.

CHAPTER 1 INTRODUCTION
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. INTRODUCTION Apart from the economics and accounting, finance also draws for its day to day decisions on supportive disciplines such as marketing, production and quantitative methods. Financial managers should consider the impact of new product development and promotion plans made in marketing area since their plans will require capital outlays and have impact on the projected cash flows. Similarly, changes in the production process may necessitate capital expenditure which the financial managers must evaluate and finance. And finally the tools of analysis developed in the quantitative method area are helpful in analyzing complex financial management problems. A successful sales program is necessary for earning profits by any business enterprise. Sales do not convert into cash instantly; there is invariably a time lag between the sale of goods and the receipt of ash. There is, therefore a need for working capital in the form of current assets to deal with the problem arising out of the lack of immediate realization of cash against the goods sold. Therefore, sufficient working capital is necessary to sustain sales activity. Ratios are relative figures reflecting the relationship between variables. They enable to draw conclusion regarding financial operations. The use of ratios, as a tool of financial analysis, involves their comparison, for a single ratio, like absolute figures, fails to reveal the true position. Trend ratios involve a comparison of the ratio of a firm over time, that is, present ratio is compared with past ratio for the same firm. Trend ratio indicates the direction of change in the performance- improvement, deterioration or constancy- over the year. Inter firm comparison involving comparison of the ratios of a firm with those of others in the same line of business or for the industry as a whole reflects its performance in relation to its competitors. Saint Gobain SEFPRO group today under a fully integrated worldwide commercial network and manufacturing plants dedicated to special Refractories for the glass industry. Fused cast materials are produced by SEPR France SEPR Italy, SEPR USA, SEPR-China, and SEPRIndia. It was made up of melted clay and denser the bonded refractors it also had high temperature conductivity and longer life combined to bonded refractors.

OBJECTIVES OF THE STUDY IMK-ADOOR Page 2

. To evaluate past financial performance. To measure profitability and solvency of Saint-Gobain SEFPRO SEPR Refractories India

Ltd. To measure the liquidity position of Saint-GobainSEFPRO SEPR Refractories India Ltd. To determine its progress over five years. To find out the financial strength and weakness of the firm.

IMPORTANCE OF STUDY The use of financial analysis is not confined to the financial managers. There are different parties interested in the ratio analysis to know the financial position of a firm for different purposes. Using financial analysis one can measure the financial condition of a firm and can point out whether the condition is strong, good or poor. Conclusions can also be drawn on whether performance of the firm is improving or deteriorating. It helps the managers in decision making, financial forecasting and planning, coordinating, controlling the business and also to communicate the financial position in a more easy and understandable manner. SCOPE OF THE STUDY The study covers a period of 5 years from 2005-06 to 2009-10. The study involves the purpose of analyzing and interpreting the financial statements of The Saint-Gobain SEFPRO SEPR Refractories India Ltd .with the help of ratios. Ratios are calculated with the available information and only relevant ratios are calculated, analyzed and interpreted. The 5 years period is considered quite adequate for analysis. Since the main tool used in the study is ratio analysis, the predictive power of financial ratios relies on analysts perception, which indicates subjective nature of the study. But the whole hearted co operation from the staff of Saint-Gobain SEPR Refractories India Ltd and the data provided by them helped to make the study fruitful to a great extent.

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. RESEARCH METHODOLOGY Research Design The research design used here is descriptive one in nature . Sources Of Data Data required for the research methodology has been collected from two sources. The source of data collection is Primary Data: This source of data used for the study is obtained from managers, officers & supervisors of the finance & accounts department. Secondary Data: The secondary source of data obtained from the published annual reports, company handouts & other documents of the company. This was to get clarification and for the information to gain insight to the nature of the problem studied. Tools Used Tools used for financial analysis are Ratio Analysis, Comparative Balance sheet and Trend Analysis LIMITATION OF THE STUDY The researcher has to encounter different constraints in completing the study: First & foremost among them was time constraints. The period of study was not fully sufficient to make an in depth & in detailed study of all activities process, procedures & documents before arriving at the conclusion based on the study. The study is mainly based on the available published information; it is bound to suffer from certain limitation, it has not been possible to have an in depth study due to the non revealing nature of certain facts by the company executives on the context that it would adversely affect the interest of the organization.

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The ratios are calculated on past financial data. So it is difficult to consider probable

happening in the future. It is only a comparative study, other factors like market conditions, management policies etc., may affect the future operations. Non financial changes are important for the business, which is not mentioned in the financial statement. Tools used for the study is only indicators. PERIOD OF THE STUDY The study was conducted based on the financial statements of the last five years from Dec-2005 to March 2010.

CHAPTER SCHEME

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. Chapter 1 Introduction This chapter contains a general introduction about the topic, the objectives, importance and scope of the study, Research Methodology and finally the limitations of the study. Chapter 2 Industry Profile This chapter gives a brief profile of the Refractories Industry Chapter 3 Company Profile This chapter deals with profile of Saint-Gobain SEFPRO SEPR Refractories India Ltd Chapter 4 Theoretical Framework

This Chapter provides a theoretical base of the project work. Chapter 5 Analysis and Interpretation This chapter involves the analysis of data and interpretation of ratios. The ratios obtained have been pictorially represented by way of charts to have better clarity. Chapter 6 Findings, Suggestions and Conclusion This chapter involves the findings of the study, recommendations after analyzing the findings and finally conclusion. Bibliography and Appendix follows it.

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CHAPTER 2 INDUSTRY PROFILE

INDUSTRY PROFILE

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. Refractories are the products to resist the corrosive and erosive action of hot glasses, liquid and solid at high temperature in various kilns and erosive action of hot glasses, liquid and solid at high temperature in various kilns and furnaces. These are made mainly from nonmetallic minerals. The refractories are highly demanded in the glass industry. In older days the bonded refractories are used in the furnaces are not able to resist corrosive action of melted glasses. Therefore there was need to develop an alternative refractory to resist the temperature and corrosion. In 1926 the first fused cast refractory was brought to us from Germany. It was made up of melted clay and denser bonded refractories. Since then fused technology has under gone tremendous changes. Today different types of refractors are available to meet different types of operating conditions. The production of refractories started in India in the form of fire clay bricks in 187. Today a wide variety of refractory products are manufactured tailor made to suit the requirements of the application in various sectors which include iron & steel, cement, glass, non-ferrous metal, petrochemical, fertilizer, thermal power plant etc. 2.1 PRODUCTION SCENARIO The installed capacity for refractory production in India is 1.65 million tons & today runs at 62.37% of the total capacity. The production was a mere 47.25% of the installed capacity in 2002-03. Refractory production in the country has been showing a growth of 16% per annum from 2002-03 till now. This is to the stupendous growth in steel production for the few years. Refractories are the products to resist the corrosive and erosive action of hot glasses, liquid and solid at high temperature in various kilns and erosive action of hot glasses, liquid and solid at high temperature in various kilns and furnaces. These are made mainly from nonmetallic minerals. The refractories are highly demanded in the glass industry. Refractories must be chosen according to the conditions they will face. Refractory materials are used extensively in the metal industries, along with glass melting & other heat treatment operations. Refractory metals are a class of metals that are extraordinarily resistant to heat & wear. They are said to be poorly resistant to oxidation & corrosive. They IMK-ADOOR Page 8

. are used in lighting, tools, lubricants, nuclear reaction control rods, as catalysts,& for their chemical or electrical properties. 2.2 FUTURE OUTLOOK Refractories cost about 8%-10% of the total cost of steel production. There is greater possibility in reducing the specific consumption of refractories by 9 kg/T in steel industry, 0.4Kg/T in cement industry in the coming 3 to 4 years. Refractories still have many areas in various sectors to enter in & it would be the monolithic & special products that would dominate the production in future. 2.3 MILESTONES IN REFRACTORIES DEVELOPMENT IN INDIA 1874: Fire clay bricks 1941: Magnetite bricks 1949: Coke oven silica bricks 1955: Sillimanite blocks for glass industries. 1960: Bauxite based high alumina bricks for steel & cement industries. 1977: AZS electro cast blocks 1983: Magnesia carbon refractories 1985: Ceramic fibers 1986: Bubble alumina based insulating blocks 1990: Direct bonded magnesia-chrome bricks 1990: Slide gate refractories 1991: Dense silica shapes for blast furnace stoves 1993: Alumina carbon continuous casting refractories

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. 1993: Dry basic ramming mass for furnaces 1994: Ultra low cement cartable/monolithic 1995: Alumina carbon silicon carbide blast furnace through mass 1998: Magnesia alumina zircon bricks for cement rotary kilns

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CHAPTER 3 COMPANY PROFILE

3.1 SAINT-GOBAIN GROUP

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. The origin of the Saint-Gobain groups traces back to 1665 in France with a setting of the manufacture Royal des Glaces de mirrors (Royal Mirror Glass Works) by Jean Baptist co Codert, King Louis XIVs comptroller of finance at Saint-Gobain in France. Since then it has been a long journey from producing glass for the historic hall of mirrors at the place of what Saint-Gobain today.Over the years the group has witnessed and immense evolution it forayed into diverse business broadened its international presence and continued to build on and leverage its inherent strengths. Today the group features as one of the worlds leading Industrial Corporation ranged at 116 in the fortune Global 500 list (2007). The groups diversions, strength and reach is reflected in its strong international presence, with over 1400 consolidated companies in countries, sales exceeding 41 billion Euros and a committed team for over 207000 employees worldwide. The company has manufacturing facilities in US, France and India.As a procedure, processor and distributor a high technology materials (glass, ceramics, plastics, ductile, iron etc), Saint-Gobain transforms raw materials into advanced products for use in our daily lives. The groups business comprises 5 sectors, namely building distribution, high performance materials, flat glass, packaging and other refractories. The Saint-Gobain groups invest about 345 million Euros in R & D each year. A team of over 3000 individuals work relentlessly in the groups 16 research centers and development units. GROUP COMPANIES

Saint-Gobain SEFPRO Saint-Gobain Sekurit Ltd. Grindwell Norton Saint-Gobain Weber Saint-Gobain Flat Glass Ltd.

