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Submitted in partial fulfillment of the requirements

for the award of the degree of

Bachelor of Business Administration (BBA)


Guru Gobind Singh Indraprastha University, Delhi

Project Guide: Submitted by:

Ms. Manisha Sethi ABHISHEK KUMAR

Roll No.:44324401716
Batch: BBA-V (E2)

Institute of Innovation in Technology& Management,

New Delhi– 110058
Batch (2016-2019)


I, Mr.ABHISHEK KUMAR Roll No. 44324401716 certify that the SummerProject


ASSOCIATES” is done by me and it is an authentic work carried out by me. The matter embodied

in this project work has not been submitted earlier for the award of any degree or diploma to the best

of my knowledge and belief.

Signature of the Student


Certified that the SummerProject Report/Dissertation (BBA-311) entitled “A STUDY ON


KUMAR, Roll No. 44324401716, is completed under my guidance.

Signature of the Guide

Name of the Guide: Ms. Manisha
Designation: Assistant Professor


Director/Project Coordinator


I would like to thank the employees of “ROHIT GOYAL & ASSOCIATES”for constant

guidance to conduct the present arduous project and untiring cooperation which they extended to

me throughout the duration of my training.

Getting a project ready requires the work and effort of many people. I would like all those who

have contributed in completing this project. I would like to take an opportunity to thank all the

people who helped me in collecting necessary information and making of the report. I am

grateful to all of them for their time, energy and wisdom.

Thank You All.


S No Topic Page No Sign

1 Certificate (s)

2 Acknowledgements

3 List of Abbreviations

4 Chapter-1: Introduction

5 Chapter-2: Research Methodology

6 Chapter-3: Data Presentation, Analysis & Interpretation

7 Chapter-4: Summary and Conclusions

8 References/Bibliography

9 Appendices



 Profile of Industry/ Organisation/Company

 Objectives of Study

1.1 Profile of Industry/Organisation/Company

M/s ROHIT GOYAL & ASSOCIATESis a well-established firm of chartered accountants

registered with The Institute of Chartered Accountants of India since 2004. We provide services

in the field of Accounting, Auditing & Assurance, Internal Audit, Tax Audit, Management

Audit, Statutory Audit, Income Tax, Tax Planning, Direct Taxes, Service Tax, Value Added Tax,

Sales Tax, Company Registration, Company Incorporation, Corporate Compliance, Project

Financing, Registration of trade mark etc.

Our Team

The firm comprises of four Partners:

 CA. Rohit Goyal,

 CA. Nidhi Garg,

 CA. Mini Goel

 CA. Deepika Gupta

The firm comprises of three Partners - CA. Rohit Goyal, CA. Nidhi Garg & CA. Mini Goel and

qualified team of staff which includes Chartered Accountants, Company Secretary & Advocates

among others. The firm from its very beginning has been working under the able guidance of Sh.

I.D Garg, Sr. Advocate who has nearly 45 years of experience in the field of taxation, appeals,

consultancy and financial advisory services.

Our Mission

Client's satisfaction is our sole aim and to maintain long term relationship and faith amongst

them we work with full sincerity, honesty and dedication. Each & every work is invariably

supervised and finalized by a partner. Professionalism through the extensive use of information

technology is the key area in which the firm has believed in as one of the means to attain

professional excellence and is equipped with all the infrastructure.


Audit & Assurance

 Statutory Audits required under various applicable Indian laws such as Income Tax Act,

Sales tax laws, Companies Act, etc.

 Tax Audits.

 Internal and Management Audits.

 Internal Control Review.

 Due-diligence.

 Bank Branch Audits.

 Certification work as requires under various statutes.

 Drafting of Agreements under various laws such as Indian Partnership Act, Wills,

Conveyance, etc.

Taxation Services (Direct & Indirect Taxes)

 Tax Planning.

 Filing of Income-tax and Wealth-tax returns of residents and non-residents (NRI)


 E-Return filing of domestic companies and other entities as per guidelines issued by

Income Tax Department.

 Compliance with law relating to Service tax laws, VAT laws, Central Sales tax laws,

 Corporate and personal tax advisory and compliance services including assessments,

appeals with CIT(A) and Tribunal.

 Designing tax-efficient pay-packages for executives and salaried class.

 Withholding tax (Tax Deduction at Source) compliance including Efiling of TDS

returns etc.

 Fringe Benefit Tax Planning.

 Planning with special reference to Gift Tax Provisions.

 Non-resident Taxation & Foreign Exchange Management Act (FEMA) provisions.

Corporate Law Matters

 Registrar of Companies (ROC)/ MCA Filing.

 Formation of Indian Companies.

 Advising on various matters under the Companies Act.

 Compliance Procedures under the Companies Act.

 Maintenance of statutory records and registers under Companies Act, 1956.

 Maintenance of minutes book.

 Assistance in preparation and filing of various forms with the Registrar of


 Obtaining Directors’ Identification number (DIN).

 Digital Signature Certificate (DSC).

Accounts Writing Management

 Accounts writing, Book keeping and preparation of final accounts.

 Payroll processing.

 Preparation of management accounts and management information system (MIS) reports

such as budgets, cash flow reports, fund flow analysis, financial projections, etc.

 Fixed Assets verification and updating records.

 NRI Taxation & FEMA Matters

 Tax Advisory Services and filing of income tax and wealth tax returns (including E-


 Banking and Remittances.

 Investment advisory support.

 Application for Income Tax Permanent Account Number (PAN).

 Incorporation of Companies in India.

Business Advisory Services

 Personnel selection and advisory.

 Business Consultancy.

 Preparation of Accounting manuals.

 Setting up of Internal Control Systems & Procedures.

Financial Advisory Services

 Assisting in raising finance including IPO / Equity Placement.

 Undertaking feasibility studies and preparing project reports.

 Liaison with Bank/ Financial institutional for raising finance.

 Assisting in Capital Investment and Restructuring Decisions.

