Ratio Analysis.

RATIO ANALYSIS

7.1 Financial Analysis:

Financial analysis is the process of identifying the financial strengths and

weaknesses of the firm and establishing relationship between the items of the balance

sheet and profit & loss account.

 Financial ratio analysis is the calculation and comparison of ratios, which

are derived from the information in a companys financial statements. The level and

historical trends of these ratios can be used to make inferences about a companys

financial condition, its operations and attractiveness as an investment. The information in

the statements is used by

Trade creditors, to identify the firms ability to meet their claims i.e. liquidity

position of the company.

Investors, to know about the present and future profitability of the company and

its financial structure.

Management, in every aspect of the financial analysis. It is the responsibility of

the management to maintain sound financial condition in the company.

Ratio Analysis:

The term Ratio refers to the numerical and quantitative relationship

between two items or variables. This relationship can be exposed as

Percentages

Fractions

Proportion of numbers
 Ratio analysis is defined as the systematic use of the ratio to interpret the

financial statements. So that the strengths and weaknesses of a firm, as well as its

historical performance and current financial condition can be determined. Ratio reflects a

quantitative relationship helps to form a quantitative judgment.

Ratios Are Useful For Several Parties Such As:

1) Investors, both present as well as potential investors.

2) Financial analyst.

3) Mutual funds.

4) Stock broker and stock exchange authorities.

5) Government.

6) Tax department.

7) Competitors.

8) Research analysts and students.

9) Companys management.

10) Creditors and Suppliers

11) Lending Institutions Banks and Financial Institutions

12) Financial Manager

13) Other Interested parties like credit rating agencies etc.

Nature of Ratio Analysis:

Ratio analysis is a technique of analysis and Interpretation of financial

statements. It is the process of establishing and interpreting various ratios for helping in
making certain decisions. It is only a means of understanding of financial strengths and

weaknesses of a firm. There are a number of ratios which can be calculated from the

information given in the financial statements, but the analyst has to select the appropriate

data and calculate only a few appropriate ratios. The following are the four steps involved

in the ratio analysis.

Selection of relevant data from the financial statements depending upon the

objective of the analysis.

Calculation of appropriate ratios from the above data.

Comparison of the calculated ratios with the ratios of the same firm in the past, or

the ratios developed from projected financial statements or the ratios of some

other firms or the comparison with ratios of the industry to which the firm

belongs.

Classification of Ratios:

A) Liquidity Ratios

It is also known as liquidity ratios. it includes the following

1) Measures ability of a company to meet its current obligations.

2) Indicates short term financial stability of a company.

3) Indicates present cash solvency and ability to remain solvent in times of

adversities.

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

 Current ratio

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

(a) Current Ratio:

Current ratio is useful to find out solvency of the company. High current

ratio indicates that company will be able to pay its debt maturity within a year. Low

current ratio indicates that company will not be able to meet its short term debts.

Minimum standard current ratio is 2:1.

Current Assets
Current Ratio=
Current Liabilities

(b) Quick Ratio:

Quick ratio is also known as acid test ratio. It indicates immediate ability

of a company to pay off its current obligations. And also shows the solvency and

financial soundness of the business. Greater the ratio stronger the financial position of

the company.

The standard quick ratio should be 1:1

Quick Assets
Quick Ratio=
Quick Liabilities
B) Profitability Ratios:

The primary objectives of business undertaking are to earn profits.

Because profit is the engine, that drives the business enterprise.

It measures the overall efficiency of the business. It indicates whether

utilization of business assets and funds are done efficiently and best way or not , so as to

generate adequate profits or returns.

Profitability ratios fall in two categories:

a) Related To Sales:

1) Gross Profit Ratio:

It shows the operating efficiency of the business. It measures the

efficiency of production as well as pricing. Decrease in the ratio indicates reduction in

selling price or increase in the cost of production or decline in the business activity.