3.2 MILESTONES

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. Year 1688 1692 1853 1856 1880 1889 First glass casting Factory opens at Saint-Gobain (Aisne, France) First Saint-Gobain site outside France (Mannheim, Germany) Pont--Mousson founded Exports from Pont--Mousson developed Saint-Gobain sets up in Italy (Pisa) followed by other sites in Belgium (1900) and Spain (1904) 1918 Saint-Gobain and Pont--Mousson begin to implement diversification policies From 1920 1930 Glass production using continuous casting processes developed The use of centrifugation process for producing cast iron piping adopted by Pont--Mousson 1946 From 1950 1957 Ductile cast iron replaces grey cast iron for piping manufacturex Saint-Gobain and Pont--Mousson begin to develop internationally TEL industrial glasswool production process begins to be used on an industrial scale 1962 1966 1970 Saint-Gobain adopts Float Glass (first factory built for this purpose) Shareholding acquired in CertainTeed Saint-Gobain and Pont--Mousson merge. Event

Organisation reflecting the Groups refocusing and complementary offering on the building, automotive and service markets 1974 The Group becomes established in the USA

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. 1976 1982 1986 From 1986 1988 1990 1995 1996 Majority holding in CertainTeed acquired The Group is nationalised Saint-Gobain is privatised. Group portfolio reconfiguration begins Insulation sector expands internationally First acquisitions in the ceramics sector Friendly takeover of Norton Ball & Foster in the USA acquired Acquisition of the Poliet Group (Point P, Lapeyre, La Plateforme, K par K, Weber) From 1998 Distribution developed via its brands in Europe (acquisition of Meyer, Raab Karcher, Jewson, Dahl) and worldwide (La Plateforme) 2005 2007 MARKETS Takeover bid for BPB Acquisition of Maxit Table 3.1

77% of sales on the habitat and construction markets. Saint-Gobain has now clearly defined itself with regard to the habitat and construction markets, in the broadest sense, having stated its new ambition to become world leader on the habitat and construction markets, providing innovative solutions to the key challenges of our age: growth, energy and the environment". The immense potential of this sector certainly offers Saint-Gobain opportunities for developing its different activities. 3.3 SAINT-GOBAIN IN INDIA

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. The Saint-Gobain group touches Indian shores in 1996 making its presence felt with the acquisition of a majority holding in Grind Well Norton. The group first subsidiary in India, the group has come a long way since with substantial investments in India. Today the group has 9 companies in India offering a variety of engineered materials. Each of these companies is a forerunner standing tall amongst the leaders in its respective field. 3.4 SAINT-GOBAIN SEFPRO Saint-Gobain SEFPRO is the only refractory group worldwide fully dedicated to and streamlined for offering top-of-the-line refractory solutions specifically to the Glass Indutries. With its 10 manufacturing sites around the world, Saint-Gobain SEFPRO offers total reactivity to the Glassmakers needs, combining the power of a global player and its large available resources with the proximity of local partners. Saint-Gobain SEFPRO also has the largest research centres in the world specialising in refractories and their interaction with all types of glasses, and has been leading the industry for decades in the development of new materials. 3.5 HISTORY MILESTONES
1929: Corning and Saint-Gobain set-up in Modane, France, "L' ELECTRO-

REFRACTAIRE" for the production of fused cast refractories for glass furnaces.

1947: A new production site is selected in Le Pontet, near Avignon, France. 1971: Acquisition of REFRADIGE (Italia) (now SEPR ITALIA S.p.A). This

fused cast materials manufacturing facility was established in 1960, under the name of "SICEDISON"

1973: "L' ELECTRO-REFRACTAIRE" becomes S.E.P.R. (Socit Europenne

de Produits Rfractaires).

1987: Integration of CORHART REFRACTORIES (USA). 1991: Signature of a Joint Venture agreement for the production of fused cast

refractories in China (ZPER Co. Ltd.).

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1996: Integration of SAVOIE REFRACTAIRES (France). SAVOIE, established

in 1898, is specialized in manufacturing bonded materials for the Glass Industry.

2001: ZPER is renamed "Beijing SEPR Refractories." Inauguration of a new plant

in Changping (Beijing)

2002: Integration of CUMI (India) created in 1977, now SEPR Refractories India

Ltd.

2003: Toshiba Monofrax, now Saint-Gobain TM K.K, joins the Saint-Gobain

SEFPRO family.

2006: Start of Linyi Saint-Gobain Refractory (JV) China.

3.6 SEPR REFRACTORIES INDIA LIMITED SEPR Refractories India Limited is a Wholly Owned Subsidiary of Saint-Gobain SEFPRO who is one of the worlds largest manufacturers of fused cast refractories for glass furnaces. SEPR India came into being in 2002 by acquiring the fused cast business from Carborundum Universal (CUMI), PRODUCTS A fused cast refractory is a highdensity material obtained by melting a mixture of the purest oxides and casting them into moulds to create the required shapes. Fused cast refractory blocks are preferred by the glass industry mainly because they offer good glass corrosion resistance at high temperatures with no glass defects. Apart from fused cast refractories, we also manufacture Wear Resistant fused cast materials, sintered refractories and monolithics. In view of our ability to manufacture products with Internationally acclaimed standards, we today are preferred suppliers to leading Glass manufacturers and designers like SGG, Fives Stein, SORG, HORN, TECO, NEG etc. We are proud to have a satisfied clientele which spreads over South East Asia, Russia, Europe, America, Africa etc. PLANT The Companys manufacturing facility is located at Palakkad in Kerala. The plant is installed in a total land area of 22 acres The company has completed the major Expansion plan in Jun09 . With this the company has an annual production capacity of 10000 MT of Fused Cast

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. Refractories. The company achieved a cumulative aggregate growth rate of 30% in Annual Sales, while the production capacities increased by 3 times since the year of inception,i.e.2002. QUALITY ASSURANCE Continuous Quality Improvement and close customer interaction have enabled us to consolidate our position in the Glass industry. We strictly adhere to quality control measures in every stage of production process. We are certified for ISO 9001, ISO 14001 and OHSAS 18001. The company has highly talented, committed professionals & skilled labour for putting in best practices.

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CHAPTER 4 THEORETICAL PERSPECTIVE

INTRODUCTION Accounting is known as the language of business as it conveys the financial story of the business concerns. Accounting is the process of identifying, measuring and communicating economic information to permit judgments and decisions by users of the informational. It involves collecting, summarizing, analyzing and reporting in monetary terms the information about an organization, the end products of accounting translations are financial statements. 4.1 FINANCIAL STATEMENTS

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. Financial statements may show a position at a moment of time as in the case of a balance sheet, or may reveal a series of activities over a given period, as in the case of an income statement. Thus the term financial statements include two basic statements: The Income Statements The Balance Sheet INCOME STATEMENT/PROFIT AND LOSS ACCOUNT It explains what has happened to a business as a result operations between two balance sheet dates. For this purpose, it matches the revenue and costs incurred in the process of earning revenues and show the net profit earned or loss suffered during a particular period. BALANCE SHEET Balance sheet provides a snapshot of financial position of the firm at the close of the firms accounting period. It contains information about recourses and obligations of a business entity and about its owners interests in the business at a particular point of time. NATURE OF FINANCIAL STATEMENTS Financial statements are only the summary of the transactions carried out in a given period of time. Financial statements exhibit a combination of recorded facts, accounting conventions and personal judgments and the judgments and conventions applied affect them materially. The nature of financial statements is follows: Financial statements are recorded facts Financial statements are prepared in accordance with the transactions recorded as per the accepted principles of accountancy. Financial statements also reflect the judgment made by the accounts at the time of finalizing these statements. IMPORTANCE OF FINANCIAL STATEMENTS

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. Financial statements contain a lot of useful and valuable information regarding profitability financial position and future prospects of the firm. These statements are mirror, which reflect the financial position and operating strengths and weakness. The utility of financial statements to different parties may be summarized as follows. Management depends heavily on the financial and managerial reports in order to formulate company policies, establish organizational objectives, and evaluate companys performance and its employees and to make other related decisions. Owners require information periodically on how investment is performing and whether or not their continue investment is justified. Investors in business learn a great deal about the company from its financial statements. Employees and trade unions make frequent use of available information in financial statements to demand for wage rise, better working conditions, bonus etc. Central, state and local governments are interested in analyzing financial statements to know the earnings for framing their fiscal and taxation policies. Trade Associations analyze financial statements and make available the essence by way of reports to their members. Based on these statements they can demand subsidies or concessions from government The financial statements enable the stock brokers to judge the financial soundness of the business concerns and price fixation. The stock exchange protects the corporate investors by continuously monitoring the companies through financial statements. OBJECTIVES OF FINANCIAL STATEMENTS The main objective of financial statement is to know the profit or loss for a particular period and to find out the financial position on a particular date. The other important objectives are: To provide reliable financial information about economic resources and obligations of the business enterprise. IMK-ADOOR Page 20

. To provide reliable information about changes in net resources of an enterprise that result from the profit directed and other activities. To provide financial information that assists in estimating the earning potential of the enterprise. To disclose, to the extend possible, other information related to the financial statement that is relevant to statement users. To assist in decision-making The preparations of financial statements are not the end aim. The statements become a tool for the future planning and forecasting. The various information given in the statements are much helpful to the management to take various steps of managerial decisions. The major policies of the company are designed only on the basis of information available from the financial statements. LIMITATIONS OF FINANCIAL STATEMENT Financial statements do not present a final picture of the business. They suffer from the following limitations: Some items in the financial statements are based on personal judgment of the accountant. This will affect the validity of financial statements. Balance sheet does not reveal the true picture of the business. In the Balance Sheet, assets are shown at original costs. Replacement cost or realizable value is ignored. Financial statements ignore the change in price level. These statements are accounting for fast rather than accounting for future. Hence, they are of little value to management in taking decisions. Non-monetary factors such as creditworthiness, efficiency of management etc influence financial statements. But these factors are no considered while preparing financial statements. These statements are sometimes prepared according to the needs of the situation or the whims of management. Window dressing may also be restored to in order to show better financial position of a concern than its real position. IMK-ADOOR Page 21