 Venture Capital Finance.

 CMA data for working capital facilities.

 Design and Development of Accounting, Costing and management Information System.

 Comprehensive services to management in all areas related to profitability of operations.

 Credit Verification & appraisals.

Insurance Advisory Services

 Life Insurance.

 Unit Linked Insurance Plan (ULIPs).

Investment Advisory Services

 Investments in IPO’s, Capital Markets, Mutual Funds, etc.

 Investment in Tax saving instruments.

 Asset Allocation & Retirement Planning.

1.2 Objective of The Study

The objectives of this study are:

1. To analyse the financial statements of the corporation to it’s true financial position by the

use of ratios.

2. To measure financial position: Short-term and long-term financial position of the

business can be measured by calculating liquidity and solvency ratios.

3. To identify the financial strengths & weakness of the Rohit Goyal & Associates.

4. To evaluate company performance relating to financial statement analysis.

5. To find out the utility of financial ratio in credit analysis & determining the financial

capacity of the firm.

6. To know deficiencies in the area of finance.





Ratio analysis is the comparison of line items in the financial statements of a business. Ratio

analysis is used to evaluate a number of issues with an entity, such as its liquidity, efficiency of

operations, and profitability. We aim at finding out the ratios of past three years. The ratio

includes of Profitability ratios, Liquidity ratios, Capital structure analysis ratio, Activity analysis

ratio, and so on. Once all these ratios are found out for all the three years. We compare them with

each other. By doing this we can tell whether the company is in profit or loss. We can make

statements whether the company is doing good or not. We can answer all such question i.e. is

the company growing, dowe need to make any amendments. It helps then customers,

stakeholders, investors. All these people can see whether the company is in profit or loss. This

helps them in taking any decision in reference to the company. Every company’s financial report

should be disclosed. And if we compare them with the previous years, it’s more appropriate. It

even helps the company as the comparison can be helpful for them. They can judge whether they

have to make any changes. This is the main objective of this study. That is to find out all the

ratios and compare them with the previous year. This is important because it gives a clear

picture of what is the company’s financial position is. And according to that the company takes

further decisions. It is easy and more convenient for all, i.e. the customers, thestakeholders, and

the shareholders. So, this is the main objective. We can state our aim according to the financial

statements and the comparison. Our aim should be appropriate. It is very necessary for a

company to compare its financial positions. Our aim is to provide the customers and the

stakeholders with the comparison for them to take decision accordingly. It helps to know the

areas which need more attention, areas that need improvement, to provide deeper analysis of

profitability, liquidity, solvency and efficiency of business. If properly done, improves the user’s

understanding with which the business is being conducted.

A financial statement (or financial report) is a formal record of the financial activities and

position of a business, person, or other entity.

Relevant financial information is presented in a structured manner and in a form easy to

understand. They typically include basic financial statements, accompanied by a management

discussion and analysis:

1. A balance sheet, also referred to as a statement of financial position, reports on a

company's assets, liabilities, and owners’ equity at a given point in time.

2. An income statement, also known as a statement of comprehensive income, statement

of revenue & expense, P&L or profit and loss report, reports on a company's income,

expenses, and profits over a period of time. A profit and loss statement

providesinformation on the operation of the enterprise. These include sales and the

various expenses incurred during the stated period.

3. A Statement of changes in equity, also known as equity statement or statement of

retained earnings, reports on the changes in equity of the company during the stated


4. A cash flow statement reports on a company's cash flow activities, particularly its

operating, investing and financing activities.

For large corporations, these statements may be complex and may include an extensive set of

footnotes to the financial statements and management discussion and analysis. The notes

typically describe each item on the balance sheet, income statement and cash flow statement in

further detail. Notes to financial statements are considered an integral part of the financial


Purpose of financial statements by business entities

"The objective of financial statements is to provide information about the financial position,

performance and changes in financial position of an enterprise that is useful to a wide range of

users in making economic decisions." Financial statements should be understandable, relevant,

reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly

related to an organization's financial position.

Financial statements are intended to be understandable by readers who have "a reasonable

knowledge of business and economic activities and accounting and who are willing to study the

information diligently." Financial statements may be used by users for different purposes:

 Owners and managers require financial statements to make important business decisions

that affect its continued operations. Financial analysis is then performed on these

statements to provide management with a more detailed understanding of the figures.

These statements are also used as part of management's annual report to the stockholders.

 Employees also need these reports in making collective bargaining agreements (CBA)

with the management, in the case of labor unions or for individuals in discussing their

compensation, promotion and rankings.

 Prospective investors make use of financial statements to assess the viability of investing

in a business. Financial analyses are often used by investors and are prepared by

professionals (financial analysts), thus providing them with the basis for making

investment decisions.

 Financial institutions (banks and other lending companies) use them to decide whether to

grant a company with fresh working capital or extend debt securities (such as a long-term

bank loan or debentures) to finance expansion and other significant expenditures.

Consolidated financial statements

Consolidated financial statements are defined as "Financial statements of a group in which the

assets, liabilities, equity, income, expenses and cash flows of the parent (company) and its

subsidiaries are presented as those of a single economic entity", according to International

Accounting Standard 27 "Consolidated and separate financial statements", and International

Financial Reporting Standard 10 "Consolidated financial statements".

Government financial statements

The rules for the recording, measurement and presentation of government financial statements

may be different from those required for business and even for non-profit organizations. They

may use either of two accounting methods: accrual accounting, or cost accounting, or a

combination of the two (OCBOA). A complete set of chart of accounts is also used that is

substantially different from the chart of a profit-oriented business.

Personal financial statements

Personal financial statements may be required from persons applying for a personal loan or

financial aid. Typically, a personal financial statement consists of a single form for reporting

personally held assets and liabilities (debts), or personal sources of income and expenses, or

both. The form to be filled out is determined by the organization supplying the loan or aid.

Financial analysis refers to an assessment of the viability, stability and profitability of a

business, sub-business or project.

