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A STUDY ON THE FINANCIAL PERFORMANCE ANALYSIS

WITH REFERENCE TO OCEAN INTERIORS (P) LTD

(A Report submitted in Partial Fulfillment of the Requirements for the degree of


Master of Business Administration in Pondicherry University)

Submitted by
Ms.R.KEERTHANA
Enrolment No : 0216370609
MBA : Finance

Under Guidance of
Dr. Mr. S.K Prakash

DIRECTORATE OF DISTANCE EDUCATION


PONDICHERRY UNIVERSITY
PONDICHERRY – 605 01
June-2018

1
CERTIFICATE OF THE GUIDE

This is to certify that the project work titled “A STUDY ON THE FINANCIAL
PERFORMANCE ANALYSIS WITH REFERENCE TO OCEAN
INTERIORS (P) LTD” is a bonafied work carried out by Ms.Keerthana
Enrolment no: 0216370609 carried out in partial fulfillment for the award of
degree of MBA Finance of Pondicherry University under my guidance. This project
work is original and not submitted earlier for the award of any Degree/ Diploma or
associate ship of any other University / Institution.

Signature of the Guide,

Dr. Mr. S.K.PRAKASH

Place:

Date:

2
STUDENT’S DECALARATION

I, Ms. Keerthana hereby declare that the project work titled “A STUDY ON THE
FINANCIAL PERFORMANCE ANALYSIS WITH REFERENCE TO OCEAN
INTERIORS (P) LTD” original work done by me and submitted to the Pondicherry
University in partial fulfillment of the requirements for the award of Master of
Business Administration in finance is a record of the original work done by me
under the supervision of Prof. Dr. Prakash.

Enrollment No: 0216370609

Date:

Ms.Keerthana

ACKNOWLEDGEMENT
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I am using this opportunity to express my gratitude to everyone who supported
me throughout the course of this MBA project. I am thankful for PU-LC, Twinning
program, Loyola College, Chennai for extending their support in providing all
facilities for completing the project.

Their aspiring guidance, invaluably constructive criticism and friendly advice


during the project work.

I am sincerely grateful to Dr.Mr.S.K.PRAKASH, for sharing his truthful and


illuminating views on a number of issues related to the project.

At the outset, I thank the almighty God for showering his abundant blessing on
me in all my endeavours.

LIST OF CONTENTS

CHAPTER NO CONTENTS PAGE NO

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CHAPTER I INTRODUCTION

1.1 Definition meaning and concept

1.2 Industry profile

1.3 Company profile

CHAPTER II Review of the literature

2.1 Need for the study

2.2 Objectives of the study

2.3 scope of the study

2.4 Research methodology

2.5 limitation of the study

CHAPTER III Data analysis and Interpretation

CHAPTER IV Findings, Suggestions and Conclusion

4.1 Findings

4.2 Suggestions

4.3 Conclusion

Bibliography

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CHAPTER I

1.1 INTRODUCTION

The performance of the firm can be measured by its financial results, i.e.., by
its size of earnings, riskiness and profitability are two major factors which jointly
determine the value of the concern. Financial statements are prepared to review the
state of investments in a business and result achieved during the specific period.

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They reflect recorded facts, accounting conventions and personal judgments.
Financial decisions which increase risk will decrease the value of the firm and on
the other hand financial decisions which increases the profitability will increases
value of the firm. Risk and profitability are two essential ingredients of a business
concern. There has been a considerable debate about the ultimate objective of firm
performance, whether it is profit maximization or wealth maximization. It is
observed that while considering the firm performance, the profit and wealth
maximization are linked and are effected by one-another. However. Profit and loss
account is a statement, which is prepared for a particular financial year. In Indian
context, where an analyst has to rely upon the audited financial statements for a
particular company, the performance so to be judged from the financial statements
only. This chapter however indicates some of the techniques, which can be used for
such analysis of financial performances.

Usefulness of financial performance to various stakeholders:

The analysis of financial performance is used by most of the business


communities. They include the following:

Trade Creditors
The creditors provide goods/ services on credit to the firm. They always face
concern about the recovery of their money. The creditors are always keen to know
about the liquidity position of the firm. Thus, the financial performance parameters
for them evolve short term liquidity condition of the firm.

Suppliers of Long Term Debt


The suppliers of long term debt provide finance for on- going/ expansion
projects of the firm. The long term debt providers will always focus upon the

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solvency condition and survival of the business, their confidence in the firm is of
utmost importance as they are providing finance for a longer period of time.

The long term creditors do consider the historical financial statements for
financial performance. However, the financial institution/ bank also depend a lot on
the projected financial statements indicating performance of the firm normally; the
projections are prepared on the basis of expected capacity expansion, projected
level of projection level of production/ service and market trends for the price
movements of raw materials as well as finished goods.

Investors
Investors are the persons who have invested their money in the equity share
capital of the firm. They are the most concerned community as they have also
taken risk of investments- expecting a better financial performance of the firm. The
investor’s community always put more confident in firms growth in earnings. They
judge the performances of the company by analyzing firms present and future
profitability, revenue stream and risk position.

Management
Management for a firm is always keen on financial analysis. It is ultimately
the responsibility of the management to look at the most effective utilization of the
resources. Management to look at the most effective balance between the asset
liability management, effective risk management and short term and long term
solvency condition

Techniques/ tools to measure financial performance


 Financial Tools
Ratio Analysis
Comparative Balance Sheet
Common-Size Balance Sheet

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 Statistical tools:

Trend analysis

Ratio analysis:

The financial ratio analysis is considered to be the most powerful tool of


financial analysis. In simple language ratio means relationship between two or
more things. It is also said that a ratio is the indicated quotient of two mathematical
expressions. The ratio analysis also helps to summarize the large quantities of
financial data and to make qualitative judgments about the firm’s financial
performance. There are various liquidity ratios which are quantitative in nature but
are helpful to make qualitative judgments about the firm. The financial ratios
involve useful information about the analysis of the firm. However, stand alone
ratio of one firm alone may not be useful to evaluate the firm’s performance.

Comparative Statements:

Comparative statement analysis is one of the methods to trace periodic


change in the financial performance of a firm. The changes over the period are
described by way of increase and decrease in income statement and balance sheet.
These statements summaries and resent related data for a number of years,
incorporating therein changes in individual items of financial statements. These
statements help in making inter-period and inter firm comparisons and also
highlight the trends in performance efficiency and financial position. An
assessment of comparative financial statements helps to highlight the significant

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facts and points out the items requiring further analysis. All annual report of the
selected companies provides data related to last 2 financial years.

Common Size Statements:

Common size statement indicates the relationship of various items with some
common items, (expressed as percentage of the common item). In the income
statements, the sales figure is taken as basis and all other figures are expressed as
percentage in sales. Similarly, in the balance sheet the total assets and liabilities is
taken as base and all figures are expressed as percentage of this total. The
percentages so calculated are compared with corresponding percentages in other
periods or other firms and meaningful conclusions are drawn. Generally, a
common size income statements and common size balance sheet is prepared.

1.2 INDUSTRY PROFILE

Introduction

The Indian Construction Industry, one of the fastest growing Construction


Industry Internationally and the second largest employer in India. They deals with
the key areas of construction opportunity and & activity, the use of PPP models,
type and extent of use of International Standard Form of Contracts and Contract
administration and certification processes.

Construction Industry Development Council

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Construction industry Development Council (CIDC) is the apex body of
Construction Industry of India and is promoted jointly by the Planning
Commission, Govt. of India and the Construction Industry of India. The paper
describes, in brief, the political, social and legal framework. The paper details the
economic overview, administrative and regulatory features, enhancement and
development of Indian Construction Industry and the globalization of construction
services with a perspective of WTO and GATS.

Political, Social & Legal framework:

• Secular Constitution.
• Stable Democratic environment since 1947.
• Broad consensus on Economic policy across party lines.
• Independent multi-tier judicial system.
• Judicial systems in sync with international practices.

• Preferred language of domestic business & international interactions is


English.

Economic Overview

India’s economy encompasses traditional village farming, modern agriculture,


handicrafts, a wide range of modern industries and a multitude of support services
& industries. Production, trade, and investment reforms have provided new
opportunities for Indian businesspersons. India has an estimated 350 million
middle class consumers. :

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• India is the second fastest growing economy of the world at present. India
has recorded
one of the highest growth rates in the 1990s. The target of the 10 th Five Year
Plan (2002-07) is 8%. India’s services sector growth of 7.9% over the
period 1990-2001 is the second highest in the world.
• India is a young country with median age of population being 24.6 years &
one-third of the population is below 14 years of age.
• Long run GDP growth from mid 1990s has now stepped up to 6.5% from an
average of 5% a decade & half ago and less than 3% two decades ago.
• The average annual growth rate for the next few years is expected to be 7%
to 7.5%
• The opportunities unfolding in India is as a result of reforms enacted from
early 1990s as well as a result of India’s increasing competitiveness &
confidence
• A unique feature of the transition of the Indian economy has been high
growth with stability.
• 4th largest economy in terms of purchasing power parity.
• 350 million middle-class consumer market.
• Steady economic growth over 50 years.
• Increasingly transparent & open policies to access, investment,
location, choice of technology, import and export.
• Government rapidly moving out of ownership / Management of
commercial enterprises by a process of disinvestment of existing
Government-owned businesses.
• Positive outlook to international investments & trade policies.
• Fiscal incentives & Central Government & States support in
physical & social infrastructure development.
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• Very large pool of educated and trained & skilled manpower
• Rapidly developing R&D, infrastructure, technical and marketing services.
• Agricultural self-sufficiency, rich mineral base and abundance of other
natural resources.
• Large, diversified and geographically well distributed manufacturing
capability.
• Diversified infrastructure facilities available and under development.
• Sound banking system with a network of 70,000 branches,
among the largest in the world supported by national and state
level financial institutions.
• Leading International Banks entrenched and expanding.
• Vibrant capital market comprising 23 stock exchanges with over 9000 listed
companies.
• Large Coastline with easy access to South Asian markets.
• India has the third largest investor base in the world.
Class 2006-07 2001-02 1995-96