. 4.2 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS Analysis and interpretation of financial statements refers to the process of determining the significant operating and financial characteristics from the accounting data with a view to getting an insight into the activities of an enterprise. Myers defines financial statement analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements, and a study of the trend of these factors as shown in a series of statements. By establishing a strategic relationship between the items of a balance sheet and income statement and other operative data, the financial analysis explains the meaning and significance of such items. The terms analysis and interpretation are complimentary to each other, though sometimes they are used distinctively. While analysis is used to mean the simplification of data by methodical classification of data given in the financial statements, the term interpretation means explaining the meaning and significance of the data so simplified. However, analysis is useless without interpretation, and interpretation becomes difficult without analysis. Hence, ass the objective of analysis is to study the relationship among the various items of financial statements by interpretation, many to cover both analysis and interpretation together use it. OBJECTIVE OF FINANCIAL ANALYSIS Different parties are interested in the financial statements for different purposes and look at them from different angles. For example, the debenture holders analyze the statements in order to ascertain the ability of companies to make regular periodical interest payments and final payments of principal amount on maturity. The prospective shareholders would like to know whether the business is profitable and is progressing on sound lines. Above all, the management is interested in the operational efficiency as well as the financial position of the business. Hence, the main objective of financial analysis is to make a detailed study about the cause and effect of the profitability and financial condition of the firm. TYPES OF FINANCIAL ANALYSIS Financial analysis may be classified into different categories depending upon (1) the materials used, and (2) the method of operation followed in the analysis. Based on the material used or people interested in the analysis, it may be classified as external vs. internal analysis. IMK-ADOOR Page 22

. External analysis People outside the firm do external analysis in the matter of financial statement analysis, investors, credit agencies, government agencies, shareholders, etc., are outsiders/external parties to the firm. An external analyst usually has only the published information to rely upon. His position has been improved in recent times due to increased government regulations requiring business concerns to provides detailed information to the public through audited account. Internal analysis Analysis for management purposes is the internal type of analysis. It is done by the companys finance and accounting departments and is more detailed than external analysis. Executives and employees of the organization also conduct it. Officers appointed by the governmental or court agencies under regulatory and other jurisdictional powers vested in them over the business also conduct the analysis. Based on the methods of analysis, it may be classified as horizontal vs. vertical analysis. Horizontal analysis: It refers to the comparison of the trend of each item in the financial statement over a period of years, or that of companies. The figures for this type of analysis are presented horizontally over a number of columns. Such a column represents a year or a company. This type of analysis is also called as Dynamic analysis as it is based on data from year to year, rather than on data of any one year. Vertical analysis: It is also called as Static analysis. In vertical analysis the figures relating to a financial statement are presented vertically, i.e., a figure from a years statement is compared with a base selected from the same statement. This type of analysis is mainly used to study through ratios the quantitative relationship of various items in the financial statement on a particular data, or for one accounting period. It is useful to understand the performance of several companies in the same group, or many divisions or departments in the same company. However this type of analysis is not very conducive to a proper analysis of a companys financial position, for it depends on the data for one time period. In order to make it more effective, it could be conducted both vertically as well as horizontally. 4.3 COMPARATIVE FINANCIAL STATEMENTS

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. Comparative financial statements refer to the statements of financial position of a business, which are prepared in such a way as to provide a time perspective to the various elements embodied in the financial statements. In these statements figures are placed side by side for two or more periods in order to facilitate comparison among two or more firms that belong to the same industry. Comparison may be regarding to profitability and financial soundness. 4.4 TREND PERCENTAGES Trend analysis refers to the comparison of past data over a period of time with that of a base year. Under this method, percentage relationship that each statement item bears to the same item in the base year is calculated. Any year i.e., earliest year involved in comparison, or the latest year, or any intervening year, may be taken as the base year. As the purpose of this analysis is to highlight some important changes, the trend calculated only for some important items that can be connected with each other. The concerned item in the base year is taken to be equal to as 100 and then based on this, trend percentage for the curresponding items in other years are calculated. This method is a horizontal type of analysis of financial statements. The trend percentage are shown in comparative financial statements. Trend analysis is a useful tool for the management since it reduces large amount of absolute data in to a simple and easily readable form. By looking at the trend in a particular ratio one can see whether the ratio is increasing or decreasing or remaining constant. From this a problem is unearthed and good management is observed. 4.5 RATIO ANALYSIS The term ratio simply means one number expressed in terms of another. It describes in mathematical terms the quantitative relationship that exists between two numbers. The term accounting ratio, j. batty points out, is used to describe significant relationships between figures shown on a balance sheet, in a profit and loss account, in a budgetary control system or in any other part of the accounting organization. Ratio analysis, simply defined, refers to the analysis and interpretation of financial statements through ratios. Nowadays it is used by all business and industrial concerns in their financial analysis. Ratios are considered to be the best guides for the efficient execution of basic managerial functions like planning, forecasting and control, etc.

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. Ratios are invaluable aids to management and others who are interested in the analysis and interpretation of financial statements. Absolute figures may be misleading unless compared, one with another. Ratios provide the means of showing the relationship that exists between figures. Though there is no special magic in ratio analysis, many prefer to base conclusions on ratios as they find them highly useful for making judgments more easily. However, the numerical relationships of the kind expressed by ratio analysis are not an end in themselves but are a means for understanding the financial position of a business. Generally, simple ratios or ratios compiled from a single years financial statements of a business concern may not serve the real purpose. Hence, ratios are to be worked out from the financial statements of a number of years. Ratios, by themselves, are meaningless. They derive their status partly from the injenuity and experience of the analyst who uses the available data in systematic manner. Besides, inorder to reach valid conclusions, ratios have to be compared with some standards that are established with a view to present the financial position of a business under review. However it should be borne in mind that after computing the ratios one cannot categorically say whether a particular ratio is good or bad as the conclusions may vary from business to business a single ideal ratio cannot be applied for all types of business. A complete record of ratios employed is advisable; and explanations of each, and actual rations year by year should be included. The record may be treated as apart of an account manual or a special ratio register may be maintained.

USES OR ADVANTAGES OF RATIO ANALYSIS Simplification of mass of accounting data Ratios enable the mass of accounting data to be summarized and simplified. Beside, they provide the means of showing the interrelationship that exist between various segments of business, as revealed through accounting statements, and thereby prevent distortions that may result from the study of absolute figure. IMK-ADOOR Page 25

. An invaluable aid to management Ratio analysis helps management in the discharge of its basic functions such as planning, forecasting, control, etc. The trend ratios may be useful for predicting likely events in the future. The plans made can be signposted by accounting ratios and thereby became an integral part of the standard costing and budgetary control system. Facilitates better co ordination and control Ideal ratios can be established and the relationship between primary ratios may be used to establish the desire coordination. Ratios may also be used for control of performance as well as control of costs. They are an effective means of communication and play vital role in informing the position of and progress made by the business concern to the owners or other parties. A tool to assess important characteristics of business Ratio analysis is an effective instrument to assess important characteristics of business like liquidity, solvency, profitability etc.. a study on this aspects may enable to draw conclusions relating to the financial requirements and capabilities of business concerns. An effective tool of analysis for intra-firm and inter-firm comparisons Ratio may also be used as measures of efficiency. It is the main tools of analysis for inter- firm and intra- firm comparisons. By comparing the ratios of different firms one may the identify factors associated with successful and unsuccessful firm or strong and weak firms or over valued and undervalued firms.

UTILITY OF RATIO ANALYSIS The utility of ratio analysis may be explained under the following heads: Utility to management: Ratio analysis helps the management in (a) formulating the policies, (b)forecasting and planning (c) decision making (d) knowing the trends of business (e) measuring efficiency (f) communicating and (g) controlling. IMK-ADOOR Page 26

. Utility to shareholders and investors: An investors would normally assess the financial position of a business before they invests the money in it. He is interested in the safety, security and profitability of his investment. Accounting ratios help the prospective investors in selecting best companies to invest their funds. Ratios enable the shareholders to evaluate the performance and future prospectus of the company. On the basis of some ratios, they are able to calculate the price of their shares. Utility to creditors The creditors or suppliers are those who supply goods to the firm on credit basis. They are interested in the liquidity position or short term financial position, they use liquidity ratios. Utility to employees: The employees are interested in the profitability of the company. Their wages, fringe benefits, working conditions etc. are related to the profits earned by the company. They want to ascertain the profitability for demanding age increase and other benefits. For understanding the profitability of the company, profitability ratios come to their help. Utility to government: The government uses ratio analysis for studying the cost structure of the industries. On the basis of this study, the government can formulate various policies. It can implement the price control measures to protect interest of customers. In short, ratio analysis helps to judge operational efficiency, liquidity, profitability, solvency and growth potential of a firm. LIMITATIONS OF RATIO ANALYSIS Limitations of financial statements: Ratios are mainly calculated from the information recorded in the financial statements. As financial statements suffer from a number of limitations, such limitations may affect the quality of ratio analysis. For example, the financial statements do not reveal non-financial changes though important for the business. Hence, the ratio analysis may fail to serve its purpose fully.

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. No fixed standards: Ratios gain significance only when they are compared with other ratios or standards. But it is very difficult to lay down fixed standard for ideal ratios. Also ratios share with statistical concepts all the limitations of the latter. Qualitative factors are ignored: ratios are tools of quantitative analysis only and normal qualitative factors that may generally influence conclusions derived are ignored while computing ratios. For example, a high current ratio may not necessarily mean sound liquid position when current assets include a large inventory consisting of mostly obsolete items. Hence, it is very difficult to generalize whether a particular ratio is good or bad. Lack of standard formulae: There are no standard formulae for working out ratios and it makes comparison very difficult. They are worked out on the basis of different items in different industries. In addition, the number of ratios is so large that the task of selecting appropriate ratios for different units becomes very difficult. Ratios also fail to indicate clearly the point where the error lies. It is no substitute for personal judgment: Ratio analysis is only a beginning and gives just a fraction of information needed for decision-making. It is just an aid and cannot replace thinking and personal judgment employed in the decision-making process. Problems of price level changes: Ratios fail to reflect the price level changes as they are based on historical data. Hence, they may give misleading results when inflationary conditions are ignored. Comparison of two firms set up in different years through ratio analysis may not be meaningful, since the values of assets and liabilities of the two companies may not be comparable. Ratios alone are not adequate: Ratios computed from historical data are used for predicting and projecting the likely events in the future. Such ratios may provide only a glimpse of a firms past performance, but the forecast for the future may not be correct since several other factors like management policies, economic and market conditions, etc., may induce future operations. It may be concluded that ratio analysis, if not done properly or done mechanically, would be both misleading and dangerous. It is an aid to management to take correct decisions, but as a mechanical substitute for personal judgment and thinking, it would be worse than useless.