It is performed by professionals who prepare reports using ratios that make use of information

taken from financial statements and other reports. These reports are usually presented to top

management as one of their bases in making business decisions. Financial analysis may

determine if a business will:

 Continue or discontinue its main operation or part of its business;

 Make or purchase certain materials in the manufacture of its product;

 Acquire or rent/lease certain machineries and equipment in the production of its goods;

 Issue stocks or negotiate for a bank loan to increase its working capital;

 Make decisions regarding investing or lending capital;

 Make other decisions that allow management to make an informed selection on various

alternatives in the conduct of its business.


Financial analysts often assess the following elements of a firm:

1. Profitability - its ability to earn income and sustain growth in both the short- and long-term.

A company's degree of profitability is usually based on the income statement, which reports on

the company's results of operations;

2. Solvency - its ability to pay its obligation to creditors and other third parties in the long-term;

3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate obligations;

Both 2 and 3 are based on the company's balance sheet, which indicates the financial condition

of a business as of a given point in time.

4. Stability - the firm's ability to remain in business in the long run, without having to sustain

significant losses in the conduct of its business. Assessing a company's stability requires the use

of both the income statement and the balance sheet, as well as other financial and non-financial

indicators. etc.


Financial analysts often compare financial ratios (of solvency, profitability, growth, etc.):

 Past Performance - Across historical time periods for the same firm (the last 5 years for


 Future Performance - Using historical figures and certain mathematical and statistical

techniques, including present and future values, This extrapolation method is the main

source of errors in financial analysis as past statistics can be poor predictors of future


 Comparative Performance - Comparison between similar firms.

These ratios are calculated by dividing a (group of) account balance(s), taken from the balance

sheet and / or the income statement, by another, for example :

Net income / equity = return on equity (ROE)

Net income / total assets = return on assets (ROA)

Asset Management Ratios gauge how efficiently a company can change assets into sales.

Stock price / earnings per share = P/E ratio

Comparing financial ratios is merely one way of conducting financial analysis. Financial ratios

face several theoretical challenges:

 They say little about the firm's prospects in an absolute sense. Their insights about

relative performance require a reference point from other time periods or similar firms.

 One ratio holds little meaning. As indicators, ratios can be logically interpreted in at least

two ways. One can partially overcome this problem by combining several related ratios to

paint a more comprehensive picture of the firm's performance.

 Seasonal factors may prevent year-end values from being representative. A ratio's values

may be distorted as account balances change from the beginning to the end of an

accounting period. Use average values for such accounts whenever possible.

 Financial ratios are no more objective than the accounting methods employed. Changes

in accounting policies or choices can yield drastically different ratio values.

 Fundamental analysis.

Financial analysts can also use percentage analysis which involves reducing a series of figures as

a percentage of some base amount. For example, a group of items can be expressed as a

percentage of net income. When proportionate changes in the same figure over a given time

period expressed as a percentage is known as horizontal analysis. Vertical or common-size

analysis, reduces all items on a statement to a “common size” as a percentage of some base value

which assists in comparability with other companies of different sizes.[4] As a result, all Income

Statement items are divided by Sales, and all Balance Sheet items are divided by Total Assets.

Another method is comparative analysis. This provides a better way to determine trends.

Comparative analysis presents the same information for two or more time periods and is

presented side-by-side to allow for easy analysis.

Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a

company's financial statements to make better economic decisions. These statements include the

income statement, balance sheet, statement of cash flows, and a statement of changes in equity.

Financial statement analysis is a method or process involving specific techniques for evaluating

risks, performance, financial health, and future prospects of an organization.

It is used by a variety of stakeholders, such as credit and equity investors, the government, the

public, and decision-makers within the organization. These stakeholders have different interests

and apply a variety of different techniques to meet their needs. For example, equity investors are

interested in the long-term earnings power of the organization and perhaps the sustainability and

growth of dividend payments. Creditors want to ensure the interest and principal is paid on the

organization’s debt securities (e.g., bonds) when due.

Common methods of financial statement analysis include fundamental analysis, DuPont analysis,

horizontal and vertical analysis and the use of financial ratios. Historical information combined

with a series of assumptions and adjustments to the financial information may be used to project

future performance. The Chartered Financial Analyst designation is available for professional

financial analysts.


Ratio analysis is a powerful tool of financial analysis. A ratio is defined as "the indicated

quotient of two mathematical expression" and as" the relationship between two or more things".

In financial analysis, a ratio is used as an index or yardstick for evaluating the financial position

and performance of a firm. The absolute accounting figures reported in the financial statements

do not provide a meaningful understanding of the performance and financial position of a firm.

An accounting figure conveys meaning when it is related to some other relevant information.

The relationship between two accounting figures, expressed mathematically, is known as a

financial ratio (or simply as a ratio). Ratios help to summaries the large quantities of financial

data and to make qualitative judgment about the firm's financial performance. The investors who

are interested in investing in the company’s 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 company’s shares.

Ratio analysis is a technique of analysing the financial statement of industrial concerns. Now a

day this technique is sophisticated and is commonly used in business concerns. Ratio analysis is

not an end but it is only means of better understanding of financial strength and and weakness of

a firm. Ratio analysis is one of the most powerful tools of financial analysis which helps in

analysing and interpreting the health of the firm. Ratios are proved as the basic instrument in the

control process and act as back bone in schemes of the business forecast. With the help of ratio

we can determine the ability of the firm to meet its current obligation.


A ratio is a mathematical Relationship between two items expressed in a quantitative from. It

may define as the indicated quotient of two mathematical expressions.


Ratio Analysis is the process of determining and presenting the relationship of items and group

of items in the statements.

According to Batty J. Management Accounting “Ratio can assist management in its basic

functions of forecasting, planning co-ordination, control and communication”.

It is helpful to known about the liquidity, solvency, capital structure and profitability of an

organization. It is helpful tool to aid in applying judgment, otherwise complex situations.