Rich 5.2 2.6 1.2

Middle Class 75.5 46.4 32.5

Aspiring 81.7 74.4 54.1

Source:
NCAER

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Size of Indian Household by Profile (Millions)

Main Macroeconomic Indicators - Overview of national economy

2000- 2001- 2002- 2003- 2004- 2005- 2006-


Unit 01 02 04 04 05 06 07**

GDP at factor cost (at Rs


1999- trillion 18.7 19.7 20.47 22.22 23.89 26* 28.48
00 price)

GDP at current Rs
market prices trillion 19.3 20.80 22.65 25.49 28.55 32.5* -

% GDP growth
(constant % 4.5 5.8 3.8 8.5 7.5 8.4* 9.5*
price)

Sub-Sectors of GDP

Rs
Agriculture & Allied trillion 4.5 4.8 4.4 4.9 4.9 5.1* -

(%)
Growth % - 6.6 (-) 8.3 11.3 0 4*

Rs
Manufacturing Sector trillion 2.8 2.9 3.1 3.3 3.6 3.9* -

(%) Growth % - 3.5 6.8 6.4 9 8.3*

Rs
Service Sector trillion 10.4 11.1 11.9 12.9 14.2 15.7* -

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(%) Growth % - 6.7 7.2 8.4 10 10.5* -

Rs
Construction Sector trillion 1.8 2 2.2 2.55 3 3.4* 3.8*

(%) Growth % 12 12 14 14 14* 15*

Project Exports Rs
(Overseas billion 12.2 14.3 25.2 33.47 440 - -
construction
engineering
and/consultancy
projects
secured during the
year)@

Rs
Plan-outlay trillion 1.8 - 2.1 2.2 2.6 3.5 -

Population* (Millions) Millions 1019 1037 1055 1073 1088 1103 1123

Population growth rate


(%) % 1.80 1.77 1.76 1.73 1.41 1.4 1.4

Total labour force in Million 31.5 31.5 31.5 32 32.5 32.85 32.9*
Construction

Construction labour
force Million 1.61 0.00 0.00 1.2 1 1.1 1.1*
growth rate (%)

Unemployment Rate # # # # # # # #

Short term interest rate


(%) % 17-18.5 14-16 11-14 11-12 11 11 11

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Long term interest rate
(%) % 10-12.5 9-11.5 9-11.5 6-11 6-11 6-11 6-11

Wholesale Price Index - - - - 187.3 195.6* 206.1

Average Consumer
price 444 468 482 500 520 542* -
index @

% change in CPI % 3.7 4 4.2* -

Base lending rate % 12.5 10 10 11 10.25 10.25 10.25


(Commercial Banks)

Base lending rate


(Finance % 14.5 12.5 12.5 9 9 9 9
Companies)

CONSTRUCTION OPPORTUNITY & ACTIVITY

Civil Aviation

The Opportunities

Domestic and international passenger traffic in India is projected to grow annually

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at 12.5 per cent and 7 per cent respectively over the next decade, and domestic and
International cargo traffic at 4.5 per cent and 12 per cent. By the year 2005, Indian
airports are likely to be handling 60 million International passengers, and 300,000
tones of domestic and 1.2 million tones of International cargo.

The Airport Authority of India (Amendment) Bill, 2003 has been passed by
parliament. The Bill provides a legal framework for operational and managerial
independence to private operators. It also seeks to ensure a level playing field to
private sector green field airports by lifting control of AAI except in certain
respects. The Amendment Bill defines a private airport-one that is ‘owned,
developed or managed’ by any agency or person other than AAI or a state
government, or managed jointly by AAI, a state government, and a private player,
where the latter’s share is more than 50 percent – and allows leasing of existing
airports to private operators.

The AAI has also drawn up an Rs 40 billion (US$ 1.1 billion) plan to modernize
and expand its airspace management and infrastructure to meet the demand
growth projected for the coming five years. The growth strategy envisages not
only better passenger facilities but also improved navigational and
communications systems. The first phase will involve upgradation of conventional
communication and navigational and surveillance systems as an immediate
measure. The internal resources generated at present being inadequate, the AAI
plans to enhance revenues through rationalization of the tariff structure, as well as
from commercial, cargo and duty-free shops.
The two majors airports of the country at Mumbai and Delhi have been handed
over to private parties for extensive development and operation. Further concrete

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plans have been put in place to develop Airports of other town and cities.
India could step closer to wide-ranging reform of its aviation sector after public
consultation closes today for a committee drafting the country's new civil aviation
policy.

CEMENT

CMA is the apex representative body of large cement manufacturers in India. It is


a unique body with the private as well as the public sector cement units as it s
members.

Opportunities

• To promote Indian cement industry’s growth


• To protect consumer interests
• To identify newer usages of cement
• To establish contacts with similar bodies abroad for exchange of
information data, publications, etc.

India has excellent deposit of lime stone which can be used for cement production.
As the construction industry has been growing the cement industry has been
enhancing its capacity to meet the demand.
PORTS

India enjoys a strategic location in the Indian Ocean and has a vast coastline of
around 6,000 km. However, due to the conscious policy the country followed for
over four decades self-reliance through import substitution rather than export-led
growth-its share in international trade was not significant. India's economic

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strategy has, however, been changed radically in the last few years. As India
globalize its economy fast, it will need to handle a growing volume of international
trade. Thus, the up gradation and expansion of its ports will be a key success factor
for India's economic development programme

The Opportunities

Under the Government of India's Eighth Five-year Plan (1992-97), outlay for
major ports was Rs 32 billion (US$0.9 billion). But it is estimated that investments
worth Rs 254 billion (US$7.3 billion) are necessary to create the 350 million tones
of additional capacity needed by 2005-06 Of this, the ports' internal resources are
likely to yield Rs 135 billion (US$3.9 billion) between 1996 and 2006. The
balance of around Rs 119 billion (US$3.4 billion) will need to come from other
sources like the domestic capital market or through international capital flows.

The 4 major ports-Jawaharlal Nehru Port Trust(JNPT), Mumbai Port Trust,


Cochin Port Trust, and Kandla Port Trust have drawn plans to add a container
terminal each. The government is following the ‘landlord port model’ where
private parties will operate terminals and other services while the ownership of
land, waterfront, and security would remain under government control.

JM Baxi & Company along with the Dubai Ports Authority is setting up the
Visakha Container Terminal. P & O Ports, through its Mauritius registered
company, took over the Mundra International Container Terminal, earlier known
as Aani Container (Mundra) Terminals Ltd and A P Mollier Group ( a Danish
company which owns Maersk Sealand) is likely to take over the Pipavav Port.

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ROADS

Industrialization in India has brought in its wake considerable demand for more
and better roads. A better road network will result in enormous savings, estimated
to be between Rs 200 and 300 billion (US$5.7-8.6 billion) per annum.
Improvement of the road network will also enable commercial vehicles to run
500-600 km per day, which is the average distance covered by them in the
developed world, as opposed to the 200-300 km per day average in India
currently.

The Opportunities:

Roads in India are categorised as Expressways, National Highways, State


Highways Major District Roads, Other District Roads and village roads. The
investments needed over the next 10 years, till 2005-06, for the development of
the National and State Highways are estimated to total Rs 1,180 billion (US$ 33.7
billion). Of this, budgetary resources are expected to provide Rs 465 billion (US$
13.3 billion), and multilateral and bilateral agencies Rs 220 billion (US$6.3
billion). Private sector investment required is at least Rs 290 billion (US$ 8.3
billion).
Railways

Demand for rail services has grown in tandem with economic expansion, quickly
outstripping the supply capacity of existing assets (GOI 2002). Pricing anomalies
and different priorities assigned to the Indian Railways (IR) stretched the internal
resources to the extent that regular maintenance of fixed assets was accorded low
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priority. As a result, important infrastructure deficits have appeared. These deficits
have created serious bottlenecks that hamper further growth on certain sections of
IR. The need to increase investment in infrastructure was recognized in the late
1990s.

Government is seriously considering to build dedicated freight corridors with the


help of private participations.

CONTRACT ADMINISTRATION AND CERTIFICATION PROCESSES

All process & systems involved in procurement & execution of public works have
to have:

Value for money


Transparency
Accountability
Efficiency

TRANSPARENCY

Public money is involved–Works are done for the general public–Should stand
public scrutiny. By putting in place an elaborate system of checks & balances–By
defining in great detail processes, procedures, authority, responsibility–Making
maximum information available to public. GOI has introduced RTI Act.

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The question would be is it achieved? The answer is yes –by way of account
codes, & works manuals. The next question would be at what cost? The response
is that like everything else transparency comes with a cost; this is in terms of time
taken. Necessity to comply with large number of rules tends to delay or slow
down processes. Fear of violating the rules makes officers cautious thus further
slowing down processes.