Increase in the ratio indicates increase in the selling price or reduction in the cost of

production.

Gross Profit
Gross Profit Ratio = X 100
Sales

2) Operating Profit Ratio:

It indicates profitability of entire business after meeting all operating cost

including direct and indirect cost of administrative and distribution expenses.

 Operating Profit
Operating Profit Ratio: X 100
Sales

3) Net Profit Ratio:

It shows the overall efficiency of the business. Higher the ratio indicates

higher efficiency of business and better utilization of total resources. In addition it

indicates efficiency of financing operations as well as tax management.

Net profit after tax

Net Profit Ratio: X 100
Sales

b) Related To Investment Of Capital Employed:

1) Return On Investment:

It measures the overall performance of the company that is utilization of total resources

and funds available with the company. Higher the ratio better utilization of funds. It

indicates earning capacity of the business. It measures the management performance.

EBT But AT

Return on Investment: X 100

Total Assets/ Liability
2) Return On Net Worth Or Proprietors Funds:

It measures the productivity of shareholders funds. Higher the ratio indicates better

utilization of shareholders funds or higher productivity of owners funds. It helps to

investor to compare the earning capacity of company with that of other companies.

Net Profit after Tax

Return on Net Worth: X 100
Equity Shareholder Fund

C) Turnover Ratio-

It measures how efficiently the assets are employed. These ratios are

expressed in number of times the assets is used during the period.

1) Inventory Turnover Ratio:

It indicates number of times the replacement of inventory during the given

period usually a year. Higher the ratio more efficient is the management of inventory. But

higher inventory turnover ratio is not always good if it is lower level of inventory because

it invites problem of frequency stock outs and loss of sales and customer or goodwill.

Cost of Goods Sold

Inventory Turnover Ratio:
Average Stock in Hand
2) Average Collection Period:

It indicates credit and collection policy and also indicates efficiency in

management of debtors. Smaller no. of dates, higher will be the efficiency of the

collection department.

Avg. collection period should not exceed 1.5 times the credit period allowed.

Receivable (Debtors)
Avg. Collection Period:
Average Sales per Day.

3) Receivable Turnover Ratio:

The ratio indicates average credit period enjoyed by debtors.

Debtors + Bills Receivable

Receivable Turnover Ratio: X 100
Total Credit Sales

4) Fixed Asset Turnover Ratio:

It indicates efficiency in the utilization of fixed assets like plant and machinery by

management.

Net Sales
Fixed Assets Turnover Ratio =
Fixed Assets

5) Total Asset Turnover Ratio =

It indicates how efficiently the assets are employed overall. It indicates

relationships between the amount invested in the assets and the result accrues in terms of

sales.

Net Sales
Total Asset Turnover Ratio =
Total Assets

6) Creditors Turnover Ratio:

It indicates the how the credit period enjoyed by the creditors.

Net Credit Purchases

Creditors Turnover Ratio=
Average Creditors
D) Financial Ratio

1) Capital Gearing Ratio:

 This ratio indicates the relationship between preferential capital,

debenture. Term loan and capital which does not carry fixed rate of interest or dividend.

When the ratio is more than one then the capital is said to be highly geared that means

low equity share capital and greater amount of preference share capital, debenture, long

term loan.

When the ratio is less than one then the capital is said to be very lowly

geared that means low earning per share. Equity shareholder will control the company. It

results in over capitalization.

Preferential Capital + Debenture + Term Loan

Capital Gearing Ratio:
Equity Share Capital + Reserve and Surplus

2) Proprietary Ratio:

It measures the relationship between funds invested in business by the

owners with the total funds invested in business. It indicates long run solvency of the

business. High ratio means company is less dependent on outside funds and company is

quite solvent. Low ratio indicates company is more dependent on outside funds solvency

and solvency may be danger.