In these two figures is expressed in hundredth for Example.

If capital = Rs 1, 00,000, profit = Rs 20,000 then 20,000/1,00,000 x100 = 20%


It is expressed by the simple division of one number by another. For example:-

If current asset = Rs 2,00,000, current liability = 1,00,000 then 2,00,000/1,00,000 = 2:1

3. Times (5 times):

In this type, It is calculated how many times a figure is in comparison to another figure for


If firm’s credit sales during the year/Debtor at the end of year = 2,00,000/40,000 = 5 Times.


Classification of Ratios can be classified into different categories depending upon the basis of


TRADITIONAL CLASSIFICATION Traditional Classification has been on the basis of

financial statements, on which ratio may be classified as follows:

1. Profit & Loss account ratios. E.g.Gross Profit Ratio, Net Profit Ratio, Operating Ratio etc

2. Balance sheet ratio. E.g. Current Ratio, Debt Equity Ratio, Working Capital Ratio etc

3. Composite/ Mixed ratio. E.g. Stock Turnover Ratio, Debtors Turnover Ratios, Fixed Assets

Turnover Ratio

Liquidity ratio: - It refers to the ability of the firm to meet its current liabilities. The liquidity

ratio, therefore, are also called ‘Short-term solvency Ratio’. These ratios are used to assess the

short-term financial position of the concern. They indicate the firm’s ability to meet its current

obligation out of current resources.






Liquidity means the ability of a concern to meet in current obligations.

a) Current Ratios = This ratio explains the relationship between current assets and current

liabilities of a business.

Current Assets: - ‘Current assets’ includes those assets which can be converted into cash with in

a year’s time.

Current Assets = Cash in Hand +Cash at Band

+ B/R+ Short Term Investment+ Debtors (Debtors- provision) + Stock (Stock of Finished Goods

+ Stock OF Taw Material + Work in Progress) + Prepaid Expenses.

Current Liabilities: -‘Current liabilities’ include those liabilities which are repayable in a year’s


Current Liabilities = Bank Overdraft + B / P + Creditors + Provision forTaxation + Proposed

Dividend + Unclaimed Dividends + Outstanding Expenses + Loans Payable withina year.

Significance: -According to accountingprinciples, a current ratio of 2:1 is supposed to be an

ideal ratio.

It means that current assets of a business should, at least, be twice of its current liabilities. The

higher ratio indicates the better liquidity position; the firm will be able to pay its current

liabilities more easily. If the ratio is less than 2:1, it indicates lack

Current Asset/Current Liability, standard 2:1. It means ratios is less than 2:1 it indicate lack of

liquidity and shortage of working capital.

a. Quick ratios = Quick Assets/Current Liability, Standard = 1:1. It is more than it is considered

to the better.

This ratio is a better test of short term financial position of the company.

b. Absolute Liquidity Ratio = Absolute Liquid Assets/Current Liabilities, Absolute Liquid Assets

= Cash + Bank + Short term securities, Standard = 0.5:1. Even though super quick ratio is more

vigorous in measuring the liquidity position of the firm. It is not widely used in practice.


These ratios are calculated on the bases of ‘cost of sales’ or sales, therefore, these ratio are also

called as ‘turnover ratio’ turnover indicates the speed or number of times the capital employed

has been rotated in the process of doing business.

Higher turnover ratio indicates the better use of capital or resources and in turn lead to higher


This ratio indicates the number of times the stock has been turned over during the period and

evaluates the efficiency with which a firm is able to manage its inventory.

Stock turnover ratio: –

This ratio indicates the relationship between the cost of goods during the year and average stock

kept during that year.

Significance: - This ratio indicates whether stock has been used or not.

It shows the speed with which the stock is rotated into sales or the number of times the stock is

turned into sales during the year.

The higher the ratio, the better it is, since it

Stock turn over ratios = cost of goods sold/Average stock. Here the higher the ratio, the better it

is, since it indicates that stock is selling quickly.

In a business where stock turnover ratio is high, goods can be sold at a low margin of profit and

even than the profitability may be quite high.

Debtor’s turnover ratio – This ratio indicates the relationship between credit sales and average

debtor’s doing the year.

Debtor’s turnover ratio = Net credit sales/Average debtor’s + Average B/R.

Average Collection period = 365/52/12/Debt turnover ratio.

While calculating this ratio, provision for bad and doubtful debts is not debuts from the debtors,

so that it may not give a false impression that debtors are collected quickly,

Significance: - This ratio indicates the speed with which the amount is collected from debtors,

The higher the ratio, the better it is, since it indicates that amount from debtors is being collected

more quickly.

The more quickly the debtors pay, the less the risk from bad – debts, and so the lower the

expenses of collection and increase in the liquidity of the firm.

By comparing the debtor’s turnover ratio of the current year with the previous year, it may be

assessed whether the sales policy of the management is efficient or not.

Fixed assets turnover ratio – This ratio reveals how efficiently the fix assets are being utilized.

Fixed assets turnover ratio = Cost of good sales/Net fixed assets.

This ratio is particular importance in manufacturing concerns where the investment in fixed asset

is quit high compared with the previous year.

Significance: - This ratio is particular importance In manufacturing concerns where the

investment in fixed asset is quite high.

Compared with the previous year, if there is increase in this ratio, it will indicate that there is

better utilization of fixed assets. If there is a fall in this ratio it will show that fixed assets have

not been used as efficiently, as they had been used in the previous year.

Working capital turnover ratio: - This ratio reveals how efficiently working capital has been

utilized in making sales.Formula: -

Working capital turnover ratio = Cost of Goods sold / working capital

Here, cost of Goods sold = opening stock + purchases + carriage + wages + other Direct

Expenses – closing stock

Working capital= current assets - current Liabilities

Significance: - This ratio isof particular importance in non- manufacturing concerns where

current assets play a major role in generating sales.