So what is the solution? A via-media needs to be adopted Rules should be


modified to give greater freedom to project managers but simultaneously they
should be held accountable for delivery. The hierarchy of objectives should be
well defined.

ACCOUNTABILITY

Another issue is the accountability and one should have no doubts about it. A
person has to be accountable for the work he does-whether procures/executes
public works or does work for a private organization. It has only one issue,
Accountability should go hand in hand with authority over processes.

EFFICIENCY:

Efficiency is difficult to define. Normally efficiency is mistaken for economy.


However a project executed with richer specifications, i.e. with higher initial
outlay may be more economical as it reduces whole life cycle costs. Similarly a
project executed faster may be more economical as it allows utility to be used
early. Present situation of public works in India has its focus on saving costs,
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necessity of doing things faster has not been given due consideration

Now there has been a paradigm shift in the view point of the Government. Focus
is shifting to faster and better delivery systems and harmonized procurement
systems. There is a growing feeling that existing organizations, with their
traditional processes, may not be able to meet expectations

NEED FOR IMPROVING EFFICIENCY

Need for improving efficient delivery of public works cannot be denied. All
processes have to be efficient if money put in has to travel far and therefore a fresh
look has to be given to the question how we define our goals? What processes we
use? How we design utilities/buildings? How we select the agencies? While need
for improved overall efficiency cannot be denied we have to ensure that:

 Systems followed are well

defined

 Focus is clear

So far focus has always been on saving costs and normally lowest financial bids
are accepted. Before a project is taken up the focus should be defined and
transparency and accountability are not forgotten or relegated

Increase in efficiencies of processes alone will not yield desired results if


efficiencies in actual construction practices are also not increased
Indian construction industry is poised to grow exponentially because of massive
infrastructure building programs. This has created excellent opportunities for the
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construction industry in terms of business opportunity. The Indian economic
environment and system and procedures would further boost the construction
industry which would provide the basic physical infrastructure for the nation as
well as other industries.

1.3 COMPANY PROFILE

INTRODUCTION

Establishing deep rooted foundations in 1996, Ocean Interiors (P) Ltd., is a turnkey
interior contracting company. Under the expert guidance of Mr. Peter, MD & CEO
and Mr. Sriram, Chairman and the dedicated team, the company has expanded to
become one of the best in its field. It has also perfected itself as an aesthetic
combination of skill, speed, workmanship and punctuality, leveraged by a decades
worth of experience. This, in fact, is one of the major reasons for the company to
have attained the much acclaimed ISO certification, a strong domain and long-
lasting business relationships with many of the major architects and clients in
India.

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ORGANIZATIONGOAL:

To achieve success in all ventures and become the only name remembered by
Business Associates in all our endeavors and beyond.

STRATEGY POLICY:

We aim to achieve our goal constantly upgrading our systems, processes, teams
and activities to ensure that we remain on top of our present and future clients need
at all times.

ORGANIZATION QUALITY:

Quality is a state of being and level of competency. At Ocean Interiors (P) Ltd., we
ensure the highest levels of quality in our work.

Vision:
To achieve success in all latitudes and become the only name remembered by
Business Associates in all our endeavors and beyond.
Mission:

We aim to achieve our goal by constantly merging our systems, processes, teams &
activities to ensure that we remain on top of our present and future clients need at
all times.

Core values of the Company:

 Transparency in the process


 Integrity in the trade

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Absolute commitment to work

 Dedication to the client


 Speed in execution
 Trust in our own skill
 Team Work
 Collective growth as an organization

SERVICES:

I. CIVIL & INTERIOR WORKS:

Ocean Interiors (P) Ltd. specializes in bringing outstanding creations through its
exceptional interior design solutions. Within a span of 15 years, Ocean Interiors (P)
Ltd., has accumulated an expertise that is incomparable to any other player in

the industry by the strong guidance and headship of Mr.S.K.Peter the Managing
Director of Ocean Interiors (P) Ltd.

Ocean Interiors (P) Ltd., as a resourcefully structured organization is backed by


well-qualified and veteran professionals in its team. These professionals guarantee
in handing over the Deliverables with utmost quality standards and strictly adhere
to timelines, thereby making Ocean Interiors (P) Ltd., the most preferred turnkey
contractor to undertake interior turnkey projects.

This closely knit team of design professionals and architects at Ocean Interiors (P)
Ltd., absorb and translate clients’ dreams into winning projects, which turn out to
be successful, both aesthetically and commercially. Interior design experts at
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Ocean Interiors (P) Ltd., work on all the interior disciplines. The designs generated
from the studios are the essence of artistry which has indeed earned an enormous
good-will in area of interior turnkey contracting.

II. CLIENTS’ SATISFACTION

With a firm commitment to enhance the clients’ satisfaction, Ocean Interiors (P)
Ltd., always believes in transcending the quality standards in its every initiative. It
emphasizes on quality excellence and timely completion to the fullest satisfaction
of the Clients. The ever expanding list of clients stands as a live testament to this.

Ocean Interiors (P) Ltd., has effectively contributed its expertise in providing these
exceptional interior turnkey solutions to plentiful commercial IT offices, property
developers and many other projects.

Some of the top brasses in the clientele include TCS, Cognizant, Royal Bank of
Scotland, HSBC, Franklin Templeton, e- Bay, Nokia, Renault Nissan, iNautix,
Infoparks, Logica, HP, Mahindra & Mahindra, Scope International, Tata
Communications and First Source ltd, Depuy a Johnson & Johnson company.

Ocean Interiors (P) Ltd. renders civil works to clients in accordance to the interior
requirements. With the extended expertise of civil engineering professionals and
contractors, Ocean Interiors (P) Ltd., offers its extended services in compliance
with the Indian standards of civil work in many of its specifications & site
requirements. Having achieved a dominant position in the industry of Interior
Turnkey Solutions and won the heart of numerous clients, Ocean Interiors (P) Ltd.,

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has gathered all its expertise and placed its first step by venturing into civil
construction. In collaboration with the most Reputed and well-experienced
Builders – Ramaniyam Constructions, Ocean Interiors (P) Ltd., has newly stepped
into the arena of construction of multistoried apartments across Chennai.

I. ELECTRICAL:

Catering to the diverse requirements of clients, Ocean Interiors (P) Ltd. offers
urbane Electrical services, which involves designing and execution of electrical
installations as a part of the interior turnkey contracting. The dexterous
professionals assure that the products used are of branded make as per the
specifications with highest quality, thereby ensuring the safety and durability of the
electrical installations as a whole. Ocean Interiors (P) Ltd. offers all kinds of
interior electrical work with standard specification & brand to suit every specific
electrical layout & clients’ requirement.

The various services that intend to present safe, secured and uninterrupted services
are as follows;

 HT substation 110kv/33kv/22kv/11kv.
 HT & LT Switch gears.

 Distribution Transformers.

 DG Sets including acoustics, Fuel handling, and Exhaust systems.

 UPS and Emergency Lighting System.

 Office space electrical works and other related Services.


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 Testing commissioning of HT & LT works.

II. HVAC:

HEATING VENTILATION AIR CONDITIONING (HVAC)

The very purpose of Ocean Interiors (P) Ltd., offering HVAC service is to render
quality reliable products & services that unite performance with value pricing,
while creating a mutually successful relationship with clients and supplier. Ocean
Interiors (P) Ltd., is a pioneer in the industry for designing and executing heating
ventilation air-conditioning systems and solutions.

KEY STRENGTHS:

 A core design team to combine performances with aesthetics ensuring a cost-


effective air conditioning system
 A planning team to ensure movement of material at the appropriate time,
reduce wastages and delivering projects on time
 Exclusive Purchase and Quality Control department to procure quality
products at reasonable rates and ensure value for money
 A group of project teams to ensure co-ordination among other agencies,
safety of workman and translating the design into reality

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 Sets of well-experienced and handpicked contractors to a consolidated
strength of 150 – 225 people
 A dedicated factory with imported machines for Duct Manufacturing, Ducts
are made using the latest 4 Bolt – TDC system eradicating the use of MS
Angle frames which is corrosive by nature
 A group of veterans of Blue Star personnel working in tandem with us
guiding and encouraging us to achieve our dreams and goals

III. FIRE & SAFETY:

Ocean Interiors (P) Ltd., is an authentic interior turnkey organization which is


well-equipped and well-specialized for implementing Security & Fire installations
on a turnkey basis. With its prime focus kept on energy conservation through
integrated, intelligent building management and automation systems which
include;

 Gas Suppression.
 Fire protection system.
 Internal sprinkler for warehouse and office.
 Fire hydrant for factory and buildings.
 FAS.
 CCTV.
 PA systems.
 Access Control.

KEY STRENGTHS:

 In-house groups that offer top-to-bottom security solutions with international


quality standards for the implementation and maintenance of the projects.

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 A strong Design Team with enriched technical skills to establish the highest
sense of Security with necessary standards through minimum equipment
usage
 An exclusive team with highest of expertise for successful installation the
systems on a premise.
 A strong partnership with well-recognized OEMs to execute projects.

The entire set of products procured for installing the fire and safety interior
solutions are from leading international brands. They, in addition have acquired
International Standards which include the CE (European Certification), UL, ULC,
FM and so on for the same.

IV. CIVIL CONSTRUCTION:

Ocean Interiors (P) Ltd., renders civil works to clients in accordance to the interior
requirements. With the extended expertise of civil engineering professionals and
contractors, Ocean Interiors (P) Ltd., offers its extended services in compliance
with the Indian standards of civil work in many of its specifications & site
requirements.