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. CLASSIFICATION OF RATIOS

In view of the various users of ratios, they are classified in to four important categories.

Liquidity Ratios

Activity Ratios

Leverage Ratios

Profitability Ratios

LIQUIDITY/ SHORT TERM SOLVENCY RATIOS Liquidity ratio measures the ability to fulfil short- term commitments with liquid assets. These ratios compare assets that can be converted in to cash quickly to fund short term obligation the important liquidity ratios are: a. Current Ratio The current ratio is the ratio of current assets to current liabilities. It is calculated by dividing current assets by current liabilities. The current ratio of a firm measures its short term solvency, which is the firms ability to meet short term obligations. The higher the current ratio, the larger is the amount of rupees available per rupee of current liability, the more is the firms ability to meet current obligations and the greater is the safety of funds of short term creditors. Thus, current ratio, in a way, is a measure of margin of safety to the creditors. Current ratio = Current assets / Current liabilities b. Quick ratio / acid test ratio The acid test ratio is the ratio between quick assets and current liabilities and is calculated by dividing the quick assets by the current liabilities. Acid test ratio is a measure of liquidity calculated by dividing, current assets minus inventory and prepaid expenses by current liabilities. IMK-ADOOR Page 29

. Quick ratio = Quick asset / Current liabilities c. Cash ratio Cash is the most liquid asset. A financial analyst may examine cash ratio and its equivalent to current liabilities. Trade investment or marketable securities are equivalent of cash. Therefore, they may be included in the computation of cash ratio. Cash ratio = Cash + marketable securities / Current liabilities The absolute liquid asset includes cash and near cash assets like the cash in bank and at hand and also the readily marketable securities.

d. Inventory to Working Capital Ratio Inventory to Working Capital Ratio = (Inventory / Working Capital) X 100 Inventory Includes opening stock, work in progress, finished goods and semi finished good. Working capital is the excess of current Assets over current liabilities. ACTIVITY/TURNOVER RATIO Funds of creditors and owners are invested in various assets to generate sales and there by profits. The better management of assets means the larger the amount of sales. Activity ratios are employed to evaluate the efficiency with which the firm manages and utilizes assets. These ratios are also called turnover ratios because they indicate the speed with which assets are being converted or turnover ratios. Important activity ratios are: a. Working capital Turnover Ratio It is the relation between sales and working capital. It is given by the formulae Working capital ratio = Net Sales / Working Capital This indicates whether working capital is effectively used in making sales. A low working capital turnover Ratio may reflect an inadequacy of working capital and lower turnover of inventory or receivables. IMK-ADOOR Page 30

. b. Stock Turnover Ratio It is computed by dividing the cost of goods sold by the average inventory. The ratio indicates how fast inventory is sold. A high ratio is good from the view point of liquidity and vice versa. A low ratio would signify that inventory does not sell fast and stays on the shelf or in the warehouse for a long time. Stock turnover ratio is given by the formulae = cost of the goods sold / Average Stock Cost of goods sold = Sales Gross Profit. Average stock = (Opening stock + Closing stock) / 2 This ratio establishes the relationship between cost of goods sold and inventory. It shows how many times during the period, the firm has turned its inventory. c. Debtors Turnover Ratio: A firm sells goods for cash and credit, when it sells goods for credit, Debtors are created. The liquidity position of a firm depends upon the quality of debtors as they are included in the current assets. Debtors turnover ratio indicates the relationship between debtors and sales. It indicates number of times debts are collected in a year. Debtors turnover ratio = Net Annual credit sales / Average Debtors Debt Collection Period = Number of days in a year / Debtors Turnover Ratio d. Fixed Assets turnover Ratio This ratio measures sale per rupee of investment in fixed assets. This ratio supposed to measure the efficiency with which fixed assets are employed. A high ratio indicates the high degree of efficiency in asset utilizing and a low ratio reflects inefficient use of assets. It is the ratio between fixed assets and net sales. Fixed assets turnover ratio = Net sales / Fixed Assets Fixed Assets means the fixed assets after depreciation and turnover means net sales after deducting returns.

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. e. Creditors Turnover Ratio This ratio measures the managerial efficiency in paying out the creditors liability. A very low creditors turnover ratio or too long credit payment period is also not good from the firms view point because in such case the tendency of credit purchase increases, scope of getting cash discount diminishes and the overall cost of production increases. Creditors Turnover Ratio = Credit Purchases / Average Creditors Credit Payment Period = Number of days in a year / Creditors Turnover Ratio

f. Current Assets turnover Ratio This ratio indicates the relationship between current assets and turnover. Current assets turnover ratio = Net sales / Current Asset A high ratio indicates better utilization of current assets and a lower ratio indicates poor utilization. g. Total Assets Turnover Ratio. Some analysts like to compute the total assets turnover in addition to or instead of net assets turnover. This ratio shows the firms ability in generating sales from all financial recourses committed to total assets. This ratio establishes the relationship between total assets and turnover. It is given by the formulae. Total asset turnover ratio = Sales / Total Assets h. Sales to capital employed Ratio. Sales to capital employed ratio = Sales / Capital Employed The sales refer to annual sales less returns. Capital employed refers to total long term funds used or employed in the business. It is equal to net fixed assets to trade investment to net working capital. IMK-ADOOR Page 32

. LEVERAGE RATIOS Leverage ratio measures the extent of the firms total burden of debt. They reflect the ability to meet both long term and short term obligation. It measures the relative interest of the owners and the creditors in an enterprise. The principal leverage ratios are. a. Debt- Equity/ External Ratio Debt equity ratio shows the relationship between long-term debts and shareholders funds. It is also known as External-Internal equity ratio. Debt Equity Ratio = Long Term Debt / Equity Where Debt (long term loans) includes Debentures, Mortgage Loan, Bank Loan, Public Deposits, Loan from financial institution etc. Equity (Shareholders Funds) = Share Capital (Equity + Preference) + Reserves and Surplus Fictitious Assets This ratio is a measure of owners stock in the business. Proprietors are always keen to have more funds from borrowings because: (i) Their stake in the business is reduced and subsequently their risk too (ii) Interest on loans or borrowings is a deductible expenditure while computing taxable profits. Dividend on shares is not so allowed by Income Tax Authorities. The normally acceptable debt-equity ratio is 2:1. b. Proprietary Ratio It establishes the relationship between shareholders or proprietors fund and total asset. Ratio shows how much funds have been contributed by the shareholders in the total assets of the firm. Proprietary ratio = tangible assets. c. Solvency ratio This ratio expresses the relation between total assets and total liabilities of a business. It measures the solvency of the business. IMK-ADOOR Page 33 Net worth / Total Assets Here net worth means excess of total assets over liabilities. Total assets include tangible and non

. Solvency ratio = Total Assets / Total Debt

Here there is no standard ratio, if the ratio is high, then the financial position of concern is stronger and if the ratio is low, then the financial position is weak. d. Fixed assets Ratio It is the ratio of fixed assets to long term funds or capital employed. Fixed asset ratio = fixed assets / Long term Funds

The fixed assets refer to fixed assets after depreciation and also include long term investments. Long term fund includes shareholders fund and long term borrowed funds. It helps to ascertain the proportion of long term funds invested in fixed assets. Lower the fixed ratio better is the financial position. e. Fixed Assets to Net worth Ratio This ratio indicates the relationship between fixed assets and Net worth Fixed Assets to Net worth Ratio= Fixed Assets/ Net worth f. Net worth to capital employed Ratio This indicates the proportion of debt or net worth in total net assets of the concern. Net worth capital Ratio = Net Worth / Capital Employed

A high ratio indicates that financial position of the firm is sound and a low ratio indicates that the financial position is not sound. PROFITABILITY RATIOS Profitability ratio measures the success of the firm in earning a net return on its operations. Profit is an important objective of an enterprise. It is of much importance to the enterprise, Management, Government, Customers, Creditors, Employees and to the country. Profitability of a firm can be easily measured by profitability ratios. a. Gross Profit Ratio

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. Gross Profit Ratio shows the relationship between Gross Profit of the concern and its Net Sales. Gross Profit Ratio can be calculated in the following manner: Gross profit ratio = (Gross profit / Net Sales) X 100 Gross Profit Ratio provides guidelines to the concern whether it is earning sufficient profit to cover administration and marketing expenses and is able to cover its fixed expenses. The gross profit ratio of current year is compared to previous years ratios or it is compared with the ratios of the other concerns. The minor change in the ratio from year to year may be ignored but in case there is big change, it must be investigated. This investigation will be helpful to know about any departure from the standard mark-up and would indicate losses on account of theft, damage, bad stock system, bad sales policies and other such reasons. Gross profit means profit that a concern earns on its trading or it indicates efficiency with which management products of net sales over the cost of goods sold. Cost of goods sold means opening stock of finished goods to purchases of finished goods + all the expenses incurred on finished goods - closing stock of finished goods. b. Net Profit Ratio Net Profit Ratio shows the relationship between Net Profit of the concern and Its Net Sales. Net Profit Ratio can be calculated in the following manner:
Net Profit Ratio = (Net Profit / Net Sales) X 100

Where Net Profit = Gross Profit Selling and Distribution Expenses Office and Administration Expenses Financial Expenses Non Operating Expenses + Non Operating Incomes. Net Profit means the final balance of operation and non operating incomes after meeting expenses, both operating and non operating expenses. c. Operating Ratio It is used to analyze profitability and managerial efficiency. It explains the proportion of operating expenses in sales of rupee 1. This can be found out by using the following formula Operating Ratio= (Cost of goods sold + operating expenses)/ Net sales X 100 IMK-ADOOR Page 35

. d. Expense Ratio These ratios are used to measure the profitability and managerial efficiency. The relationship between any particular expense and net sales is expressed by this ratio. This ratio can be calculated by using the following formula Expense Ratio = (Particular Expense / Net Sales) X 100 e. Material consumed ratio It is used to analyze the managerial skill in carrying out the production and increasing the profitability of the firm. It explains the proportion of material cost of the total sales. This ratio can be calculated by using the following formula: f. Operating Profit Ratio Operating Profit Ratio = (Operating Profit / Net Sales) X 100 Operating Profit = Net Sales- ( Cost of goods Sold+ Office & Administrative expenses+ Selling & Distribution Expenses ) A high operating profit ratio is an indicator of good profitability and efficient managerial ability. It is relevant to mention in thyis context that the operating profit ratio and operating ratio are complementary to each other. If a firms operating ratio is 80% its operating profit ratio would be 20% or (100-80) %.