Proprietary Fund
Proprietary Ratio:
Total Assets
3) Stock Working Capital Ratio:

It indicates weightage of stock in the current assets or in the working

funds. It indicates strength and weaknesses of working capital; high ratio indicates slow

movement in stock and also reflects better management of inventory as well as working

capital.

Stock
Stock Working Capital Ratio:
Working Capital

E) Financial Leverage Ratio:

It indicates financial structure of the organization that is proportion of

debts as compare to owners fund.

1) Debt Equity Ratio:

Higher the ratio less secured is the creditors, lower the ratio creditors

enjoy higher degree of safety.

Debt
Debt Equity Ratio:
Equity
2) Debt Asset Ratio:

It indicates the percentage of the total asset created by the company

through short term and long term debt. Higher the ratio less safe is the creditors and vice

versa.

Debt
Debt Asset Ratio:
Total Assets

3) Long Term Debt to Total Capitalization:

It explains the relationship between long term debts borrowed from

outsiders with owners contribution. Lower the ratio better is the solvency of the business

and safer is the creditor so far as his repayment.

Long Term Debt

Long Term Debt to Total Capitalization:
Total Capital Employed

4) Interest Coverage Ratio:

This indicates earning capacity of the business to pay its interest

burden. Higher the ratio business can easily pay the interest.
 Earnings before Interest and Tax
Interest Coverage Ratio:
Interest

F) Dividend Ratio:

These ratios for a particular company are relevant for an investor for

making an investment decision as to whether he should invest in the share of the

company.

1) Earnings per Share:

This ratio indicates weather over a given period their have been change

in the wealth per share holder. Other the ratio increases the possibility for the higher

dividends and increase in the market price of the shares.

Earnings after Tax Preference Dividend

Earnings per Share:
No. Of Shares Paid Up

2) Price Earnings Ratio:

It indicates relationship between market price of the share and the current

earnings per share. It helps to determine the future price of the share.
 Market Price per Share
Price Earnings Ratio:
Earning Per Equity Share

3) Payout Ratio:

It indicates how much proportion of the earning per share is retaining for

plaguing back and portion distributed as dividend to the share holder.

Dividend per Equity Shares

Payout Ratio:
Earnings per Share

4) Dividend Yield Ratio:

It indicates the ultimate current return which investor will get as a

percentage of is investment. It indicates the feature like the profitability and dividend

policy of the company. When dividend yield is lower than the expected return, market

price for the share may fall in future or vice versa.

Equity Dividend
Dividend per Share:
No. Of Equity Shares
 Dividend per Share
Dividend Yield
Market Price per Share

7.6 Interpretation of the Ratios:

The Interpretation of ratios is an important factor. The inherent limitations of ratio

analysis should be kept in mind while interpreting them. The impact of factors such as

price level changes, change in accounting policies, window dressing etc.

7.7 Guidelines or Precautions for Use of Ratios:

The calculation of ratios may not be a difficult task but their use is not

easy. Following guidelines or factors may be kept in mind while interpreting various

ratios is

Accuracy of financial statements

Objective or purpose of analysis

Selection of ratios

Use of standards should also be kept in mind when attempting to interpret ratios.

DATA ANALYSIS AND INTERPRETATION

8.1 Financial stability Ratios:

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

ratios,
a) CURRENT RATIO:

Current Asset
Current Ratio:
Current Liabilities

Table 8.1.a:
(Rupees in lakhs)
Year Current Assets Current Liabilities Ratio
31-3-07 48468.47 21582.46 2.2:1
31-3-08 51764.02 27739.78 1.8:1
31-3-09 49807.77 32808.36 1.5:1

ANALYSIS AND INTERPRETATION:

The current ratio of the firm measures the short term solvency. It indicates

the rupees of current asset available for each rupee of current liabilities.

The above chart shows that decline trend from the F.Y. 2007 to F.Y. 2009.