Having achieved a dominant position in the industry of Interior Turnkey Solutions


and won the heart of numerous clients, Ocean Interiors (P) Ltd., has gathered all its
expertise and placed its first step by venturing into civil construction in the name &
style Ocean Life Spaces Pvt Ltd, which is an 100% subsidiary of Ocean Interiors
(P) Ltd.

31
In collaboration with the most Reputed and well-experienced Builders, Ocean
Interiors (P) Ltd., has stepped into the arena of civil construction of buildings in
commercial spaces, factory spaces and residential spaces.

CLIENTS:

32
33
CHAPTER II

2.1 REVIEW OF LITERTURE

Doron Nissim & Stephen H Penman (1999)

In his research article on financial performance he has pointed that this paper
outlines a financial statement analysis for use in equity valuation. Standard profitability
analysis is incorporated, and extended, and is complemented with an analysis of growth.
The perspective is one of forecasting payoffs to equities. So financial statement is
presented first as a matter of Performa analysis of the future, with forecasted ratio
viewed as building blocks of forecasts of payoffs.

34
Kennedy And Muller (1999)

In his research article on financial performance he has pointed that the


analysis and inferences/ interpretation of financial statement are an attempt to determine
the significance and meaning of financial statement data so that the forecast may be
made of the prospects for future earnings, ability to pay interest and debt maturates (both
current and long term) and profitability and sound dividend policy.

Abate, Juan Manuel De La Fuente Puente, Esther de Quevedo (2003)

This paper reviews the empirical literature analyzing the relationship between
corporate reputation and financial performance. It points out the progress made and the
new trends that have become apparent, reflects on the gaps that have been left in our
knowledge and speculates on possible future studies that will allow us to enlarge our
knowledge of this relationship.

Elizabeth Duncan and Elliott (2004)

In this research article on financial performance he has pointed that he had


stated that the paper in the title of efficiency, customer service and financing
performance among Australian financial institutions showed that all financial
performance measures as interest margin, return on assets, and capital adequacy are
positively correlated with customer service quality scores.

Jonas Elmerraji (2005)

In his research article on financial performance he has pointed that he


tries to say that ratio can be an invaluable tool for making an investment decision.
Even so, many new investors would rather leave their decision to fate than try to

35
deal with the intimidation of financial ratios. The truth is that ratios aren’t that
intimidating, even if you don’t have a degree in business or finance. Using ratio to
make informed decisions about an investment makes a lot of scenes, once you
know how use them

John j. wild, K.R. Subramanyam & Robert f. Halsey (2006)

In his research article on financial performance he has pointed that he have


said that the financial statement analysis is the application of analytical tool and
technique to general- purpose financial statements and related data to derive estimates
and inferences useful in business analysis. Financial statement analysis reduces reliance
on hunches, guesses, and intuition for business decision. It decreases the uncertainty of
business analysis.

I.M Pandey (2007)

In his research article on financial performance he has pointed that the


financial statement contain information about the financial consequences and sources
and uses of financial resources, one should be able to say whether the financial variable
given in financial statements in a meaningful way which will suggest the actions which
one may have to initiate to improve the firm’s financial condition.

Susan ward (2008)

In his research article on financial performance he has pointed that


emphasis that financial analysis using ratio between key values help investors cope with
the massive amount of numbers in company financial statements. For example, they can
compute the percentage of net profit a company is generating on the funds it has

36
deployed. All other things remaining the same, a company that earns a higher percentage
of profit compared to other companies is a better investment option.

Vedran Capkun, Ari‐Pekka Hameri, Lawrence A. Weiss, (2009)

The paper finds a significant positive correlation between inventory


performance (total as well as the discrete components of inventory) and measures of
financial performance (at both the gross and operating levels) for firms in manufacturing
industries. The correlation between the performance of discrete types of inventory and
financial performance varies significantly across inventory types. RMI performance has
the highest correlation with all financial performance measures. Between WIP inventory
and FGI performance, the former is more highly correlated with gross profit measures
while the latter is more highly correlated with operating profit measures.

Rachchh Minaxi A (2011)


In his research article on financial performance he has pointed & suggested
that the financial statement analysis involves analyzing the financial statements to
extract information that can facilitate decision making. It is the process of evaluating the
relationship between component parts of the evaluating the relationship between
component parts of the financial statements to obtain a better understanding of an
entity’s position and performance.

S.M. Tariq Zafar (2012)

The author made study to explored the truth that the ratios are calculated
from the financial statements’ which are prepared as desired by the management and
policies adopted on depreciation and stock values and thus produce only a collection of
37
facts expressed in monetary term and cannot produce complete and authentic picture of
the business and also may not highlight other factors which affects performance. They
found that to control manager’s management often overuse ratio and concentrate more on
improving the ratios and also known fact that ratio is simple comparison of numerator
and a denominator and in comparing ratios it become difficult to adjudicate whether
differences are due to change in the numerator or denominator or in both. It is also found
that ratios are interconnected but are often treated by management in isolation and also
found that analysis of ratios lack authenticity as data used in calculation are not accurate
but manipulated presentation by the promoters.

Priyaaks (2012)

In this research article on financial performance he has pointed that financial


statement analysis is the process of examining relationships among financial statement
elements and making comparisons with relevant information. It is a tool in decision-
making processes related to stocks, bonds.

Jerónimo de Burgos‐Jiménez Diego Vázquez‐Brust (2013)

This paper analyses the relationship between environmental protection and mid‐
term financial performance, focusing on when and why this relationship is positive. In
particular, the paper disaggregates environmental protection, differentiating between
environmental management practices, environmental proactivity and environmental
performance of the organization.

38
Prodromos Chatzoglou , Dimitrios Chatzoudes , Nikolaos Kipraios , (2015)

The purpose of this paper is to explore the relationship between the acquisition of
an ISO 9000 certification and the overall financial performance of the certified firms.
More specifically, the study proposes a multidimensional conceptual framework,
including “customers’ demand”, “ISO adoption”, “operation efficiency”, “market
efficiency” and “overall financial performance”. Such a multidimensional approach has
randomly been explored in the existing literature, making the examination of the
proposed conceptual framework an interesting research topic.

M. Venkata Subramanian (2016)

Financial analysis referred to financial statement analysis or accounting


analysis refers to an assessment of the viability, stability and profitability of a business,
sub-business or project. The main idea behind this study is to analyze the financial
operating position of the company. This research is done with help of secondary data
which is gathered from the annual report of the company. The financial performance can
be measured by using various financial tools such as profitability ratio, solvency ratio,
comparative statement, etc. Based on the analysis, findings have been arrived that the
company has got enough funds to meet its debts & liabilities, the income statement of the
company shows sales of the company increased every year at good rate and profit also
increased every year.

2.2 NEED FOR THE STUDY

This study is selected to analyze the financial strength and weakness


of the company. At present the company is facing problem in earning profit in

39
accordance with sales. The year 2014 to 2016 the profit level is 8.94,6.33,6.152 as
compared to the previous two years 2012-2013

2.3 OBJECTIVES OF THE STUDY:

Primary objectives:

 To analyze the financial performance of Ocean Interiors.

Secondary objectives:

 To study the liquidity, solvency, profitability position of the company.


 To know the future prospectus of the company.
 Ascertaining the past and current financial performances of the firm with
the help of comparative balance sheet.

2.4 SCOPE OF THE STUDY

The scope of study is limited to the operations of Ocean Interiors. The


information obtained from the primary and secondary sources are limited to Ocean
Interiors. The key performance indicators were taken from annual reports of Ocean
interiors. The information regarding Annual reports, profit & loss Account, Balance
Sheet are taken from last five years. Comparison Analysis was done with
information available in annual reports.

40
This study helps the company to improve the performance. Effective utilization of
financial resource and that leads to achieve profitability and efficiency of operation.
This study will help to frame strategies and to take decision making.

2.5 RESEARCH METHODOLOGY

MEANING OF RESEARCH:

Research in common parlance refers to a search for knowledge. One can also
define research as a scientific and systematic search for pertinent information on a
specific topic. In fact, research is an art of scientific investigation. When we talk of
research methods but also consider the logic behind the methods we use in the
context of our research study and explain why we are using a particular method or
technique and why we are not using others so that research results are capable of
being evaluated.

DEFINITION OF RESEARCH:

According to Clifford Woody research comprises of “define and redefining


problem, formulating hypothesis or suggested solution, collecting, organizing and
evaluating data; making deduction and reaching conclusion; and at last carefully
testing the conclusion to determine whether they fit the formulating hypothesis”.

Research can be defined as the search of knowledge or any systematic


investigation to establish fact. The primary purpose for applied research (as
opposed to basic research) is discovering, interpreting and the development of

41
methods and systems for the advancement of human knowledge on a variety of
scientific matters of our world and the universe.

RESEARCH DESIGN

The Research is of various types like Applied Research, Descriptive Research,


Analytical Research, Empirical Research, Exploratory Research etc. The type of
research used in this study is analytical research.

ANALYTICAL RESEARCH:

Analytical research is concerned with determining validity of hypothesis based on


analysis of facts collected. The researcher uses facts or information already
available and does analysis to make critical evaluation of the material.

SOURCES OF DATA COLLECTION

The data collections classified into two types are Primary data and Secondary data.