It shows the number of times working capital has been rotated in producing sales.

A high working capital turnover ratio shows efficient use of working capital turnover of current

assets like stock and debtors.

Alow working capital turnover ratio indicates under- utilization of working capital.

Cost of Sales/Average Working Capital. This ratio measures the efficiency with which the

working capital is being used by a firm. A higher ratio indicates efficient utilization of working

capital and a low ratio indicates otherwise.


A business must be able to earn adequate profits in relation to the risk and capital invested in it.

The efficiency and the success of a business can be measured with the help of profitability ratio.

General Profitability Ratios

Gross Profitability ratio = This ratio shows therelationship between gross profit and sales.

Significance: - This ratio measures the margin of profit available on sales, the higher the gross

profit ratio, the better it is. No ideal standard is fixed for this ratio, but gross profit ratio should

be adequate enough not only to cover the operating expenses but also to provide for deprecation

interest on loans, dividends and creation of reserves.

Gross profit x 100/Net Sales.

Here gross profit = Sales – Cost of goods sold and Net sales = Total Sales – Sales Return. It

indicated higher the gross profit ratio, better the result. And low gross profit ratio, indicates high

cost of goods sold due to unfavourable purchasing policies,

2. Net Profit ratio = this ratio shows the relationship between net profit and sales. It may be

calculated by two methods:

Formula: - Net profit ratio = Net profit / Net sales*100 operating Net profit = operating Net

profit / Net sales*100

Here, Operating Expenses, such as office and Administrative expenses, selling and distribution

expenses, discount, Bad debts, interest on short term debts etc.

Significance: - This ratio measures the rate of net profit earned on sales,

It helps in determining the overall efficiency of the business operations.

An increase in the ratio over the previous year shows improvement in the overall efficiency and

profitability of the business.

Net profit x 100/Net Sales. This ratio indicates the firm’s capacity to face adverse economy

condition such as price competition, low demand etc.

Operating ratio = this ratio measures the proportion of an enterprise cost of sales and operating

expenses in comparison to its sales.

Classificationof Ratios

Balance Sheet Ratio P&L Ratio Balance Sheet and Profit &

Loss Ratio

Financial Ratio Operating Ratio Composite Ratio

 Current Ratio  Gross Profit Ratio  Fixed Asset Turnover

 Quick Asset Ratio  Operating Ratio Ratio, Return on

 Proprietary Ratio  Expense Ratio Total Resources Ratio

Debt Equity Ratio  Net profit Ratio  Return on Own

 Stock Turnover Ratio Funds Ratio, Earning

per Share Ratio,

Debtors’ Turnover


Structural Classification

This is a conventional mode of classifying ratios where the ratios are classified on the basis of

information given in the financial statements, i.e. balance sheet and profit and loss account to

which the determinants of the ratios belong. On this basis, all ratios are grouped as follows:

1. Balance Sheet Ratio: The components for computation of these ratios are draws from

balance sheet. These ratios are called financial ratios. Examples of such ratios are:

current ratio, liquid ratio, proprietary ratio, capital gear ratio, fixed assets ratio etc.

2. Profit and Loss Account Ratios: The figures used for the calculation of these ratios are

usually taken out from the profit and loss account. These ratios are also called ‘income

statement ratios’. Examples of such ratios are: gross profit ratio, net profit ratio,

operating ratio, expenses ratio, stock turnover ratio etc.

3. Balance Sheet and Profit & Loss Ratio: The information required for the computation

of these ratios is normally drawn from both the balance sheet and profit and loss account.

Examples of such ratios are: return on capital employed, return on owners’ fund, return

on total investment, debtor’s turnover ratio, creditors turnover ratio, fixed assets turnover

ratio, working capital turnover ratio etc.


Now-a-days, it is the most popular mode of classifying the ratios. Accordingly, the ratios may be

grouped on the basis of certain tests which satisfy the needs of the parties having financial

interest in the business concern. For example, creditors or banks have interest in the liquidity of

the firm, debenture holders in the long-term solvency and shareholders in the profitability of the

firm. The ratios may be grouped as per different interests or objectives as under:

1. Liquidity Ratios: These ratios are used to measure the ability of the firm to meet its

short-term obligations out of its short-term resources. Such ratios highlight short-term

solvency of the firm. Examples of such ratios are:

I. Current Ratio

II. Liquid or Quick Ratio

III. Absolute Liquidity Ratio

2. Activity or Efficiency Ratio: These ratios enable the management to measure the

effectiveness or the usages at the command of the firm. Following ratios are included in

this category:

I. Stock Turnover Ratio

II. Total Assets Turnover Ratio

III. Fixed Assets Turnover Ratio

IV. Current Assets Turnover Ratio

V. Capital turnover Ratio

3. Profitability Ratio: These ratios are intended to measure the end result of business

operations i.e. profitability. Profitability is a measure of the ability to make a profit

expressed in relation to the sales or investments, and as such the following ratios are

computed in this category

 Based on Sales

I. Gross Profit Ratio

II. Operating Ratio

III. Expenses Ratio

IV. Operating Profit Ratio

V. Net Profit Ratio

 Based on Capital or Investments

I. Return on Capital Employed

II. Return on Net Worth or Shareholders’ Fund

III. Return on Equity shareholders’ fund

IV. Return on Total Assets


These ratios play a key role in analyzing the short-term financial position of a business Liquidity

refers to a firm’s ability to meet its current financial obligations as they arise. Commercial banks

and other short-term creditors i.e. suppliers of goods and services are generally interested in such

ratios. However, the management can use these ratios to ascertain how efficiently it has utilizing

the working capital. Some of the principal liquidity ratios are described below:

Current ratio:

Current ratio is one of the important ratios used in testing liquidity of a concern. This is a good

measure of the ability of accompany to maintain solvency over a short-run. This is computed by

dividing the total current assets by the total current liabilities and is expressed as:

Current Assets

Current ratio= ------------------------------

Current Liabilities

The current assets of a firm represent those assets, which can be in the ordinary course of

business, converted into cash within one accounting year. The current liabilities are defines as

obligation maturing within a short period (usually one accounting year). Excess of current assets

over current liabilities is known as working capital and since these two (Current assets and

current Liabilities) are used in current ratio therefore, this ratio is also know as working capital


Idle Current Ratio: 2:1


The solvency of the company is better indicated by quick Ratio. The fundamental object of

calculating this Ratio is to enable the financial management of a company to ascertain that would

happen if current creditors press for immediate payment and either not possible to push up the

sales of closing or it is sold; a heavy loss is likely to be suffered. This problem arises because

closing stock is two steps away from the cash and their price is more or less uncertain according

to market demand.