This is mainly due to increasing creditors from F.Y. 2007 to F.Y. 2009. In the F.Y. 2007-

08 it shows 2.2:1 which was higher than the standard ratio i.e. 2:1. There was continuous

decline in the current ratio which is not good sign for the company.
b) QUICK RATIO:

Quick Asset
Quick Ratio:
Quick Liabilities

Table 8.1.b:
(Rupees in lakhs)
Year Quick Asset Quick Liabilities Ratio
31-3-07 23199.99 21582.46 1.07:1
31-3-08 27062.4 27739.78 0.975:1
31-3-09 28573.68 32808.36 0.870:1

ANALYSIS AND INTERPRETATION:

The above chart indicates the decline trend from the F.Y. 2007 to F.Y. 2009. In the

F.Y. 2008 and F.Y. 2009 the quick ratio of the company was below standard that means

large part of current asset of the firm is tie up in slow moving and unsellable investment
of Finish goods and also slow moving of debts, but, the overall trend shows declining

which is not a positive sign for .

8.2. PROFITABILITY RATIO

A) RELATED TO SALES

a) Operating Profit Ratio:

Earnings before Interest Taxes

Operating Profit Ratio: X 100
Sales

Table 8.2.A.a:
(Rupees in lakhs)
Earning Before
Year Sales Ratio
Interest Taxes
31-3-07 15542.89 129345.66 12.02 %
31-3-08 16759.11 139992.48 11.97 %
31-3-09 14272.70 139639.94 10.22 %

ANALYSIS AND INTERPRETATION:

 The above chart shows that there was a continuous decreased in the ratio.

That means the ratio was decreased from 12.02% in FY 2007-08 to 10.22% in FY 2009-

10. This is due to increases in the expenditure of the company.

b) Net Profit Ratio:

Net Profit
Net Profit Ratio: X 100
Sales
Table 8.2.A.b:
(Rupees in lakhs)
Year Net Profit Sales Ratio
31-3-07 10202.8 129345.66 7.88 %
31-3-08 11702.72 139992.48 8.35 %
31-3-09 10136.19 139639.94 7.25 %

ANALYSIS AND INTERPRETATION:

The above chart indicates the Net Profit Ratio in 2007-08 was 7.88 %

which further increases to 8.35% in FY 2008-09. Further it had fallen to 7.25% in FY

2009-10. That means company suffers the losses after the FY 2008-09. In FY 2008-09 the

net profit was high to increase in the sales of the company.

(B) RELATED TO CAPITAL EMPLOYED
a) Return on investment:

Earnings before interest but after tax

Return on investment: X 100
Total asset / liability

Table 8.2.B.a:
(Rupees in lakhs)
Earnings Before
Total Asset /
Year Interest But After Ratio
Liability
Tax
31-3-07 10378.39 65912.12 15.74 %
31-3-08 11929.75 73746.32 16.17 %
31-3-09 10257.99 75662.49 13.55 %

ANALYSIS AND INTERPRETATION

It can be found that the return on investment ratio of was slightly

increased in first two years. Further it was decreased by 0.13% which implies an
ineffective decisions made by the managers.
(b) Return on Net Worth or Proprietors Funds:

Net Profit after Tax

 Return on net worth: X 100
Equity shareholder fund

Table 8.2.B.b:
(Rupees in lakhs)
Equity shareholder
Year Net Profit after Tax Ratio
fund
31-3-07 10202.8 51721.18 19.72 %
31-3-08 11702.72 59875.12 19.54 %
31-3-09 10136.19 66299.87 15.28 %

ANALYSIS AND INTERPRETATION:

This ratio indicates how well the firm has used the resources of owner.

The earning of a satisfactory result is the most desirable objective of the business. This

ratio is important to present as well as prospective shareholders and also of great concern

to management.

The above chart shows that the ratio was almost constant in first two

years. Further it declined to 15.28% this is due to increased in the reserve and surplus of

the company.
 Higher the ratio indicates better utilization of recourses but in It shows

decreasing trend which is not good.