Primary Data

Primary Data is a data collected for the first time. The information is collected
directly from the source by means of field study. Primary Data are original and are
like raw materials. It is the crudest form of information. The investigator himself
collects primary data or supervises its collection. It may be collected on a sample
or census basis or from case studies.

42
Secondary Data

According to M. M. Blair, Secondary data “are those already in existence and


which have been collected for some other purpose”. Secondary Data may be
abstracted from existing records and published sources. The data which have
already been collected and processed by some persons or agency and are not used
for the first time are termed as secondary data. In simple, it refers to information
gathered from sources that are already in existence. Here it refers to

 Company’s annual report


 Company’s website
 Manual
 Existing records

This study is based on secondary data. The details regarding the company like
company profile and financial data was sourced from company’s website and
financial records.

Instruments Used

 Financial Tools
 Ratio Analysis
 Comparative Balance Sheet
 Common-Size Balance Sheet

 Statistical tools:
 Trend analysis

TOOLS USED IN FINANCIAL STATEMENT ANALYSIS

1. RATIO ANALYSIS

43
Ratio analysis is a widely used tool for financial analysis. It can be used to
compare the risk and return relationships of firms of different sizes. It can be
defined as the systematic use of 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.

Modes of Ratios used for analysis

1. Current Ratio

The ratio of current assets to current liabilities is called current ratio. It


measures a company’s ability to repay short-term liabilities. A ratio of 2:1 is
usually considered the benchmark; however, this may vary across industries.

Current assets

Current ratio =

Current liabilities

2 . Liquid Ratio

This ratio is also called as “Acid test or Quick ratio”. It refers to the assets which
are quickly convertible into cash. The higher the value, the lower the level of risk
because the company has more claims to immediate liquidity than the industry
norm.

44
Liquid assets

Liquid ratio =

Current liabilities

Liquid assets= Total assets – stock- prepaid expenses.

3.Debt-Equity Ratio (DE)

It is also called as external-internal equity ratio. It provides an indication of a


company’s capital structure and whether the company is more reliant on
borrowings (debt) or shareholder capital (equity) to fund assets and activities.

Total long-term debt

DE ratio =

Shareholder’s Funds

4.Return on Shareholder’s Funds (ROS)

It is the ratio of net profit to shareholder’s investment. It is the relationship


between net profit and shareholder’s fund. This ratio determines the
profitability from the shareholder’s point of view:

45
Net profit after interest and tax

ROS = X 100

Shareholder’s fund

5. Return on Total Assets (ROA)

Here, the profitability ratio is measured in terms of relationship between net


profits and assets. The ROA may be called as profit asset ratio.

Net profit after tax

ROA= X 100

Total Assets

6. Earnings per share (EPS)

This ratio highlights the overall success of the concern from owners’ point of
view and it is helpful in determining market price of equity shares.

Net Profit after interest & tax

EPS =

Weighted average no. of equity shares

46
7. Proprietary Ratio (PR)

It is the relationship between the shareholder’s funds and total tangible assets
(or) total assets excluding intangible asset and goodwill. Proprietary ratio
indicates the extent to which assets are financed by owner’s fund.

Shareholder’s funds

PR =

Total Assets

8. Fixed assets ratio

The objective of calculating this ratio is to ascertain the proportion of long-term


funds invested in fixed assets.

Fixed assets

FAR =

Long-term funds

9. Overall solvency/ total debt ratio

It is a ratio which relates the total tangible assets (or) total assets excluding
intangible and goodwill with the total borrowed funds. It also measures the
extent to which the debt is covered by assets

Total debt

47
Overall Solvency = Total Asset

10.Gross profit ratio:

Gross profit ratio is also called as gross margin. It is calculated by dividing


gross profit by sales. The gross margin represents the limit beyond which fall in
sales prices are outside the tolerance limit.

Gross profit

Gross profit margin = X 100

Sales

11. Net profit ratio:

Net profit ratio is also called as net margin. This measures the relationship
between net profit and sales of the firm.

Net Profit

Net profit ratio = X 100

Net sales

48
12. Return on equity:

This profitability ratio carries the relationship of return to the sources of funds.
While ROCE expresses the profitability of a firm in relation to the funds
supplied by the lenders and owners taken together, the return on shareholders’
equity measures exclusively the return on the owner’s funds.

Net income

Return on Equity = *100

Shareholder’s Equity

13. Working capital turnover ratio:

Working capital turnover ratio is a measurement comparing the depletion of


working capital to the generation of sales over a given period. This provides
some useful information as to how effectively a company is using its working
capital to generate sales.

Net Sales

Working capital turnover ratio = Working capital

COMPARATIVE BALANCE SHEETS

According to “Faulke”-

49
Comparative Balance Sheet analysis is the study of the trend of the same items,
group of items and computed items in two or more balance sheets of same
business enterprises on different dates.

ADVANTAGES

 It shows the extent to which there is increase or decrease in assets and


liabilities between two balance sheet dates.
 It helps in studying the trends in business firms.
 It shows the effect of business operation on its assets, liabilities and
capital.

COMMON SIZE BALANCE SHEET

A common-size financial statement is simply one that is created to display


line items on a statement as a percentage of one selected or common figure.
Creating common-size financial statements makes it easier to analyze a company
over time and compare it with peers.

Using common-size financial statements helps investor’s spot trends that a


raw financial statement may not uncover. In this, the total assets or liabilities are
taken as 100 and all figures are expressed as percentage of the total.

STATISTICAL TOOLS:

TREND ANALYSIS:

Trend analysis is one of the tools for the analysis of the company’s monetary
statements for the investment purposes. Investors use this analysis tool a lot in

50
order to determine the financial position of the business. In a trend analysis, the
financial statements of the company are compared with each other for the several
years after converting them in the percentage.

2.6 LIMITATION OF THE STUDY

 The study has only made a humble attempt at evaluating financial


performance and does not and cannot claim as the perfect study.
 The data used for calculation is historical data and may have some
adjustments made.
 Time constraint, Exact value of Gross Profit could not be obtained.

CHAPTERIII
51
3.1 DATA ANALYSIS AND INTERPRETATION

The financial performed of a firm can be evaluated by constructing ratio for the
various items appearing in the financial statement. A ratio is a simple artificial
expression of the relationship between two mathematical variables. Ratio analysis
is a technique of analysis and interpretation of financial statement by establishing
and interpreting various ratios useful for decision making.

In this chapter I have applied various ratios for analyzing financial position of the
company. The result and interpretation are given below:

RATIO ANALYSIS

CURRENT RATIO:

Table 3.1.1 showing computation of current ratio

52
CURRENT CURRENT
CURRENT
YEAR ASSETS LIABILITIES
RATIO
(Lakhs) (Lakhs)
2011-12 4763.45 4280.64 1.11
2012-13 7719.10 6020.80 1.28
2013-14 12662.10 9929.80 1.27
2014-15 14244.50 8308.68 1.71
2015-16 18806.99 10322.09 1.82

Chart 3.1.1.1 showing current ratio

Inference

Current ratio is the measure of liquidity calculated by dividing current asset by


the current liabilities. The ideal current ratio is 2:1. In the financial year 2011-12, the
current ratio was 1.11:1 and it was increased to 1.28:1 in later years 2012-13. The

53
current ratio has a constant raise in the financial year 2013-14 and 2014-15 as 1.71:1
and 1.82:1 respectively.

LIQUID RATIO/ QUICK RATIO/ ACID TEST RATIO:

Table 3.1.2 showing computation of Liquid Ratio

LIQUID CURRENT
LIQUID
YEAR ASSET LIABILITIES
RATIO
(Lakhs) (Lakhs)
2011-12 4400.5 4280.64 1.03
2012-13 7601.21 6020.80 1.26
2013-14 3910.85 9929.80 0.39
2014-15 2419.39 8308.68 0.29
2015-16 7957.05 10322.09 0.77

Chart 3.1.2.1 showing liquid ratio

54
INFERENCE:

Liquid ratio is a measure of liquidity calculated dividing current assets minus inventory
and prepaid expenses by current liabilities. A liquid ratio of 1:1 is considered as ideal
ratio. A quick ratio higher than 1:1 indicates that the business can meet its obligation
with available quick funds in hand (2012 to 2016) whereas a ratio less than 1:1
indicates that the company relies more on inventory or other assets to pay the
obligations.

55
DEBT EQUITY RATIO:

Table 3.1.3 showing computation of Debt-Equity ratio

TOTAL
LONG DEBT
SHAREHOLDER
YEAR TERM EQUITY
FUND (Lakhs)
DEBT RATIO
(Lakhs)
2011-12 2053.69 2695.11 0.76
2012-13 2688.52 3831.41 0.701
2013-14 527.96 5199.59 0.101
2014-15 484.24 7021.33 0.068
2015-16 1013.56 8780.26 0.115

Chart 3.1.3.1 showing Debt equity ratio

56
INFERENCE:

Debt-Equity ratio measures the ratio of long term or total debt to shareholder’s
equity. In the year 2011-12 the ratio was 0.76:1 which indicates low margin of safety
to creditors whereas in the year 2014-15 the ratio became 0.068:1 which indicates
high margin of safety to creditors.