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CHAPTER 5 DATA ANALYSIS AND INTERPRETATION

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. 5.1 RATIO ANALYSIS

1. Current ratio

Current ratio = Current asset/Current liabilities In Rs. Lakhs Source: Annual Report Year Current Assets 2005 2006 2007 2008-09 2009-10 1927.33 1754.30 1850.57 5284.30 6038.14 Table 5.1 Current Liabilities 1652.73 968.30 904.13 2748.43 2840.04 Current Ratio 1.17 1.81 2.05 1.92 2.13

2.5 2.05 2 1.81 2.13 1.92

1.5 1.17 1 Current Ratio

0.5

0 2005 2006 2007 2008-09 2009-10

Chart 5.1 Interpretation: The current ratio for 2009-10 is 2.13 It implies that for every one rupee of current liabilities, current assets of 2.13 times the current liabilities are available. The year wise comparison of the firm shows that the firm is in a better liquid position or maintains short term solvency. 2. Quick Ratio/ Acid Test Ratio: IMK-ADOOR Page 38

. Quick Ratio = Quick assets/Current Liabilities In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Quick Assets 1419.48 694.02 1255.32 3231.50 3949.20 Current Liabilities 1652.73 968.30 904.13 2748.43 2840.04 Table 5.2
1.39 1.17 0.86 0.72 Quick Ratio 1.39

Quick Ratio 0.86 0.72 1.39 1.17 1.39

Source: Annual Report

1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005 2006 2007

2008-09

2009-10

Chart 5.2 Interpretation Generally an acid test ratio of 1:1 is considered satisfactory as a firm can easily meet all current claims. The position of the firm is in a satisfactory level for the last five years. The firm has 1.39 liquid assets to meet its current liabilities of each Rs.1/- in 2010. The firm is in a better position to meets its current liabilities.

3. Cash Ratio

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. Cash Ratio = (Cash+ Marketable Securities)/ Current Liabilities In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report
2.5 2 1.5 1 0.5 0.1 0 2005 2006 2007 2008-09 2009-10 0.87 0.85 0.32 Cash Ratio 1.91

Cash+ Marketable Securities 1436.84 821.70 1724.12 281.96 919.24

Current Liabilities 1652.73 968.30 904.13 2748.43 2840.04 Table 5.3

Cash Ratio 0.87 0.85 1.91 0.10 0.32

Chart 5.3 Interpretation Above statement shows the immediate cash available to meets its current liability. In 2010 the firm has 0.32 rupees of cash available to meets its current liability of each one rupee.

4. Stock to Working Capital Ratio IMK-ADOOR Page 40

. Stock to Working Capital Ratio = (Closing Stock/ Working Capital) x100 In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report
200 180 160 140 120 100 80 60 40 20 0 2005 2006 2007 2008-09 2009-10 62.89 80.95 65.32 SWCR 134.89 184.94

Closing Stock 507.85 1060.29 595.25 2052.80 2088.94

Working Capital 274.60 786.01 946.44 2535.86 3198.10 Table 5.4

Stock to WC Ratio (%) 184.94 134.89 62.89 80.95 65.32

Chart 5.4 Interpretation This ratio shows the relationship between Closing stock and working capital of a firm. Ideal standard in Indian Perspective is 75 to 100%.From the calculation it is clear that company is not meeting the standards in the year 2010 and 2007. Company should take actions to increase the Stock to Working Capital Ratio. 5. Net Working Capital Ratio

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. Net Working Capital Ratio = Net Working Capital/ Net Asset In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report
0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2005 2006 2007 2008-09 2009-10 0.1 Net Working Capital Ratio 0.28 0.25 0.31

Net Working Capital 274.60 786.01 946.44 2535.86 3198.10

Net Asset 2621.10 2811.83 3078.81 10323.25 11086.12 Table 5.5

Net WC Ratio 0.10 0.28 0.31 0.25 0.29

0.29

Chart 5.5 Interpretation The net working capital ratio shows the relation between the net working capital and the net asset. It shows the amount of networking capital involved in the net asset. In the year 2010 net working capital ratio is 0.29.

6. Proprietary Ratio IMK-ADOOR Page 42

. Proprietary Ratio = Proprietors Fund / Total Assets In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Proprietors Fund 2479.73 2836.87 4328.60 7383.32 8970.03 Total Assets 4251.24 3921.19 5377.19 12820.83 13969.24 Table 5.6 Proprietary Ratio 0.59 0.72 0.80 0.58 0.64

Source: Annual Report

0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2005 2006 2007 0.59 0.72

0.8 0.58 0.64

PropreietaryRatio

2008-09

2009-10

Chart 5.6 Interpretation A high proprietary ratio indicates more use of proprietors funds in acquiring total assets of the firm. This situation shows a favourable long term solvency and a satisfactory financial Satiability of the firm. So a high proprietary ratio is favourable to the long term creditors and investors. From this it is clear that in 2010 64% of firms asset is financed by proprietors fund itself. From the analysis it is very clear that firm is using a nominal amount of debt for financing its assets. The company is adopting more conservative financial policy as it is using a very nominal amount of debt capital. 7. Debt Equity Ratio

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. Debt Equity Ratio = Debt/Equity In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report Debt 0 30.15 32.82 1734.93 2685.07 Equity 2479.73 2836.87 4328.60 7383.32 8970.03 Table 5.7 DE Ratio (T) 0 0.01 0.008 0.23 0.30

Chart 5.7 Interpretation This ratio reveals the extent of owners investment in relation to the use of debt capital. From the analysis it is clear that company is following a conventional financing policy and debt-equity ratio is not in a satisfactory level. The ideal debt-equity ratio in Indian perspective is 1:1. But company does not meet this ideal ratio. In 2010 for every 1 rupee equity company is using only 0.30 rupee debt. Debt Equity ratio is not in a satisfactory level. The interesting thing is that company has started to use more debt capital in recent years compared to the previous years. 8. Fixed Assets to Current Asset Ratio

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. Fixed Assets to Current Asset Ratio =Fixed Asset/ Current Asset In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Fixed Asset 2346.49 2025.82 2132.37 7787.39 7888.02 Current Asset 1927.33 1754.30 1850.57 5284.30 6038.14 Table 5.8
1.47 1.22 1.31 1.15 1.15

Fixed Asset to Current Asset Ratio 1.22 1.15 1.15 1.47 1.31

Source: Annual Report

1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005 2006 2007

Fixed Asset to Current Asset Ratio

2008-09 2009-10

Chart 5.8 Interpretation This ratio is used to measure the long term solvency and financial stability of the firm. If this ratio is high that indicates more investment in fixed assets than current assets. From this it is clear that company is having more investments in fixed assets than current assets. In 2010 for every 1 rupee current asset company is having 1.31 fixed assets. Higher investments in fixed assets will reduce the profitability of the firm as the current asset is more productive than the fixed asset. 9. Fixed Assets to Net worth Ratio Fixed Assets to Net worth Ratio = Fixed Asset/ Net Worth

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. In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Fixed Asset 2346.49 2025.82 2132.37 7787.39 7888.02 Net Worth 2479.73 2836.87 4328.60 7383.32 8970.03 Table 5.9 Fixed Asset to Net worth ratio 0.95 0.71 0.49 1.05 0.88

Source: Annual Report

Chart 5.9 Interpretation This ratio shows the relationship between fixed asset and Net Worth of the organization. From the analysis it is clear that company is having good fixed asset to net worth ratio.

10. Solvency Ratio / Debt Ratio Solvency Ratio = Total Asset/ Outside Liabilities IMK-ADOOR Page 46

. In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Total Asset 4273.83 3780.12 3982.94 13071.68 13926.15 Outside Liabilities 1771.51 1084.32 1048.58 5473.50 4999.22 Table 5.10
3.8 3.49 2.79 2.41 2.38

Solvency Ratio 2.41 3.49 3.80 2.38 2.79

Source: Annual Report

4 3.5 3 2.5 2 1.5 1 0.5 0 2005 2006 2007

SolvencyRatio

2008-09

2009-10

Chart 5.10 Interpretation Solvency means the ability to meet outsiders fund out of total assets of the firm. From the analysis it is clear that company s having a good solvency ratio. In 2010 for every 1 rupee outsiders fund company is having 2.79 times asset for financing. Companys solvency ratio is in a satisfactory position. 11. Gross Profit Ratio Gross Profit Ratio= (Gross Profit/ Net Sales) X 100

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. In Rs. Lakhs Year 2005 2006 2007 2008-9 2009-10 Source: Annual Report
68 66 64 62 60 58 56 54 52 50 2005 2006 2007 2008-09 2009-10 58.1 56.3 GP Ratio 59.98 64.51 66.53

Gross Profit 2831.54 1490.52 3175.05 5831.31 5881.15

Net Sales 4389.25 2240.28 5464.53 10358.17 9804.41 Table 5.11

GP Ratio (%) 64.51 66.53 58.10 56.30 59.98

Chart 5.11 Interpretation This ratio is used to measure the profitability and managerial efficiency of the firm. The relationship between gross earnings and sales is explained through this ratio. A higher gross profit ratio is favourable for earning sufficient net profit after meeting indirect cost and incidental expenses. Generally a gross profit ratio of 25 % to 30% is taken as an acceptable norm in Indian Perspective. From the analysis it is clear that company is having a good gross profit ratio. 12. Net Profit Ratio (Net Profit Ratio = Profit after Tax/ Net Sales)X100

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. In Rs. Lakhs Year 2005 2006 2007 2009 2010 Profit after Tax
912.04 258.48 1111.36 2427.39 1438.93