8.3. TURNOVER RATIOS:

a) Inventory turnover ratio:

Net Sales
Inventory turnover ratio:
Closing Stock
Table 8.3.a:
(Rupees in lakhs)
Year Net Sales Closing Stock Ratio
31-3-07 129345.66 19996.18 6.46 times
31-3-08 139992.48 19926.90 7.02 times
31-3-09 139639.94 17063.39 8.18 times

ANALYSIS AND INTERPRETATION:

The above chart shows that the stock gets converted into cash was 6.46

times, 7.02 times and 8.18 times in the FY 2007 to 2009 respectively.
If we compared the figures of sales and inventory of first two years, the

level of inventory is almost same, but in the FY 2008 and09 the sales was increased with
low cost of inventory which implies the management is successful to reduce the cost

involved for management of inventory.

b) Average Collection Period:

Receivable (Drs)
Average collection period:
Average sales per day

Table 8.3.b:
(Rupees in lakhs)
Average sales per
Year Receivable (Drs) Ratio
day
31-3-07 20994.41 129345.66 59.24days
31-3-08 23637.37 139992.48 61.62 days
31-3-09 20957.29 139639.94 54.77 days

ANALYSIS AND INTERPRETATION:

The above chart shows that the collection period was high in FY 2008-09 i.e. 62 days.

This means, a very long collection period would imply either for credit selection or an
inadequate collection. The average collection period short in FY 2009-10 which means

that better is a credit management and prompt payment on the part of debtors.

c) Receivable turnover ratio:

Credit sales
Receivable turnover ratio:
Average debtors

Table 8.3.c:
(Rupees in lakhs)
Year Credit sales Average debtors Ratio
31-3-07 129345.66 20994.41 6.1times
31-3-08 139992.48 23637.37 5.9 times
31-3-09 139639.94 20957.29 6.6 times

ANALYSIS AND INTERPRETATION:

This ratio indicates the average credit period enjoyed by debtors. The

above chart shows that the customers to whom the credit sales are made pay 6.1times, 5.9

times & 6.6 times in the FY 2007 to respectively. In the FY 2008-09 THE DEBTORS

TURNOVER RATIO was low which indicates the absence of a strict credit policy and
also point out that there were delayed to recover the revenue from sales. This point out

into the huge block up of working capital in book debt.

It was high in FY 2009-10 i.e. 6.6 times which indicate prompt payment

on the part of debtors. Overall debtors turnover ratio was good.

d) Fixed Asset Turnover Ratio:

Net sales
Fixed asset turnover ratio:
Fixed assets

Table 8.3.d:
(Rupees in lakhs)
Year Net sales Fixed assets Ratio
31-3-07 129345.66 22538.61 5.73 times
31-3-08 139992.48 24140.44 5.79 times
31-3-09 139639.94 23861.99 5.85 times

ANALYSIS AND INTERPRETATION:

It indicates efficiency in the utilization of fixed assets like plant and

machinery by management.
From the above chart the fixed asset turnover ratio of slowly increases

over period of time. From this we can say that a company has been successful to manage
and utilized its assets. Also a company has been more effective in using the investment in

fixed assts to generate revenue.

e) Total Asset Turnover Ratio:

Net sales
Total asset turnover ratio:
Total asset

Table 8.3.e:
(Rupees in lakhs)
Year Net sales Total asset Ratio
31-3-07 129345.66 65912.12 1.962 times
31-3-08 139992.48 73746.32 1.898 times
31-3-09 139639.94 75662.49 1.845 times

ANALYSIS AND INTERPRETATION:

The total asset turnover ratio indicates the firms ability to generate sales from all

financial resources.
From the above chart the total asset turnover ratio was decreased from 1.9 times in FY

2007-08 to 1.8 in FY 2009-10. The total asset turnover of the company was 1.8 times

implies that generate a sell of Rs. 1.8 for one rupee investment in fixed and current asset

together.
f) Creditors Turnover Ratio:

Net credit purchases

Creditors turnover ratio:
Average creditors

Table 8.3.f:
(Rupees in lakhs)

Net credit
Year Average creditors Ratio
purchases
31-3-07 84723.95 15906.86 5.3 times
31-3-08 89136.85 18430.47 4.8 times
31-3-09 92418.41 23007.12 4.0 times

ANALYSIS AND INTERPRETATION:

The above chart dips from 5.3 times to 4.0 times from the FY 2007-08 to FY 2009-10.