PROPRIETARY RATIO:

57
Table 3.1.4 showing computation of Proprietary Ratio

TOTAL
SHAREHOLDER PROPRIETARY
YEAR ASSETS
FUND (Lakhs) RATIO
(Lakhs)
2011-12 2695.11 4152.35 0.649
2012-13 3831.41 1859.78 2.060
2013-14 5199.59 2467.57 2.107
2014-15 7021.33 1537.23 4.56
2015-16 8780.26 1280.73 6.855

Chart 3.1.4.1 showing Proprietary ratio

INFERENCE:

The Proprietary ratio indicates the extent to which assets are financed by owner’s
fund. It is observed that the calculated proprietary ratio of the company, In 2012-2016
the ratio was 0.649 and 6.855 which indicates there is a less dependence on debt for
its operations.

58
OVERALL SOLVENCY RATIO/DEBT TO ASSET RATIO:

Table 3.1.5 showing computation of Overall Solvency Ratio

TOTAL TOTAL OVERALL


YEAR DEBT ASSETS SOLVENCY
(Lakhs) (Lakhs) RATIO
2011-12 609.73 4152.35 0.146
2012-13 1549.87 1859.78 0.833
2013-14 2381.81 2467.57 0.965
2014-15 484.24 1537.23 0.315
2015-16 1581.48 1280.73 1.234

Chart 3.1.5.1 showing Overall Solvency Ratio

INFERENCE:

Overall solvency ratio is a ratio which relates the total tangible assets with
the total borrowed funds. The overall solvency ratio has been increasing from

59
2011-12 to 2013-14. A higher ratio indicates greater risk and lower safety to the
owners. In 2014-15 the ratio is 0.315 which indicates low risk and higher safety to
the owners.

EARNINGS PER SHARE:

Table 3.1.6 showing computation of EPS

NET
PROFIT WEIGHTED EARNINGS
YEAR AFTER AVERAGE NO. PER
TAX OF EQUITY SHARE
(Lakhs) SHARE
2011-12 856.77 1347.55 0.635
2012-13 1147.99 1915.70 0.599
2013-14 1379.87 2599.79 0.531
2014-15 1834.79 3510.66 0.522
2015-16 1770.97 4390.13 0.403

Chart 3.1.6.1 showing EPS

60
INFERENCE:

EPS reflect upon the capacity of the concern to pay the dividend to its equity
shareholders. The EPS was higher in the year 2012-13 and started declining upto the
year 2015-16 is 0.403. In the year 2015-16 the ratio is too less of 0.403 which
indicates the company was not in a position to pay dividend to its shareholders

61
GROSS PROFIT RATIO:

Table 3.1.7 showing computation of Gross Profit Ratio

GROSS GROSS
NET SALES
YEAR PROFIT PROFIT
(Lakhs)
(Lakhs) RATIO
2011-12 1271.95 11402.77 11.15
2012-13 1619.23 12052.09 13.43
2013-14 1956.39 15438.17 12.67
2014-15 2794.24 28975.20 9.64
2015-16 2743.68 28783.30 9.53

Chart 3.1.7.1 showing Gross profit ratio

62
INFERENCE:

Gross profit ratio measures the percentage of each sales rupee remaining
after the firm has paid for its goods. The ratio has showed an decreased rate from
2012-13 to 2015-16 (13.43 to 9.53) which implies that the company has less revenue
from operation.

NET PROFIT RATIO:

Table 3.1.8 showing computation of Net Profit Ratio

NET PROFIT NET SALES NET PROFIT


YEAR
(Lakhs) (Lakhs) RATIO

2011-12 856.77 11402.77 7.51


2012-13 1147.99 12052.09 9.52
2013-14 1379.87 15438.17 8.94
2014-15 1834.79 28975.20 6.33
2015-16 1770.97 28783.30 6.15

Chart 3.1.8.1 showing Net Profit Ratio


63
INFERENCE:

Net profit ratio is a measure of management’s efficiency in operating the business


successfully from the owner’s point of view. In the year 2012-13 the net profit ratio
was high 9.52 which shows better efficiency in operations whereas in the year
2014-15 the ratio went down to 6.15 which shows the opposite implication.

RETURN ON TOTAL ASSETS/ PROFIT-TO-ASSET RATIO:

64
Table 3.1.9 showing computation of Return on total assets

NET
RETURN
PROFIT TOTAL ASSETS
YEAR ON TOTAL
AFTER (Lakhs)
ASSETS
TAX (Lakhs)
2011-12 856.77 4152.35 20.6
2012-13 1147.99 1859.78 61.7
2013-14 1379.87 2467.57 55.9
2014-15 1834.79 1537.23 119.3
2015-16 1770.97 1280.73 138.3

Chart 3.1.9.1 showing Return on Total Assets

INFERENCE:

65
ROA measures efficiency of the business in using its assets to generate net income.
Higher value of return on assets shows that business is more profitable. In case the
highest return on asset was recorded in the year 2015-16 that is 138.

RETURN ON SHAREHOLDER’S FUNDS:

Table 3.1.10 showing computation of Return on shareholder’s fund

NET
RETURN
PROFIT
ON SHARE
YEAR AFTER SHAREHOLDER
HOLDERS
TAX FUND (Lakhs)
FUND
(Lakhs)
2011-12 856.77 2695.11 31.79
2012-13 1147.99 3831.41 29.96
2013-14 1379.87 5199.59 26.53
2014-15 1834.79 7021.33 26.13
2015-16 1770.97 8780.26 20.16

Chart 3.1.10.1 showing Return on Shareholder’s Fund

66
INFERENCE:

Return on shareholder’s fund ratio determines whether the investment


in the firm is attractive or not as the investors would like to invest only where the
return is higher. At present the value is going in decrease for the year 2012-13 and
it is not seen as attractive for the investors.

RETURN ON EQUITY:

67
Table 3.1.11 showing computation of Return of Equity

SHARE
NET RETURN
HOLDERS
YEAR INCOME ON
EQUITY
(Lakhs) EQUITY
(Lakhs)
2011-12 1631.94 2695.11 60.55
2012-13 1148.00 3831.41 29.96
2013-14 1379.87 5199.59 26.53
2014-15 1834.79 7021.33 26.13
2015-16 1770.97 8780.26 20.17

Chart 3.1.11.1 showing Return of Equity

INFERENCE:

68
The return on equity measures the return on owner’s fund. From the year 2011-12 to
2015-16 the ratio has decreased from 60.55 to 20.17, it indicates that the owner’s fund
has been used efficiently.

WORKING CAPITAL TURN OVER RATIO:

Table 3.1.12 showing computation of Working Capital Turnover ratio

AVERAGE WORKING
NET SALES WORKING CAPITAL
YEAR
(Lakhs) CAPITAL TURNOVER
(Lakhs) RATIO
2011-12 11402.77 241.405 47.23
2012-13 12052.09 849.5 14.18
2013-14 15438.17 1366.5 11.29
2014-15 28975.20 2967.91 9.76
2015-16 28783.30 4242.45 6.78

Chart 3.1.12.1 showing Working Capital turnover ratio

69
INFERENCE:

In the year 2011-12 the highest working capital turnover ratio 47.23 has been
recorded indicating that the working capital was used efficiently while in the year
2015-16 the lowest working capital turnover ratio 6.78 has been reached indicating
that the working capital was used inefficiently.

COMPARATIVE BALANCE SHEET ANALYSIS

Table 3.1.13 showing comparative analysis for April 2011 to March 2012

Rs. in lakhs
Previous Current
Increase (+)or Decrease (-)
Year Year
Particulars 2011 (Rs) 2012 (Rs)

Amount(Rs
Percentage (%)
)
Assets
Fixed Assets 1407.46 4152.35 2744.89 195.02

70
Non-Current
300.76 110.16 (190.6) (63.37)
Investment
Other Non-
194.20 3.49 (190.71) (98.20)
Current Assets
Total Non
Current Assets 1902.42 4266 2363.58 124.24
(A)
Current Assets (
B)
Inventories 335.53 362.95 27.42 8.17
Trade
675.49 2640.88 1965.39 290.95
Receivables
Cash And Cash
2235.95 1295.49 (940.46) (42.06)
Equivalents
Other Current
988.78 464.13 (524.65) (53.06)
Assets
Total Current
4235.75 4763.45 527.7 12.45
Assets (B)
Total Assets
6138.17 9029.45 2891.28 47.10
(A+B)
Liabilities
Share Holders
Fund And 1905.45 2695.11 789.66 41.44
Reserves (A)
Non-Current
Liabilities
Long term
- 361.50 - -
borrowings
Other Long –
37.77 1692.19 1654.42 4380.2
Term Liabilities
Current
Liabilities
Short Term (74.48)
972.87 248.23
Borrowings (724.64)
Trade Payables 68.02 158.50 90.3 132.40
Other Current
3154.05 3862.16 708.11 22.45
Liabilities

71
Short Term
- 11.75 - -
Provision
Total Equity &
6138.17 9029.45 2891.28 47.10
Liabilities

INFERENCE:

From the above table comparative statement for the year has been fluctuating
during the study period. In the year 2011-2012, current liabilities was increased by
47.10 % where as non- current asset decreased by -63.37 % ,it can be derived from
this period of current asset has got risen up.