Net Sales 4389.25 2240.28 5464.53 10358.17 9804.41 Table 5.12

NP Ratio (%) 20.78 11.54 20.34 23.43 14.68

Source: Annual Report

Chart 5.12 Interpretation It is used to measure the overall profitability and efficiency of the management in generating

additional revenue over and above the total operating cost. It does not make any difference between operating and non operating expenses and shows the relationship between net profit and sales. From the analysis , it is clear that company is having a satisfactory net profit ratio. In 2010 company has earned 14.68% of Net sales as profit. Company should take actios to reduce indirect expenses as it affects the net profit of the company. Company is having good GP Ratio, but Net Profit Ratio is comparatively lower meaning that company should take action to reduce the indirect expenses. 13. Operating Ratio Operating Ratio = [(Cost of Goods Sold +Operating Expense)/ Net Sales] X100

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. In Rs. Lakhs Year Cost of Goods Sold +Operating Expense 2482.51 1474.83 3600.80 7471.94 6927.91 Net Sales Operating Ratio (%)

2005 2006 2007 2008-09 2009-10 Source: Annual Report

80 70 60 56.56 50 40 30 20 10 0 2005

4389.25 2240.28 5464.53 10358.17 9804.41 Table 5.13

56.56 65.83 65.89 72.14 70.66

65.83

65.89

72.14

70.66

OperatingRatio

2006

2007

2008-09

2009-10

Chart 5.13 Interpretation It explains the proportion of operating expenses in sales of rupee one. From the analysis it is clear that company has to spend 72.44 rupee for generating the sales of Rs. 100. An ideal standard for this ratio is absent but generally an operating ratio of 70 % to 80% is accepted as standard in Indian perspective. So firms operating ratio is in a satisfactory level. But firm should take care of controllable expenses to increase the net profit of the firm.

14. Operating Profit Ratio Operating Profit Ratio= (Operating Profit/ Net Sales) X100 IMK-ADOOR Page 50

. In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report
50 45 40 35 30 25 20 15 10 5 0 2005 2006 2007 2008-09 2009-10 43.44 34.17 34.11 27.86 29.34 OperatingProfit ratio

Operating Profit 1906.74 765.45 1863.74 2886.23 2876.50

Net Sales 4389.25 2240.28 5464.53 10358.17 9804.41 Table 5.14

OP Ratio (%) 43.44 34.17 34.11 27.86 29.34

Chart 5.14 Interpretation A high operating profit ratio is an indicator of good profitability and managerial efficiency. An ideal norm for operating profit ratio is absent but an operating profit ratio of 20 % to 25 % is considered as satisfactory in the case of manufacturing firm. Here the operating profit ratio is satisfactory. 15. Material Consumed Ratio Material Consumed Ratio = (Material Consumed/ Net Sales) X100 In Rs. Lakhs IMK-ADOOR Page 51

. Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report

35 30 25 20 15 10 5 0 2005 2006 2007 2008-09 2009-10 12.49 Material Consum Ratio ed 21.64 28.66 28.47 25.72

Material Consumed 949.97 279.73 1566.09 2949.11 2521.33

Net Sales 4389.25 2240.28 5464.53 10358.17 9804.41 Table 5.15

Material Consumed Ratio (%) 21.64 12.49 28.66 28.47 25.72

Chart 5.15 Interpretation This ratio is used to analyse the managerial skill in carrying out production and in increasing the profitability of the firm. In order to generate a sale of Rs.100, company is consuming raw material of Rs.25.72. 16. Interest Coverage Ratio Interest Coverage Ratio = EBIT/ Fixed Interest In Rs. Lakhs

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. Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report

700 600 500 400 300 200 105.54 100 17.09 0 2005 2006 2007 2008-09 2009-10 15.18 144.29 ICR 631.66

EBIT 1427.92 394.20 1711.32 2487.39 2642.91

Fixed Interest 13.53 0.62407 11.86 145.57 174.08 Table 5.16

Interest Coverage Ratio 105.54 631.66 144.29 17.09 15.18

Chart 5.16 Interpretation Interest coverage ratio measures as how many times the interest burden of the firm is covered by the EBIT of the firm. From the analysis, it is clear that firm is having good interest coverage ratio. In 2010 firm is having 15.18 times of Interest as its EBIT. So lenders need not worry regarding their repayment of loan and interest. 17. Financial Leverage Ratio Financial Leverage Ratio = EBIT/ PBT In Rs. Lakhs

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. Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report

1.08 1.06 1.04 1.02 1 0.98 0.96 2005 2006 2007 2008-09 2009-10 1.01 1.01 Financial Leverage Ratio 1.06

EBIT 1427.92 394.20 1711.32 2487.39 2642.91

PBT 1414.39 393.58 1699.46 2341.82 2468.83 Table 5.17

1.07

Financial Leverage Ratio 1.01 1.001 1.01 1.06 1.07

1.001

Chart 5.17 Interpretation This ratio tells about the extent of changes in PBT as a result of changes in PBIT. The financial risk of a firm depends on the use of the use of debt capital in its capital structure. Debt capital is less costly than equity capital. If this ratio is marginally more than 1 that is nearer to 1 it indicate moderate use of debt capital, low financial risk and good financial judgment. Here from the analysis, it can be concluded that company is having low financial risk.

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. 18. Return on Capital Ratio Return on Capital Ratio = (PATBI/ Net Capital Employed) X100 In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report
40 35.31 35 30 25 20 15 10 5 0 2005 2006 2007 2008-09 2009-10 9.21 14.55 24.92 36.48

PATBI 925.58 259.10 1123.22 2572.96 1613.01

Net Capital Employed 2621.10 2811.83 3078.81 10323.25 11086.12 Table 5.18

ROC Ratio (%) 35.31 9.21 36.48 24.92 14.55

ROC

Chart 5.18 Interpretation This ratio shows the profit achieved in comparison to the capital employed. From the analysis, it is clear that company is having good Return on Capital Employed ratio. In 2010 company has earned Rs.14.55 on every 100 rupee capital employed.

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. 19. Return on Investment Return on Investment=( EBIT/ Net Capital Employed)X100 In Rs. Lakhs Year EBIT Net Capital Employed 2005 2006 2007 2008-09 2009-10 Source: Annual Report 1427.92 394.20 1711.32 2487.39 2642.91 2621.10 2811.83 3078.81 10323.25 11086.12 Table 5.19 54.48 14.10 55.58 24.09 23.84 ROI Ratio (%)

Chart 5.19 Interpretation This ratio tells about the return on actual investment made by the company. Company is having a satisfactory ROI ratio.

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. 20. Inventory Turnover Ratio Inventory Turnover Ratio= Cost of Goods Sold/ Average Stock In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report Cost of Goods Sold 1557.71 749.76 2289.48 4526.86 3923.26 Average Stock 501.23 784.07 827.77 1324.02 2070.87 Table 5.20 IT Ratio 3.11 0.96 2.77 3.42 1.89 IT(Days) 117 382 132 107 193

Chart 5.20 Interpretation This ratio is used to measure the efficiency of inventory management in the organization. It explains the relationship between cost of goods sold and the average inventory. From the analysis, it is very velar that companys inventory management system is very poor. In 2010 company took almost 382 days to turnover its inventory. But in capital goods inventory an inventory ratio near to 2 can be considered as satisfactory as this process takes long time to complete the production and goods are produced according to the orders given by the company. Poor inventory turnover ratio of 2006 affected the sales of the company.

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. 21. Debtors Turnover Ratio Debtors Turnover Ratio = Credit Sales/Average Debtors In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report
1.4 1.2 1 0.81 0.8 0.6 0.4 0.2 0 2005 2006 2007 2008-09 2009-10 0.46 1.005 1.24 1.04

Credit Sales 526.71 224.32 630.61 932.24 1400.01

Average Debtors 646.11 489.21 510.16 927.64 1341.85 Table 5.21

DT Ratio 0.81 0.46 1.24 1.005 1.04

DTR (Days) 448 796 295 363 349

Chart 5.21 Interpretation A high debtors turnover ratio in comparison to the industry standards indicates quick collection from debtors. From the analysis it is clear that company is not having good Debtors turnover ratio. In 2010 company has taken 349 days to recover amount from debtors.

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. 22. Creditors turnover Ratio Creditors turnover Ratio= Credit Purchase/ Average Creditors In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Credit Purchase 1027.28 873.38 1099.85 4134.97 2385.88 Average Creditors 1074.57 826.56 803.50 1737.48 2621.24 Table 5.22
2.38

CT Ratio 0.96 1.06 1.37 2.38 0.91

CT Ratio(Days) 381 345 266 153 401

Source: Annual Report

2.5 2 1.5 1 0.5 0 2005 2006 2007 0.96 1.06 1.37

0.91

CT Ratio

2008-09

2009-10

Chart 5.22 Interpretation A very low creditors turnover or too long credit payment period is not good from the point of view of the company because in such case the tendency of credit purchase increases, scope of getting cash discount diminishes and the overall cost of production increases. Here firms Creditors turnover ratio is not in satisfactory level for the year 2010.

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. 23. Working Capital Turnover Ratio Working Capital Turnover Ratio=Net Sales/Net Working Capital In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report Net Sales 4389.25 2240.28 5464.53 10358.17 9804.41 Net Working Capital 274.60 786.01 946.44 2535.86 3198.10 Table 5.23 WCT Ratio 15.98 2.85 5.77 4.08 3.06

Chart 5.23 Interpretation Working capital turnover ratio shows the ability of the firm in generating the sales with the working capital of the firm. In 2010 firm has generated Rs.3.06 sale on 1 rupee working capital.

24. Capital Turnover Ratio IMK-ADOOR Page 60

. Capital Turnover Ratio= Net Sales/ Capital Employed In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report
2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005 2006 2007 2009 2010 0.8 1.003 0.88 1.67

Net Sales 4389.25 2240.28 5464.53 10358.17 9804.41

Capital Employed 2621.10 2811.83 3078.81 10323.25 11086.12 Table 5.24

CT Ratio 1.67 0.80 1.77 1.003 0.88

1.77

Capital Turnover Ratio

Chart 5.24 Interpretation It is used to analyse the efficiency in use of capital and overall managerial efficiency. It explains the sales achieved for per rupee net capital employed. In 2010 company has generated Rs.0.88 sales on every 1 rupee capital employed. It is not satisfactory.