From this we can interpret that has successful to manage its creditors because, over the

years trend is declining.

8.4 Financial ratio

a) Proprietary ratio:

Proprietary Fund
Proprietary ratio: X 100
 Total assets

Table 8.4.a
(Rupees in lakhs)

Year Proprietary fund Total assets Ratio

31-3-07 51721.18 65912.12 78.46 %
31-3-08 59875.12 73746.32 81.19 %
31-3-09 66299.62 75662.49 87.62 %

ANALYSIS AND INTERPRETATION:

From the above chart the ratio was consistently increased in three years.

The ratio was high in the FY 2009-10 i.e. 0.87%. It indicates the company is quite

solvent.

b) Stock working capital ratio:

Stock
Stock working capital ratio:
Working capital

Table 8.4.b:
(Rupees in lakhs)

Year Stock Working capital Ratio

31-3-07 19996.18 26886.01 74.37%
31-3-08 19926.90 24024.24 82.94%
31-3-09 17063.39 16999.41 100.37%
ANALYSIS AND INTERPRETATION:
The above chart shows the continuous increase in the trend of the ratio.

The weightage of stock in the current assets is high in the FY 2009 FY 2010 as compare

to other FY. That means there was a slow movement of stock.

8.5 Financial Leverage Ratio:

It indicates financial structure of the organization that is proportion of debts as compare

to owners fund.
a) Debt Equity Ratio:

Debt
Debt equity ratio:
Equity

Table 8.5.a:
(Rupees in lakhs)

Year Debt Equity Ratio

31-3-07 12657.80 51721.18 24.47%
31-3-08 12480.40 59875.12 20.84%
31-3-09 9362.62 66299.62 14.12%
ANALYSIS AND INTERPRETATION:
This ratio is useful to judge long term financial solvency of a firm. This

ratio reflects the relative claim of creditor and shareholder against the assets of the firm.
From the above chart the debt equity ratio of the was consistently

declined from 24.47% in FY 2007-08 to 14.12% in FY 2009-10.The low debt equity ratio

in FY 2009-10 indicates the firm had less claims from outsiders as compared to those of

owner.

b) Debt Asset Ratio:

Debt
Debt asset ratio:
Total assets

Table 8.5.b:
(Rupees in lakhs)
Year Debt Total assets Ratio
31-3-07 12657.80 65912.12 19.20%
31-3-08 12480.40 73746.32 16.92%
31-3-09 9362.62 75662.49 12.37%
ANALYSIS AND INTERPRETATION:
From the above chart the debt asset ratio was consistently decreased from

19.20% in FY 2007-08 to 12.37% in FY 2009-10. That means at beginning creditors of

bear the high risk than the other years.

c) Long Term Debt to Total Capitalization:

Long term debt

Long term debt to total capitalization:
Total capital employed

Table 8.5.c:
(Rupees in lakhs)

Total Capital
Year Long Term Debt Ratio
Employed
31-3-07 4660.29 65912.12 7.07%
31-3-08 4603.14 73746.32 6.24%
31-3-09 1608.29 75662.49 2.12%
ANALYSIS AND INTERPRETATION:
The above chart indicates that the ratio was consistently decreased from

7.07% in FY 2007-08 to 2.12% in FY 2009-10, means that is successful to manage its

long term debt which further implies that the is in better position in terms of solvency.