Table 3.1.14 Showing comparative analysis for April 2012 to March 2013

Rs. in lakhs
Previous Current Increase (+)or Decrease (-)
Year Year
Particulars 2012 (Rs) 2013 (Rs)

Amount(Rs) Percentage
(%)

Assets
Fixed Assets 4152.35 1859.78 (2292.57) (55.21)
Non- Current
110.16 547.38 437.22 396.89
Investments
Long Term Loans
- 2056.07 - -
& Advances
Other Non Current
3.49 357.68 354.19 10148.71
Assets
Total Non- 4266 4820.91 554.91 13.00
Current Assets

72
(A)

Current Assets
Inventories 362.95 79.24 (283.71) (78.16)
Trade Receivables 2640.88 2619.24 (21.64) (0.81)
Cash & Bank
1295.49 909.80 (385.69) (29.77)
Balances
Short Term Loans
- 4072.16 - -
& Advances
Other Current
464.13 39.35 (424.78) (91.52)
Assets
Total Current
4763.45 7719.79 2956.34 62.06
Assets (B)
Total Assets
9029.45 12540.7 3511.25 38.88
(A+B)
Shareholder’s
Funds
Share Capital 100.00 100.00 - -
Reserves &
2595.11 3731.41 1136.3 43.78
Surplus
Non-Current
Liabilities
Long Term
361.50 238.62 (122.88) (33.99)
Borrowings
Other Long –
1692.19 2449.90 757.71 44.77
Term Liabilities
Current
Liabilities
Short Term
248.23 1311.25 1063.02 428.23
Borrowings
Trade Payables 158.50 381.63 223.13 140.77
Other Current
3862.16 4315.92 453.76 11.74
Liabilities
Short Term
11.76 11.98 0.22 1.87
Provisions
Total Equity &
9029.45 12540.7 3511.25 38.88
Liabilities

73
INFERENCE:

From the above table comparative statement for the year has been fluctuating
during the study period. In the year 2012-2013, current liabilities was increased by
38.88 % where as non- current asset decreased by 13% ,it can be derived from this
period of current asset has got risen up

Table 3.1.15 Showing comparative analysis for April 2013 to March 2014

Rs. in lakhs
Previous Current
Increase (+)or Decrease (-)
Year Year
Particulars 2013 (Rs) 2014 (Rs)

Percentage
Amount(Rs)
(%)
Assets
Fixed Assets 1859.78 2467.57 607.79 32.68
Non- Current
547.38 523.96 (23.42) (4.278)
Investments
Long Term Loans
2056.07 - - -
& Advances
Other Non Current
357.68 3.71 (353.97) (98.96)
Assets
Total Non-
Current Assets 4820.91 2995.24 (1825.67) (37.86)
(A)
Current Assets
Current
- -
Investments
Inventories 79.24 58.78 (20.46) (25.82)
Trade Receivables 2619.24 3452.64 833.4 31.81
Cash & Bank 909.80 399.42 (510.16) (56.07)

74
Balances
Short Term Loans
4072.16 6548.04 2475.88 60.80
& Advances
Other Current
39.35 2203.20 2163.85 5498.98
Assets
Total Current
7719.79 12662.08 4942.29 64.02
Assets (B)
Total Assets
12540.7 15657.32 3116.62 24.85
(A+B)
Shareholder’s
Funds
Share Capital 100.00 100 - -
Reserves &
3731.41 5099.59 1368.18 36.66
Surplus
Non-Current
Liabilities
Long Term
238.62 527.96 289.34 121.25
Borrowings
Other Long –
2449.90 - - -
Term Liabilities
Current
Liabilities
Short Term
1311.25 1853.84 542.59 41.37
Borrowings
Trade Payables 381.63 620.91 239.28 62.69
Other Current
4315.92 7442.02 3126.1 72.43
Liabilities
Short Term
11.98 13.00 1.02 8.51
Provisions
Total Equity &
12540.7 15657.32 3116.62 24.85
Liabilities

INFERENCE:

75
From the above table comparative statement for the year has been fluctuating
during the study period. In the year 2013-2014, current liabilities was decreased by
24.85 % where as non- current asset increased by 32.68 ,it can be derived from this
period of current asset has got risen up.

Table 3.1.16 showing comparative analysis for April 2014 to March 2015

Rs. in lakhs
Previous Current Increase (+)or Decrease (-)
Year Year
Particulars 2014 (Rs) 2015 (Rs)

Amount(Rs Percentage
) (%)
Assets
Fixed Assets 2467.57 1542.94 (924.63) (37.47)
Non- Current
523.96 19.44 (504.52) (96.28)
Investments
Other Non Current
3.71 7.37 3.66 98.65
Assets
Total Non-Current
2995.24 1569.75 1425.49 47.68
Assets (A)
Current Assets
Inventories 58.78 75.74 16.96 28.85
Trade Receivables 3452.64 2068.00 (1384.64) (40.10)
Cash & Bank Balances 399.42 275.64 (123.78) (30.98)
Short Term Loans &
6548.04 6337.63 (210.43) (3.213)
Advances
Other Current Assets 2203.20 5487.48 3284.28 149.06
Total Current
12662.08 14244.48 1582.4 12.49
Assets(B)
Total Assets (A+B) 15657.32 15814.24 156.92 1.00
Shareholder’s Funds

76
Share Capital 100 100 - -
Reserves & Surplus 5099.59 6921.33 1821.74 35.72
Non-Current
Liabilities
Long Term Borrowings 527.96 484.24 (43.72) (8.28)
Current Liabilities
Short Term Borrowings 1853.84 - - -
Trade Payables 620.91 912.44 291.53 46.95
Other Current Liabilities 7442.02 7181.22 (260.8) (35.05)
Short Term Provisions 13.00 215.01 202.01 1553.92
Total Equity &
15657.32 15814.24 156.92 1.00
Liabilities

INFERENCE:

From the above table comparative statement for the year has been fluctuating
during the study period. In the year 2014-2015, current liabilities was increased by
1.00 % where as non- current asset decreased by (-37.47) ,it can be derived from
this period of current liabilities has got risen up.

.Table 3.1.17 showing comparative analysis for April 2015 to March 2016

Rs. in lakhs
Previous Current Increase (+)or Decrease (-)
Year Year
Particulars 2015 (Rs) 2016 (Rs)

Amount(Rs Percentage
) (%)
Assets
Fixed Assets 1542.94 1295.21 (247.73) (16.05)
Non- Current
19.44 2.90 (16.54) (85.08)
Investments
Long Term Loans &
-
Advances
77
Other Non Current
7.37 10.85 3.48 47.21
Assets
Total Non-Current
1569.75 1308.93 (260.82) (16.61)
Assets (A)
Current Assets
Current Investments
Inventories 75.74 262.20 186.46 246.18
Trade Receivables 2068.00 6930.88 4862.88 235.14
Cash & Bank Balances 275.64 761.82 486.18 176.38
Short Term Loans &
6337.63 264.35 (6073.28) (95.82)
Advances
Other Current Assets 5487.48 10587.73 5100.25 92.94
Total Current
14244.48 18806.99 4562.51 32.03
Assets(B)
Total Assets (A+B) 15814.24 20115.92 4301.68 27.20
Shareholder’s Funds
Share Capital 100 100 - -
Reserves & Surplus 6921.33 8680.26 1758.93 25.41
Non-Current
Liabilities
Long Term Borrowings 484.24 1013.56 529.32 109.30
Current Liabilities
Short Term Borrowings - 567.91 - -
Trade Payables 912.44 883.39 (29.05) (3.18)
Other Current Liabilities 7181.22 8857.06 1675.84 23.33
Short Term Provisions 215.01 13.72 (201.29) (93.61)
Total Equity &
15814.24 20115.92 4301.68 27.20
Liabilities

INFERENCE:

From the above table comparative statement for the year has been fluctuating
during the study period. In the year 2015-2016, current liabilities was increased by

78
27.20% where as non- current asset decreased by (-16.61%) ,it can be derived from
this period of current liabilities has got risen up.

Common size statement:

Table 3.1.18 common size statement for year 2012,2013,2014,2015 & 2016

PARTICULAR 2012 2013 2014 2015 2016


Assets
Current Assets:
Inventories 4.02% 0.63% 0.38% 0.48% 1.30%
Trade receivables 29.25% 20.88% 22.05% 13.07% 34.45%
Cash & Bank Balance 14.35% 7.25% 2.55% 1.74% 3.79%
Loans &Advances - 48.87% 41.82% 2.14% 1.31%
Other Current Assets 5.14% 0.31% 14.07% 72.63% 52.63%
Total Current Assets (A) 52.76% 77.94% 80.87% 90.06% 93.48%
Fixed Assets (B) 45.99% 14.84% 15.76% 9.76% 6.44%
Investments (C ) 1.25% 7.22% 3.37% 0.18% 0.08%
Total 100% 100% 100% 100%
Assets(A+B+C) 100%
Liabilities
Current Liabilities
Provision 0.13% 0.10% 0.08% 1.36% 0.06%
Loan Funds 25.4% 31.89% 15.21% 3.06% 7.86%
Trade Payables 1.76% 3.04% 3.97% 5.77% 4.39%
Other Current liabilities 42.86% 34.42% 47.53% 45.41% 44.1%
Total Liabilities (A) 70.15% 69.45% 66.79% 55.6% 56.41%
Capital & Reserves:
Equity Share Capital 1.11% 0.80% 0.64% 0.63% 0.50%
Reserves & Surplus 28.74% 29.75% 32.57% 43.77% 43.15%
Total Shareholder's 29.85% 30.55% 33.21% 44.4% 43.59%

79
Funds(B)
Total Liabilities & 100% 100% 100% 100%
Capital (A+B) 100%

INFERENCE:

In the table of Common Size Balance Sheet of 2012-2016, Current Assets had
grown to 93.48 % out of total assets and loan funds have been decreased to 7.86%
out of total liabilities, when compared with the preceding years. In the year 2012 to
2015 Reserves & Surplus has been increased 28.74 % to 43.15 %,

TREND PROJECTION

LEAST SQUARE METHOD:

 The least square method is based on the assumption that the past rate of change of
the variable under study will continue in the future. It is a mathematical procedure
for fitting a line to a set of observed data points in such a manner that the sum of
the squared differences between the calculated and observed value is minimized.