The term quick assets include all current assets expect inventories and prepaid expenses. It

shows the relationship of quick assets and current liabilities. The Ratio is calculated as


Quick Assets

Quick Ratio = -------------------------------

Current Liabilities


Research Design

Research as we know is an art of scientific investigation. It refers to the systematic method

consisting of enunciating the problem formulating a hypothesis, collection of the facts or data

analyzing the fact and reaching certain conclusions either in the form of solutions towards the

concerned problems or in certain generalization for some theoretical formulation. In short, search

for through objectives and systematic method of finding solution to the problem in research.

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. In it we study the various

steps, the research process that is generally adopted to study the research problem and basic

logics behind them.

Research methodology includes the following steps:

• Formulate the objectives of the study.

• Collection of the primary and secondary data.

• Interpreting the data and drawing the conclusions.

A research design is the arrangement of condition and analysis of data in a manner that aims to

combine relevance to research purpose with economic in procedure. It is the overall operational

pattern or framework of the project. What information is to be collected from which sources by

which procedures? Three research designs are:-

• Exploratory Research

• Descriptive Research

• Experimental Research

1. Exploratory Research to gain familiarity with a phenomenon or to achieve new insight into its


2. Descriptive Research to portray accurately the characteristics of particular individual, situation

of a group.

3. Experimental Research to determine the frequently with which something occur or with it is

associate with sometime else.

I have selected the Descriptive research design for my research.


Data Collection from Secondary Source

Information was collected from secondary sources such as customer survey, newspapers

advertisements, automobile newsletters, etc.

Beside these the use of internet was also made in collecting relevant information. The data

collected from the abovementioned sources has been adequately structured and used at

appropriate places in the report. The information gathered included:

• their annual reports.

• pamphlets.

• newsletters.

• pictures.

• exchange schemes.

Research Methodology is a way to systematically study and solve the research problems.

Sampling Techniques

Here the ‘non-probability’ technique was selected. Mainly through ‘judgement sampling’


Judgmental sampling: Sample was taken on judgmental basis. The advantage of sampling are

that it is much less costly, quicker and analyse will become easier.

Tools for analysis

 Bar chart (Bar charts will be used for comparing two or more values that will be taken

over time or on different conditions, usually on small data set )

 Pie-chart (Circular chart divided in to sectors, illustrating relative magnitudes or


As no study could be successfully completed without proper tools and techniques, same with my

project. For the better presentation and right explanation I used tools of statistics and computer

very frequently.





Calculation and Interpretation of Ratios

1] Current Ratio:


Current assets

Current ratio = Current liabilities

YEAR 2013-2014 2014-2015 2015-2016 2016 -2017

Current assets 24,696.15 30,210.99 44,743.86 56,298.09

Current liabilities 21,547.00 25,858.06 32,221.16 45,675.71

Current ratio 1.14 1.16 1.38 1.23

Current ratio
1.14 1.16





2013-2014 2014-2015 2015-2016 2016 -2017


In Rohit Goyal & Associates the current ratio is 1.23:1 in 2016-2017. It means that for one rupee

of current liabilities, the current assets are 1.23 rupee is available to the them. In other words the

current assets are 1.23 times the current liabilities.

Almost 4 years current ratio is same but current ratio in 2015-2016 is bit higher, which makes

company sounder. The consistency increase in the value of current assets will increase the ability

of the company to meets its obligations & therefore from the point of view of creditors the

company is less risky.

Thus, the current ratio throws light on the company’s ability to pay its current liabilities out of its

current assets. The Rohit Goyal & Associateshas a goody current ratio.

2] Quick Ratio:


Quick assets

Quick ratio = Quick liabilities

YEAR 2013-2014 2014-2015 2015-2016 2016 -2017

Quick assets 14,576.33 18,674.48 24,227.75 36029.91

Quick liabilities 21,547.00 25,858.06 32,221.16 45,675.71

Liquid ratio 0.67 0.69 0.75 0.78

Quick ratio
0.76 0.75
0.7 0.69
0.68 0.67
2013-2014 2014-2015 2015-2016 2016 -2017


The liquid or quick ratio indicates the liquid financial position of an enterprise. Almost in all 4

years the liquid ratio is same, which is better for the company to meet the urgency. The liquid

ratio of the Rohit Goyal &Associates has increased from 0.67 to 0.78 in 2016-2017 which

shows that company follow low liquidity position to achieve high profitability.

This indicates that the dependence on the long-term liabilities & creditors are more & the

company is following an aggressive working capital policy.

Liquid ratio of Company is not favorable because the quick assets of the company are less than

the quick liabilities. The liquid ratio shows the company’s ability to meet its immediate

obligations promptly.

3] Proprietary Ratio:


Proprietor’s fund

Proprietary ratio = Total assets


Shareholders fund

Proprietary ratio= Fixed assets + current assets

YEAR 2013-2014 2014-2015 2015-2016 2016 -2017

Proprietary fund 49,804.26 63,967.13 81,448.60 126,372.97

Total Assets 68,520.72 87,439.93 105,405.58 189,655.07

Proprietary ratio 0.72 0.73 0.77 0.66

Proprietary ratio
0.78 0.77


0.74 0.73





2013-2014 2014-2015 2015-2016 2016 -2017


The Proprietary ratio of the company is 0.66 in the year 2016-2017. It means that the for every

one rupee of total assets contribution of 66 paisa has come from owners fund & remaining

balance 34 paisa is contributed by the outside creditors. This shows that the contribution by

owners to total assets is more than the contribution by outside creditors. As the Proprietary ratio

is very favorable of the company. The Company’s long-term solvency position is very sound.