d) Interest Coverage Ratio:

Earning before interest and tax

Interest coverage ratio:
Interest

Table 8.5.d:
(Rupees in lakhs)

Earnings Before
Year Interest Ratio
Interest And Tax
31-3-07 15718.48 175.59 89.51times
31-3-08 16986.14 227.03 74.91 Times
31-3-09 14505.05 212.8 68.16 Times
ANALYSIS AND INTERPRETATION:
From the above chart the trend of the ratio was decreased from 89.51

times in FY 2007-08 to 68.16 times in FY 2009-10. From this, it indicates that is trying

to reduce its interest burden which is good sign for both i.e. there creditors and

shareholders.

8.6 Dividend Ratio:

These ratios for a particular company are relevant for an investor for making an

investment decision as to whether he should invest in the share of the company.

a) Earnings per Share:

Earning after tax preference dividend

Earning per share:
No. of shares paid up

Table 8.6.a:
(Rupees in lakhs)

Year Earnings After Tax No. Of Shares Paid Ratio

Preference Up
 Dividend
31-3-07 10202.08 255.07666 39.99
31-3-08 11702.72 269.45986 43.43
31-3-09 10136.19 269.45986 37.61

ANALYSIS AND INTERPRETATION:

From the above chart the EARNING PER SHARE of the company was

high in FY 2008-09 i.e. Rs.43.43. This means that as compare to the other FY there has

been increase in wealth per shareholder.

b) Payout Ratio:

Dividend per equity share

Payout ratio: X 100
Earnings per share

Table 8.6.b:
(Rupees in lakhs)

Dividend per Earning per equity

Year Ratio
equity share share
31-3-07 12.14 39.99 30.35%
31-3-08 12.00 43.43 27.63%
31-3-09 12.00 37.61 31.90%
ANALYSIS AND INTERPRETATION:
It indicates how much proportion of the earning per share is retaining for

plugging back and portion distributed as dividend to the share holder.

The above chart indicates that the pay out ratio was high in FY 2009-10

i.e. 31.90%. If the divided pay out ratio is subtracted from 100, retention ratio is obtained.

Means that in the retention ratio from FY 2007 to FY 2009 was 69.65%, 72.37%, 68.1%

respectively and is ploughed back its maximum percentage of its profit.

c) Dividend per shares ratio:

Equity dividend
Dividend per share:
No. of equity shares

Table 8.6.c:
(Rupees in lakhs)

No. Of Equity
Year Equity Dividend Ratio
Shares
31-3-07 309879000 25507666 Rs. 12.14
31-3-08 323352000 26945986 Rs. 12.00
31-3-09 323352000 26945986 Rs. 12.00
ANALYSIS AND INTERPRETATION:
The dividend per share ratio of the was almost same i.e. Rs. 12 in the FY

2007 to FY 2009.But if we compared earning per share with Dividend per share it shows

that Earning per share is more than Dividend per share. In this case of Earning per share,

adjustment of bonus or right issue should be made while calculating Dividend per share

over the year.

FINDINGS

1. The ideal current ratio is 2:1 which the firm obtains only in the FY 2007-08 it shows

the positive impact.

2. The ideal liquid ratio is 1:1 which is also obtained by the firm in FY 2007-08 and FY

2008-09 it indicates that , without selling its inventory, has enough short-term assets to

cover its immediate liabilities.

3. The net profit ratio shows fluctuating trend, it shows that more or less the company is

successful to maintained efficiency in sales value and operating expenses.

4. The operating profit ratio of the is in fluctuating manner as 12.02%, 11.97%, and

12.22% from FY 2007to FY 2009.

5. The return on investment ratio is increased from 0.15% to .016% in FY 2007 to FY

2008 because both the EBIT and total asset increased.

6. The company is maintaining the proper record of inventory. Management is successful

to manage the cost involved in inventory, because of increasing ratio of inventory.