80
 This technique is used to find a trend line which best fit the available data. This
trend is then used to project dependent variable in the future. This method is very
popular because it is simple and inexpensive.

The table values are obtained as follows,

 First two columns as year (X) and quantity demand per year (Y) are noted
manually.
 In the third column, the deviation of x is obtained by the difference between the
center value and the other respective given values.
 In fourth column, the value of x square (x2) is obtained by squaring the third column
values which are previously determined.
 In the fifth column, the value is obtained by multiplying the quantity demand per
year (Y) and x square(x2).
 And in sixth column, Y=a+bx equation values are obtained by calculations.

PROCEDURE

 Step1:

Find the values of a and b using formula as follows,

a= ∑Y/n

b= ∑xY/x2

 Step 2:

81
Find the value of Y from the equation Y=a+bx by substituting the values of a, b, x.

 Step 3:

In this step, the Expected value for the upcoming year (i.e in our case 2017, 2018,
and 2019) is fixed in order i.e -1, -2, 0, 1, 2, 3, 4, 5.

 Step 4:

Calculate the estimated value for upcoming years are determined using the
equation Y=a+bx by substitution of respective values of a, b, x.

TREND PROJECTIONS FOR GROSS SALES FOR THE YEARS 2017, 2018,
2019

YEAR GROSS DEVIATI X2 xY TREND


(x) SALES (Y) ON OF x VALUES
Y=a+bX
(in Lakhs) (in Lakhs)
2012 -2 4
11538.25 -23076.5 3918.82
2013 12291.0 -1 1 -12291.08 9126
82
8 .55
2014 15783.61 0 0 0 14334.28
2015 1 1
29160.83 29160.83 19542.01
2016 29142.40 2 4 58284 24749.74
2017 29957.47
2018 35165.08
2019 40372.78
2
n=5 ∑Y=71671.4 ∑x=0 ∑x =1 ∑xY=52077
0 .25

Forecasted value

YEAR 2017 2018 2019


GROSS SALES 29957.74 35165.08 40372.78
(In Lakhs)
INFERENCE:

From above, estimated value of Gross sales is determined for next 3 years.
Estimated value of Gross sales for the year 2017, 2018 and 2019 are determined as
29957.47 Rs (in Lakhs), 35165.08 Rs (in lakhs) & 40372.78 Rs. (in Lakhs).

TREND PROJECTIONS FOR GROSS PROFIT FOR THE YEARS 2017,


2018, 2019

YEAR (x) GROSS DEVIATION X2 xY TREND


PROFIT (Y) OF x VALUES
Y=a+bX
(in Lakhs) (in Lakhs)
2012 -2 4
1271.95 -2543.9 1255.22

83
2013 1619.23 -1 1 -1619.23 1665.26
2014 1956.39 0 0 0 2075.3
2015 2794.24 1 1 2794.24 2485.34
2016 2734.68 2 4 5469.36 2895.38
2017 3305.42
2018 3716.9
2019 4125.5
n=5 ∑Y=10376.49 ∑x=0 ∑x2=10 ∑xY=4100.47

Forecasted value

Year 2017 2018 2019


Gross profit 3305.42 3716.9 4125.5

INFERENCE:

From above, estimated value of Gross Profit is determined for next 3 years.
Estimated value of Gross Profit for the year 2017, 2018 and 2019 are determined
as 3305.42 Rs (in Lakhs), 3716.9 Rs (in lakhs) & 4125.5 Rs. (in Lakhs).

TREND PROJECTIONS FOR NET PROFIT FOR THE YEARS 2017, 2018,
2019

YEAR X NET DEVIATION x2 xY TREND


PROFIT OF x VALUES
(in Lakhs) (in Lakhs)
2012 856.77 -2 4 -1713.54 895.03

84
2013 1147.99 -1 1 -1147.99 1146.55
2014 1379.87 0 0 0 1398.07
2015 1834.79 1 1 1834.79 1649.59
2016 1770.97 2 4 3541.94 1901.11
2017 2152.63
201 2404.15
2019 2655.67
n=5 ∑Y=6990.39 ∑x=0 ∑x2=10 ∑xY=2515.2

Forecasted value

Year 2017 2018 2019


Net profit 2152.63 2404.15 2655.67

INFERENCE:

From above, estimated value of Net Profit is determined for next 3 years. Estimated
value of Net Profit for the year 2017, 2018 and 2019 are determined as 2152.63 Rs
(in Lakhs),2404.15 Rs (in lakhs) &2655.67 Rs. (in Lakhs).

85
CHAPTER IV

86
4.1 SUMMARY OF FINDINGS

 Current ratio for the period of study is less than ideal point of 2:1 and every
year current ratio is less than 1 which means that its assets are less than its
liabilities.
 Liquid / Quick ratio for the study period of 2013-14 to 2015-16 is less than 1
in every year which leads to laggy liquidation of and its assets.
 The Gross profit is increasing in the year of 2012-13 and the later years the
ratio range to be decreased upto 2016
 Debt-Equity ratio measures the ratio of long term or total debt to
shareholder’s equity. In the year 2011-12 the ratio was 0.76:1 which
indicates low margin of safety to creditors whereas in the year 2014-15 the
ratio became 0.068:1 which indicates high margin of safety to creditors.
 Net profit ratio is a measure of management’s efficiency in operating the
business successfully from the owner’s point of view. In the year 2012-13
the net profit ratio was high 9.52 which shows better efficiency in operations
whereas in the year 2014-15 the ratio went down to 6.15 which shows the
opposite implication.
 The Proprietary ratio indicates the extent to which assets are financed by
owner’s fund. It is observed that the calculated proprietary ratio of the company,
In 2012-2016 the ratio was 0.649 and 6.855 which indicates there is a less
dependence on debt for its operations.

87
 The overall solvency ratio has been increasing from 2011-12 to 2013-14. A
higher ratio indicates greater risk and lower safety to the owners. In 2014-15
the ratio is 0.315 which indicates low risk and higher safety to the owners.

 Return on shareholder’s fund ratio determines whether the investment in the


firm is attractive or not as the investors would like to invest only where the
return is higher. At present the value is going in decrease for the year 2012-
13 and it is not seen as attractive for the investors.

 The return on equity measures the return on owner’s fund. From the year
2011-12 to 2015-16 the ratio has decreased from 60.55 to 20.17, it indicates
that the owner’s fund has been used efficiently.

 In the year 2011-12 the highest working capital turnover ratio 47.23 has
been recorded indicating that the working capital was used efficiently while
in the year 2015-16 the lowest working capital turnover ratio 6.78 has been
reached indicating that the working capital was used inefficiently.

 Common Size Balance Sheet of 2012-2016, Current Assets had grown to


93.48 % out of total assets and loan funds have been decreased to 7.86% out
of total liabilities, when compared with the preceding years. In the year 2012
to 2015 Reserves & Surplus has been increased 28.74 % to 43.15 %,

 Trend analysis shows the forecasted amount of and sales and company
follows same financial outlay it can achieve the figure of sales for the year
2017, 2018 and 2019 are determined as 29957.47 Rs (in Lakhs), 35165.08 Rs
(in lakhs) & 40372.78 Rs. (in Lakhs)
.

88
 Trend analysis shows the forecasted amount of and netprofit and company
follows same financial outlay it can achieve the figure of Net Profit for the
year 2017, 2018 and 2019 are determined as 2152.63 Rs (in Lakhs),2404.15
Rs (in lakhs) &2655.67 Rs. (in Lakhs
 Trend analysis shows the forecasted amount of and gross profit and company
follows same financial outlay it can achieve the figure of Gross Profit for the
year 2017, 2018 and 2019 are determined as 3305.42 Rs (in Lakhs), 3716.9
Rs (in lakhs) & 4125.5 Rs. (in Lakhs).

4.2 SUGGESTIONS

 The Company can maintain cash position as it will increase the liquidity of
the company.

 The company has to maintain a stable current ratio in order to maintain its
current liabilities lesser than the current assets.

 The company can improve its debtor turnover ratio in order to maintain
efficiency in collecting its debts.

 The company can maintain its current assets as like this.

 The company can maintain its borrowings at a minimum possible level.

 The firm has to strengthen its management of receivables by revising the


average debt collection period.

89
4.3 CONCLUSION

Financial statements plays very important role in providing facts and figures
for the decision makers. In the same way ratios will act as analysis kit in the hands
of financial analyst. This ratio will help us and in answering the basic question
and are very much in consideration for decision making. In deciding what to do
and what not to do they are required to analyze the data as per their requirements.
In this project they try to give brief outline of ratio analysis, comparative
statements, common size balance sheet, trend analysis. Throughout project they
analyzed company’s financial position and pros and cons of the situation and they
also interpreted the data. In spite of some limitations they to analyze and
interpreted the facts and figures with accuracy .Based on the analysis
interpretation they gave findings and suggestions for the company as per the best
knowledge which may help the company finally this projects really help us in
knowing the practical things of the corporate world .Really enjoyed this project
work and learnt the most out of it.

90
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