4] Stock Working Capital Ratio:



Stock working capital ratio= Working Capital

YEAR 2013-2014 2014-2015 2015-2016 2016 -2017

Stock 10,119.82 12,136.51 14,247.54 14,836.72

Working Capital 3149.15 4352.93 12,522.70 10,622.38

Stock working 3.21 2.78 1.13 1.39

capital ratio

Stock working capital ratio

3 2.78


1.5 1.39


2013-2014 2014-2015 2015-2016 2016 -2017


This ratio shows that extend of funds blocked in stock. The amount of stock is decreasing from

the year 2013-2014 to 2016-2017. However in the year 2016-2017 it has increased a little to. In

the year 2015-2016 the sale is increased which affects decrease in stock that effected in increase

in working capital in 2015-2016.

It shows that the solvency position of the company is sound.

5] Capital Gearing Ratio:


Preference capital+ secured loan

Capital gearing ratio =Equity capital & reserve & surplus

YEAR 2013-2014 2014-2015 2015-2016 2016 -2017

Secured loan 7,664.90 9,569.12 6,600.17 10,697.92

Equity capital &

49,804.26 63,967.13 81,448.60 126,372.97
reserves & surplus

Capital gearing
16% 15% 8.2% 8.5%

Capital gearing ratio

16 15



8.2 8.5

2013-2014 2014-2015 2015-2016 2016 -2017


Gearing means the process of increasing the equity shareholders return through the use of debt.

Capital gearing ratio is a leverage ratio, which indicates the proportion of debt & equity in the

financing of assets of a company.

For the last 2 years [i.e.2015-2016 TO 2016-2017] Capital gearing ratio is all most same which

indicates, near about 8.5% of the fund covering the secured loan position. But in the year 2013-

2014 the Capital-gearing ratio is 16%. It means that during the year 2013-2014 company has

borrowed more secured loans for the company’s expansion.

6] Debt Equity Ratio:


Total long term debt

Debt equity ratio = Total shareholders fund

YEAR 2013-2014 2014-2015 2015-2016 2016 -2017

Long term debt 21,865.61 27,825.73 36,479.68 73,904.48

Shareholders fund 49,804.26 81,448.60 126,372.97

Debt Equity Ratio 0.44 0.44 0.45 0.59

Debt equity ratio


0.5 0.45
0.44 0.44





2013-2014 2014-2015 2015-2016 2016 -2017


The debt equity ratio is important tool of financial analysis to appraise the financial structure of

the company. It expresses the relation between the external equities & internal equities. This

ratio is very important from the point of view of creditors & owners.

The rate of debt equity ratio is increased from 0.44 to 0.59 during the year 2013-2014 to 2016-

2017. This shows that with the increase in debt, the shareholders fund also increased. This

shows long-term capital structure of the company is sound. The lower ratio viewed as favorable

from long term creditor’s point of view.

7] Gross Profit Ratio:


Gross profit

Gross profit ratio = Net sales * 100

YEAR 2013-2014 2014-2015 2015-2016 2016 -2017

Gross profit 18345.48 25,439.43 30,086.28 25,758.2

Net sales 80,877.79 111,699.03 133,805.78 141,959

Gross profit Ratio 22.7 22.7 22.4 18.14

Gross profit ratio
22.7 22.7 22.4

20 18.14



2013-2014 2014-2015 2015-2016 2016 -2017


The gross profit is the profit made on sale of goods. It is the profit on turnover. In the year 2013-

2014 the gross profit ratio is 22.7%. It has decreased to 18.14% in the year 2016-2017 due to

increase in sales with corresponding more increase in cost of goods sold.

It is continuously declined from 2013-2014 to 2016-2017 due to high cost of purchases &

overheads. Although the gross profit ratio is declined during the years 2013-2014 to 2016-2017.

The net sales and gross profit is continuously increasing from the year 2013-2014 to 2016-2017.

8] Operating Ratio:


Operating Profit

Operating ratio = Net sales *100

Operating profit = COGS+ operating expenses

YEAR 2013-2014 2014-2015 2015-2016 2016 -2017


Operating 68,550.24 91,947.72 109,506.10 118,234.17


Net sales 80,877.79 111,699.03 133,805.78 141,959

Operating ratio 84.75% 82.31% 81.80% 83.28%

Operating ratio
85 84.75
83.5 83.28

82.5 82.31

82 81.8

2013-2014 2014-2015 2015-2016 2016 -2017


The operating ratio shows the relationship between costs of activities & net sales. Operating ratio

over a period of 4 years when compared that indicate the change in the operational efficiency of

the company.

The operating ratio of the company has decreased in 3 year and increase a little in last year. This

is due to increase in the cost of goods sold, which in 2013-2014 was 84.75%, in 2014-2015 was

82.31%, in 2015-2016 was 81.80% & in 2016-2017 it is 83.28%. Though the cost has increased

in 2014-2015 as compared to 2013-2014, it is reducing continuously over the next two years,

indicate downward trend in cost but upward / positive trend in operational performance.

9) Net Profit Ratio:


Net Profit After Tax

Net profit ratio = Net sales * 100

YEAR 2013-2014 2014-2015 2015-2016 2016 -2017

NPAT 9,069.34 11,943.40 19,458.29 15,309.32

Net sales 80,877.79 111,699.03 133,805.78 141,959.00

Net profit ratio 11.21% 10.69% 14.54% 10.78%

Net profit ratio

12 11.21 10.78

2013-2014 2014-2015 2015-2016 2016 -2017


The net profit ratio of the company is high in all year but the net profit is increasing order from

this ratio of 4 year it has been observe that the from 2013-2014 to 2015-2016 the net profit is

increased and it decreased in the year 2016-2017.