7. The fixed asset turnover ratio of the firm is in increasing trend from the F.Y. 2007 to

2009, means that the company is efficiently utilizing the fixed assets.
8. The proprietary ratio of the firm shows increasing trend, means that the long term

solvency of the firm is increased.

9. borrowed loans in such a way that the cost of this debt financing do not outweigh the

return that the company generates on the debt through investment and business activities

And become too much for the company to handle.

10. The is successful to manage its long term debt. In the FY 2007-08 the long term debt

was Rs. 4660.29 which was reduced to Rs. 1608.29 in FY 2009-10.

11. is far better in covering its fixed cost with the interest coverage ratio.

12. The sales, profit before tax, profit after tax shows the increasing trend during the

period under review. It depicts that the company is working with more efficiency.
13. The company has not made any preferential allotment of shares and also company has

not issue any debentures.

SUGGESTIONS AND CONCLUSION

Suggestions:
1. The CURRENT RATIO of was less than the standard in FY 2008-09 and 2009-10

i.e.1.8, 1.5 respectively. A low current ratio indicates that co will not be able to meet its

short term debts.

2. should look into its credit policies in order to ensure the timely collection of imparted

credit that is not earning interest for the firm.

3. There is decreasing trend in interest coverage ratio which is due to heavy investment

which further effect on the return on investment ratio. So should keep up its investment

unto sufficient level.

4. The should formulate the strategy to use the fixed assets more effectively to generate

more revenues.

5. Operating expenses should be especially considered to be reduced.

6. Inventory is the biggest item of balance sheet that must have demanded a large amount

of maintaining cost. So there is need for efficient Inventory Management.

7. There should be efficient utilization of share holder fund to increase return on

investment and return on equity to maintain its goodwill in investors mind.

CONCLUSION:
Finance is the life blood of every business. Without effective financial

management a company cannot in this competitive world. A Prudent financial Manager

has to measure the working capital policy followed by the company.

The companys overall position is at a good position. Through the losses

were there in the FY 2003-2004, they were able to come out of it successfully and regain

into profitable scenario. Particularly the last three years position is well due to raise in

the profit level from the FY 2007 to FY 2009. It is better for the firm to diversify the

funds to different sectors in the present market scenario.

On a whole ICON INFOTECH has once again demonstrated its

potential to ride through the difficult times. Despite the slowdown in its growth, it has

determined to grab numerous opportunities that are facing Indian Paint Industry.

As mentioned earlier, other opportunities in India are pegged to the

transport sector. Car ownership in India stands at little more than one percent. However,

rising affordability and the launch of economical cars such as the Tata Nano are expected

to propel the market for OEM coatings and refinishes in the coming years.

Higher demand for marine can be expected in the next decade, once

investments in ports and port development have started to reach fruition. As India is
hopeful of competing with other established shipbuilding nations, the multinationals are

likely to find plentiful opportunity in India, given the compliance requirements imposed

by effects of international legislation on marine .

Also other segments are showing promising opportunities to grow. With

these many opportunities at hand along with the potential player who would be able to

make use of the situation well, I would rather start looking at a career in .

So from this we can conclude that there is a better opportunities for

investors to invest in this company.

 LIMITATIONS

The main limitations of the project undertaken are as under:-

Time: The time of around two months was too short to study as wide subject like

Financial Analysis.

Confidential information: The executives were hesitant to reveal complete

information since it was confidential.

Busy Schedule of Concerned Executives: The concerned executives were not

having very busy schedule because of which they were reluctant to give

appointment.
 12 BIBLIOGRAPHY

Financial Management: M Y KHAN AND P K JAIN Fifth Edition

FINANCIAL MANAGEMENT - I. M. PANDEY

Financial Management (BMS): MR. Kale.

Icon infotech magazines, brochures etc.

Annual Reports of the ICON INFOTECH Ltd.

o 88th annual report 2007-08

o 89th annual report 2008-09

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