25. Earnings Per Share IMK-ADOOR Page 61

. Earnings Per Share= PAT/ No. Of equity shares In Rs. Lakhs Year 2005 2006 2007 2008-09 2009-10 Source: Annual Report
80 70 60 50 40 30 20 10 0 2005 2006 2007 2008-09 2009-10 8.62 37.05 30.4 42.53 EPS

PAT
912.04 258.48 1111.36 2427.39 1438.93

No. Of equity shares 30.00007 30.00007 30.00007 33.83393 33.83393 Table 5.25
71.74

EPS 30.40 8.62 37.05 71.74 42.53

Chart 5.25 Interpretation In the earning per share shows the earning of each share out of its profit. Earning in 2010 is Rs. 42.53 that means a shareholder will get an earning of Rs 42.53 on his share.

5.2 COMPARATIVE FINANCIAL STATEMENTS

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. 1. COMPARATIVE BALANCE SHEET 2005-2006 In Rs. Lakhs

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PARTICULARS I. SOURCES OF FUND Source: Annual Report 1.Shareholders Fund a. Share Capital b. Reserves & Surplus

2005

2006

INCREASE

DECREASE % OF CHANGES .

300.0007 3127.29

300.0007 3191.91

64.62

0 2.07

2.Loan Funds a. Secured Loans b. Unsecured Loan 30.15 30.15 100

3.DT Liability

118.78

85.88

32.9

27.70

TOTAL

3546.07

3607.94

61.87

1.74

II. APPLICATION OF FUND 1.Fixed Asset a. Gross Block b. Less: Depreciation c. Net Block d. Capital WIP 3735.59 1454.45 2281.14 65.35 2346.49 3812.75 1856.02 1956.73 69.09 2025.82 3.74 320.67 77.16 401.57 324.41 2.07 27.61 14.22 5.72 13.66

2.Investments

924.97

796.11

128.86

16.19

3.Curent Assets a. Inventories b. Sundry Debtors IMK-ADOOR c. Cash & Bank 507.85 702.25 512.86 1060.29 276.16 26.59 552.44 426.09 486.27 108.78 60.67 Page 64 94.81

. Table 5.26

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. Interpretation From the above comparative Balance Sheet, following conclusions can be drawn; Fixed Assets have been decreased by Rs. 320.67 Lakhs A huge decrease in the cash and bank balances and sundry debtors made current assets decreasing. Current Liabilities have been reduced by Rs.684.44 Lakhs Net Working Capital has been increased by Rs 511 Lakhs Shareholders Fund has been increased by Rs 64.62 Lakhs. Company has raised Rs.30.15 Lakhs by way of unsecured Loans. Companys deferred tax Liability has also been decreased by Rs.32.90 From these points, it is clear that companys financial position in 2006 is not satisfactory when compared to 2005.

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2. COMPARATIVE INCOME STATEMENT 2005-2006 In Rs. Lakhs PARTICULARS I.INCOME a. Sales b. Less Excise Duty 4884.14 494.89 4389.25 c. Other Income 86.11 4475.36 2540.36 300.08 2240.28 105.69 2345.97 19.58 2129.39 2343.78 194.81 2148.97 47.99 39.36 48.96 22.74 47.58 2005 2006 INCREASE DECREASE % OF CHANGES

II.EXPENDITURE a. Materials b. Employee Cost c. Other Expenses d. Int & Fin Charges e. Pre-Operative & Preliminary Exp f. Depreciation/Amrn 949.97 467.57 1195.17 13.53 28.78 405.94 3060.98 III.PBT 1414.38 279.73 343.71 923.64 0.62 404.69 1952.39 393.58 670.24 123.86 271.53 12.91 28.78 1.25 1108.59 1020.8 70.55 26.49 22.72 95.44 100 0.31 36.22 72.17

a. Provision for tax

502.34

135.1

367.24

73.11

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. IV. PAT 912.04 258.48 653.56 71.66

a. Profit B/F

141.94

274.85

132.91

93.64

V. Amount Available for Appropriation Less: Proposed dddDividend Dividend Tax Transfer to GR

1053.98

533.33

520.65

49.40

599.90 88.03 91.20

170.00 23.84 25.85

429.9 64.19 65.35

71.66 72.91 71.66

VI. Balance Transferred to Balance Sheet Source: Annual Report Interpretation

274.85

313.62

38.77

14.10

Table 5.27

From the above comparative Income Statement following points can be noted; A huge decrease in the Net sales. Net sales have been decreased by 47.99% when compared to the previous year. It will make a huge impact on the net profit of the company. Other income by way of sale of fixed assets, profit on investment in Mutual Fund has been increased by 22.74 % when compared to the previous year. A huge decrease in the consumption of materials which shows lower production in the year. Profit After Tax has been decreased by Rs. 653.56 Lakhs.

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. From the above points we can conclude that Financial Performance of the company in the year 2006 is not at all satisfactory when compared to 2005.

3. COMPARATIVE BALANCE SHEET 2006-2007

In Rs. Lakhs PARTICULARS I. SOURCES OF FUND 1.Shareholders Fund a. Share Capital b. Reserves & Surplus 300.0007 300.0007 3191.91 4303.27 1111.36 34.82 2006 2007 INCREASE DECREASE % OF CHANGES

2.Loan Funds a. Secured Loans b. Unsecured Loan 30.15 32.82 2.67 8.86

3.DT Liability

85.88

111.63

25.75

29.98

TOTAL

3607.94

4747.72

1139.78

31.59

II. APPLICATION OF FUND 1.Fixed Asset a. Gross Block 3812.75 4215.69 402.94 10.57

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. b. Less: Depreciation c. Net Block d. Capital WIP 1856.02 1956.73 69.09 2025.82 2115.47 2100.21 32.16 2132.37 106.55 259.45 143.48 36.93 13.99 7.33 53.45 5.26

2.Investments

796.11

1668.91

872.8

109.63

3.Curent Assets a. Inventories b. Sundry Debtors c. Cash & Bank d. Other CA e. Loans & Advances 1060.29 276.16 26.59 2.05 389.22 1754.30 Less C L a. Liabilities b. Provisions Net CA 747.21 221.08 786.01 859.79 44.34 946.44 160.43 112.58 176.74 15.07 79.94 20.41 595.25 744.17 56.21 3.63 451.31 1850.57 468.01 29.62 1.58 62.09 96.27 465.04 43.86 169.47 111.40 77.07 15.95 5.49

Total Source: Annual Report

3607.94

4747.72 Table 5.28

1139.78

31.59

Interpretation IMK-ADOOR Page 70

. From the above Comparative Balance Sheet following inferences can be made; A huge increase in the Shareholders Fund which means company is depending more on equity than debt. 5.26 % increase in the Fixed Assets Investments have been increased by 109.63 % which means company has made a huge investment outside the business. Net Working Capital has been increased by Rs. 160.43 Lakhs. Current Liabilities have been decreased by Rs. 64.16 From the above points, it is clear that Financial Position of the company has progressing toward a satisfactory level.

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. 4. COMPARATIVE INCOME STATEMENT 2006-2007 In Rs. Lakhs PARTICULARS I.INCOME a. Sales b. Less Excise Duty 2540.36 300.08 2240.28 c. Other Income 105.69 2345.97 5883.06 418.53 5464.53 417.34 5881.87 3342.70 118.45 3224.25 311.65 3535.90 131.58 39.47 143.92 294.87 150.72 2006 2007 INCREASE DECREASE % OF CHANGES

II.EXPENDITURE a. Materials b. Employee Cost c. Other Expenses d. Int & Fin Charges f. Depreciation/Amrtn
279.73 343.71 923.64 0.62 404.69 1952.3 9

1566.09 523.38 1814.91 11.86 266.17

1286.36 179.67 891.27 11.24 138.52 2230.02

459.86 52.27 96.49 1812.9 34.23 53.31 331.79

4182.41 1699.46 1305.88

III.PBT

393.58

a. Provision for tax

135.1

588.1

453

335.31

IV. PAT

258.48

1111.36

852.88

329.96

a. Profit B/F

274.85

313.62

38.77

14.10

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. V. Amount Available for Appropriation Less: Proposed dddDividend Dividend Tax Transfer to GR 170.00 23.84 25.85 170.00 23.84 25.85 100 100 100 533.33 1424.98 891.65 167.18

VI. Balance Transferred to Balance Sheet Source: Annual Report

313.62

1424.98

1111.36

354.36

Table 5.29

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. Interpretation From the above Comparative Income Statements, following conclusions can be made; A huge increase in the Net Sales- 143.92 % when compared to 2006. Materials consumption has been increased by Rs.1286.36 lakhs , which means larger production. Interest and Finance charges increased by Rs.11.24 Lakhs which means company has started to depend on loans from financial situation. Net Profit has been increased by Rs.852.88 Lakhs. While looking the overall performance of the company in the year 2007, it is far better than in the last year 2006.

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. 5. COMPARATIVE BALANCE SHEET 2007- 2008-09 In Rs. Lakhs PARTICULARS I. SOURCES OF FUND 1.Shareholders Fund a. Share Capital b. Reserves & Surplus 300.0007 4303.27 338.3393 7461.96 38.3386 3158.69 12.78 73.40 2007 2008-09 INCREASE DECREASE % OF CHANGES

2.Loan Funds a. Secured Loans b. Unsecured Loan 32.82 2546.09 142.98 2546.09 110.16 100 335.65

3.DT Liability

111.63

111.63

100

TOTAL

4747.72

10489.37

5741.65

120.93

II. APPLICATION OF FUND 1.Fixed Asset a. Gross Block b. Less: Depreciation 4215.69 2115.47 5529.12 2787.12 1313.43 671.65 31.15 31.75

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. c. Net Block d. Capital WIP 2100.21 32.16 2132.37 2741.99 5045.39 7787.38 641.78 5013.23 5655.01 30.56 15588.40 265.19

2.Investments

1668.91

1.01

1667.90

99.94

3.DT Asset 4.Curent Assets a. Inventories b. Sundry Debtors c. Cash & Bank d. Other CA e. Loans & Advances

165.11

165.11

100

595.25 744.17 56.21 3.63 451.31 1850.57

2052.80 1111.11 281.96 6.37 1832.06 5284.30

1457.55 366.94 225.75 2.74 1380.75 3433.73

244.86 49.31 401.62 75.48 305.94 185.55

Less C L a. Liabilities b. Provisions Net CA Total Source: Annual Report 859.79 44.34 946.44 4747.72 2615.16 133.27 2535.86 10489.37 Table 5.30 1755.37 88.93 1589.42 5741.65 204.16 200.56 167.94 120.93

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. Interpretation From the above Comparative Balance Sheet, following conclusions can be drawn; Share Capital has been increased as a result of amalgamation with Saint-Gobain Weber. These shares are issued to Saint-Gobain Weber as considearation other than cash. Companys loan fund has increased which means company started to depend on debt funds. Fixed Assets have been increased by Rs.5655.01 Lakhs. Working Capital has been increased by 167.94 % .