Profitability ratio of company shows considerable increase in 3 years and decreased in the last

year. Company’s sales have increased in 3 years and decreased in the last year. At the same time

company has been successful in controlling the expenses i.e. manufacturing & other expenses.

It is a clear index of cost control, managerial efficiency & sales promotion.

10] Stock Turnover Ratio:


Cost of Goods Sold

Stock Turnover Ratio = Average stock

YEAR 2013-2014 2014-2015 2015-2016 2016 -2017

COGS 18,90,98 21,96,32 28,33,02 25,72,26

Average stock 5,49,90 5,97,58 6,73,11 6,89,30

Stock Turnover
3.4 3.6 4.20 3.73

Stock Turnover Ratio

4.5 4.2
4 3.73




2013-2014 2014-2015 2015-2016 2016 -2017


Stock turnover ratio shows the relationship between the sales & stock it means how stock is

being turned over into sales.

The stock turnover ratio is 2013-2014 was 3.4 times which indicate that the stock is being turned

into sales 3.4 times during the year. The inventory cycle makes 3.4 rounds during the year. It

helps to work out the stock holding period, it means the stock turnover ratio is 3.4 times then the

stock holding period is 3.5 months [12/3.4=3.5months]. This indicates that it takes 3.5 months

for stock to be sold out after it is produced. For the last 4 years stock turnover ratio is lower than

the standard but it is in increasing order. Inurn the year 2013-2014 to 2016-2017 the stock

turnover ratio has improved from 3.4 to 3.73 times, it means with lower inventory the company

has achieved greater sales. Thus, the stock of the company is moving fast in the market.



 Results of the Study

 Limitations

 Suggestions


1. The current ratio has shown non-fluctuating trend as 1.14, 1.16, 1.38 and 1.23 during 2014,

2025, 2026 and 2027.

2. The quick ratio is also in non-fluctuating trend throughout the period 2013 – 17 resulting as

0.67, 0.69, 0.75, 0.78. The Company believes in high profitability and low liquidity position.

3. The proprietary ratio has shown a non-fluctuating trend. The proprietary ratio is decreased

compared with the last year.

4. The stock working capital ratio decreased from 3.21 to 1.39 in the year 2013 – 17.

5. The capital gearing ratio is decreased form 2006 – 08 (0.16, 0.15 and 0.82) and increased in

207 to 0.85.

6. The debt-equity ratio increased from 0.44-0.59 in the year 2013-17.

7. The gross profit ratio is in fluctuation manner. It decreased in the current year compared with

the previous year from 23.1% to 18.97%.

8. The net profit ratio is also decreased in the current year compared with the previous year from

14.54% to 10.78%.

9. The operating ratio is increased in the current year compared with the previous year from

81.8% to 83.28%.

10. The return on capital employed is increased in the year 2013 and 2015 while it decreased in

the year 2016 and 2017.

4. 2. Limitation

As said a basic research was conducted at the company to enable the company to assess how far

the customers are satisfied with product and services of Rohit Goyal & Associates During the

course of the study the following limitations were observed:

 The method lacks flexibility. In case of inadequate or incomplete information the result

may deviate. Ratios are not predictive, as they are usually based on historical information

notwithstanding ratios can be used as a tool to assist financial analysis.

 They help to focus attention systematically on important areas and summarise

information in an understandable form and assist in identifying trends and relationships

(see methods for facilitating the financial analysis above).

 However they do not reflect the future perspectives of a company, as they ignore future

action by management.

 They can be easily manipulated by window dressing or creative accounting and may be

distorted by differences in accounting policies.

 Inflation should be taken into consideration when a Ratio Analysis is being applied as it

can distort comparisons and lead to inappropriate conclusions.

 Comparisons with industry averages is difficult for a conglomerate firm since it operates

in many different market segments.

 Seasonal factors may distort ratios and thus must be considered when making ratios are

used for financial analysis.

 Not always easy to tell that a ratio is good or bad. Must be always used as an additional

tool to back up or confirm other financial information gathered.


The company’s overall position is at a very good position. The company achieves sufficient

profit in past four years. The long-term solvency position of the company is very good. The

company maintains low liquidity to achieve the high profitability. The company distributes

dividends every year to its shareholders. The profit of the company decreased in the last year due

to maintaining the comparatively high liquidity. The net working capital of the company is

maximum in the last year shows the maximum liquidity.

1. The network of Rohit Goyal & Associates.is lagging behind a little than its competitors.

2. It can be distilled from data that Rohit Goyal & Associateshas good market share as

compared to its competitors considering the amount of resources deployed by them in the


3. Consumers of Saharsa have good awareness level about Rohit Goyal & Associates as

well as about its services and products.

4. The advertising campaign has successfully been able to increase the market share of

Rohit Goyal & AssociatesineSaharsa.


Some of the recommendation and suggestion are as follows:

1. Liquidity refers to the ability of the concern to meet its current obligations as and when these

become due. The company should improve its liquidity position.

2. The company should make the balance between liquidity and solvency position of the


3. The profit ratio is decreased in current year so the company should pay attention to this

because profit making is the prime objective o every business.

4. The cost of goods sold is high in every year so the company should do efforts to control it.

5. The long term financial position of the company is very good but it should pay a little

attention to short term solvency of the company.



 http://www.ashishidg.com/resource/home.aspx

 http://profit.ndtv.com

 https://en.wikipedia.org/wiki/Financial_ratio

 https://www.investopedia.com/university/ratio-analysis/using-ratios.asp

 https://www.aaii.com/journal/article/16-financial-ratios-for-analyzing-a-companys-


 https://www.dynamiclevels.com/en

 http://www.moneycontrol.com/financials