From the above points, it can be concluded that company is in a good financial position in the year ended 31-March-2009.

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6. COMPARATIVE INCOME STATEMENTS 2007-2008-09 In Rs. Lakhs PARTICULARS I.INCOME a. Sales b. Less Excise Duty 5883.06 418.53 5464.53 c. Other Income 417.34 5881.87 11261.27 903.09 10358.18 480.73 10838.91 5378.21 484.56 4893.65 63.39 4957.04 91.42 111.78 89.55 15.19 84.28 2007 2008-09 INCREASE DECREASE % OF CHANGES

II.EXPENDITURE a. Materials b. Employee Cost c. Other Expenses d. Int & Fin Charges f. Depreciation/Amrtn 1566.09 523.38 1814.91 11.86 266.17 4182.41 III.PBT 1699.46 2949.11 1296.87 3661.06 145.57 444.48 8497.09 2341.82 1383.02 773.49 1846.15 133.71 178.31 4314.68 642.36 88.31 147.79 101.72 1127.40 66.99 103.16 37.80

a. Provision for tax

588.1

-85.57

673.67

114.55

IV. PAT

1111.36

2427.39

1316.03

118.42

a. Profit B/F

313.62

1424.98

1111.36

354.37

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. VI. Balance Transferred to Balance Sheet Source: Annual Report Interpretation From the above Comparative Income Statement following conclusions can be made; 89.55 % increase in the Net Sales when compared to previous year. Net Profit has increased by Rs.1316.03 While comparing the Income Statement of 2009 with 2007, a satisfactory financial performance can be witnessed. 1424.98 3852.37 2427.39 170.35

Table 5.31

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. 7. COMPARATIVE BALANCE SHEET 2008-09-2009-10 In Rs. Lakhs PARTICULARS I. SOURCES OF FUND 1.Shareholders Fund a. Share Capital b. Reserves & Surplus 338.3393 7461.96 338.3393 8900.89 1438.93 19.28 208-09 2009-10 INCREASE DECREASE % OF CHANGES

2.Loan Funds a. Secured Loans b. Unsecured Loan 2546.09 142.98 1668.14 66.79 877.95 76.19 34.48 53.29

3.DT Liability

424.25

424.25

100

TOTAL

10489.37

11398.41

909.04

8.67

II. APPLICATION OF FUND 1.Fixed Asset a. Gross Block b. Less: Depreciation c. Net Block d. Capital WIP 5529.12 2787.12 2741.99 5045.39 7787.38 IMK-ADOOR 11187.95 3474.33 7713.62 174.39 7888.01 100.63 5688.83 687.21 4971.63 4871 102.35 24.66 181.31 96.54 1.29 Page 80

2.Investments

1.01

312.29

311.28

30819.80

3.DT Asset 4.Curent Assets a. Inventories b. Sundry Debtors c. Cash & Bank d. Other CA e. Loans & Advances

165.11

165.11

100

2052.80 1111.11 281.96 6.37 1832.06 5284.30

2088.94 1572.59 607.97 11.19 1757.45 6038.14

36.14 461.48 326.01 4.82 74.61 753.84

1.76 41.53 115.62 75.77 4.07 14.27

Less C L a. Liabilities b. Provisions Net CA Total Source: Annual Report 2615.16 133.27 2535.86 10489.37 2627.32 212.72 3198.10 11398.41 Table 5.32 12.16 79.45 662.24 909.04 0.46 59.62 26.12 8.67

Interpretation From the above Comparative Balance Sheet, following inferences can be made;

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. Reserves & Surplus has increased to Rs.8900.89 Lakhs which means increase in the owners fund. Secured and Unsecured loans are decreased to 1668.14 and 66.79 respectively which mean decrease in the borrowed funds. Fixed Assets have been increased by Rs.100.63 Lakhs. Increase in the investment form Rs 1.01 Lakhs to 312.29 Lakhs. While comparing the overall financial position of the firm in 2010, it is better than in the previous year. (Previous Year Report is a 15 month report from Jan-2008 to Mar-2009)

8. COMPARATIVE INCOME STATEMENTS 2008-09-2009-10 In Rs. Lakhs IMK-ADOOR Page 82

. PARTICULARS I.INCOME a. Sales b. Less Excise Duty 11261.27 903.09 10358.18 c. Other Income 480.73 10838.91 10095.46 291.05 9804.41 727.84 10532.25 247.11 306.66 1165.81 612.04 553.77 10.35 67.77 5.35 51.40 2.83 2008-09 2009-10 INCREASE DECREASE % OF CHANGES

II.EXPENDITURE a. Materials b. Employee Cost c. Other Expenses d. Int & Fin Charges f. Depreciation/Amrtn 2949.11 1296.87 3661.06 145.57 444.48 8497.09 III.PBT 2341.82 2521.33 1261.53 3414.72 174.08 691.76 8063.42 2468.83 127.01 28.51 247.28 433.67 427.78 35.34 246.34 14.51 2.73 6.73 19.59 55.63 5.10 5.42

a. Provision for tax

-85.57

1029.90

1115.47

1303.57

IV. PAT

2427.39

1438.93

988.46

40.72

a. Profit B/F

1424.98

3852.37

2427.39

170.34

VI. Balance Transferred to Balance Sheet Source: Annual Report

3852.37

5291.30

1438.93

37.35

Table 5.33

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. Interpretation From the above Comparative Income Statement, following conclusions can be drawn; Sales has been decreased by 10.35 % when compared to the previous year Net Profit has been decreased by Rs.988.46 Lakhs. While comparing the overall financial performance of the company in 2010, it is not satisfactory as in 2009

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. 5.3 TREND ANALYSIS 1. Sales In Rs. Lakhs Year 2005(Base Year) 2006 2007 2008-09 2009-10 Source: Annual Report Table 5.34 Net Sales 4389.25 2240.28 5464.53 10358.18 9804.41 Trend (%) 100 51 124 236 223 Increase/Decrease (%) 0 -49 24 136 123

Chart 5.26 Interpretation From the analysis it is clear that the firm is showing an upward trend in the sales. Decrease in the sales in the year 2006 is caused by poor production. However while looking the sales for the whole year , it is apparent that company is showing a positive trend. IMK-ADOOR Page 85

. 2. Net Profit In Rs. Lakhs Year 2005(Base Year) 2006 2007 2008-09 2009-10 Source: Annual Report Table 5.35 Net Profit 912.04 258.48 1111.36 2427.39 1438.93 Trend (%) 100 28 122 266 158 Increase/Decrease (%) 0 -72 22 166 58

Chart 5.27 Interpretation The Net Profit of the Company is showing an upward trend. Decreased production and sales in the year 2006 reduced Net Profit of the company. While looking the overall performance of the company, Net Profit is on a positive trend. IMK-ADOOR Page 86

CHAPTER 6 FINDINGS CONCLUSION SUGGESTIONS

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6.1 FINDINGS OF THE STUDY

Saint-Gobain SEFPRO is the only company in India which produces Fused Cast Refractory. Company has customers all over the world including group companies and others. Saint-Gobain SEFPRO has two plants in Palakkad and third plant is under construction which will be completed in the next August. Company is following conservative financial policy where it uses limited amount of debt capital compared to equity capital. Saint-Gobain SEFPROs inventory management is not at a satisfactory level. Debtors Turnover Ratio reveals a poor debt collection. Company is not making immediate payment towards their creditors. Saint-Gobain SEFPROs ROI for the last three years showing a decreasing trend. Saint-Gobain has good solvency as against outsiders liability. Companys operating profit is in a satisfactory level. Companys Sales shows an upward trend. Companys current asset shows an upward movement which is agood sign as far as the returns are concerned.

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6.2 CONCLUSION
By analyzing the financial performance of the Saint-Gobain SEFPRO, Palakkad, it can be seen that companys financial performance is in a satisfactory level. Saint-Gobain SEFPRO is the only company in India which produces Fused Cast Refractory for Steel Industries.Strong brand image and customer bases make Saint-Gobain SEFPRO a company which continuously generates profit for the year. From the analysis, it is clear that company has a good short term and long term solvency to meet its outside liabilities. But companys Inventory management is not in satisfactory level as there is excessive blocking of moey in inventories. From the analysis , it is apparent that company is using only a limited amount of debt capital compared to equity capital. This is the sign that company is following a conservative financial policy.

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6.3 SUGGESTIONS
Company should improve its inventory management system to avoid excessive stock on

inventories. It will lead to blocking of capital in inventories. Company should think about adopting new techniques for inventory management like JIT techniques.
Debtors collection period of the company is not in a satisfactory level. Company should

take action to increase debtors collection period. Company can offer cash discounts to its debt ors for making immediate repayment. Company should reduce the credit payment period.
Company should trade on equity by utilizing more debt funds.

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BIBLIOGRAPHY
1. KotharI.C.R, Research Methodology- Methods & Techniques,2nd edition

New Age

International Publishers, New Delhi.,2006

2. Pandey I.M,Financial Management,9th edition, Vikas Publishing House Pvt Ltd, New

Delhi, 2009 3. ICWAI, Financial Accounting, Directorate of studies ICWAI, Kolkata , 2010

4. ICAI, Cost Accounting & Financila Management, Department of Publication ICAI, Noida,2009.
5. www.saint-gobain.com

6. Annual Report of the company. (2005,2006,2007,2008-09,2009-10)

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