A

PROJECT REPORT ON

RATIO ANALYSIS
FOR

KIRLOSKAR BROTHERS LIMITED PUNE BY

MR. MAYANK G. ASAR

M.B.A. - II 2008-2010

RAJARAMBAPU INSTITUTE OF BUSINESS MANAGEMENT AMBEGAON(BK), PUNE

College Certificate

Company Certificate

ACKNOWLEDGEMENT
The successful accomplishment of this project undertaken, involves efforts sheer guidance from my project guide Prof. A. S. Gandhe gives me pleasure to present project report on RATIO ANALYSIS OF KIRLOSKAR BROTHERS LIMITED at Kirloskar Brothers Limited. It was a different and wonderful experience to be there in Kirloskar Brothers Limited as a summer trainee. First I would like to thanks Mr. Rajendra Mahajan (Vice President-Finance) and Mr. Makarand Rajwade for providing me such a great chance to work with Kirloskar Brothers Limited. I also express my sincere gratitude to sir our project trainee who has been so cooperative and helpful from the first day of my training till end. He also helped me a lot in enhancing my knowledge about the finance management in manufacturing sector. I am highly thankful to him for providing the constant support and encouragement throughout the project. Lastly I would like to thanks to all my friends & all those who helped me during the two months of field training.

MAYANK ASAR MBA-FINANCE 2008-2010

INDEX
SR. NO.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

CONTENTS
Introduction of the Subject History & Profile of company Objective of the project Theoretical Background Research Methodology Data analysis Observation & findings Conclusion & suggestion Annexure Bibliography

PAGE NO
3 to 9 10 to 21 22 to 23 24 to 33 34 to 37 38 to51 52 to 53 54 to 55 56 to 57 58 to 59

CHAPTER I

INTRODUCTION OF THE PROJECT

INTRODUCTION
Financial Ratio Analysis Today we are all living in a business world. Each and every person is dealing with different type of business activity in his day today life and for running or performing this business activity person needs money i.e. finance. So with the help of finance person is able to run his business. Finance is the art and science of managing money. Finance is the most important activity of a firm. Almost all business activities directly or indirectly, involve the acquisition and use of funds. Finance is function of raising and using money. This function has significant effect on other functions. The function of raising funds, investing them in assets and distributing returns earned from assets to shareholders are known as financing decision investment decisions and dividend decisions. FINANCIAL STATEMENT Financial statement also called as financial reports, refers to such statement as contain financial information of an enterprise. Thus these statements are collection of data presented strictly according to logical and consistent accounting principle. They are reports or statements of financial position and operating results of an entire business at the end of accounting period. The basis for financial planning analysis and design making is the financial information.

Financial information is needed to be predicted, compare and evaluate the firms earning ability. It is also require aiding in economic. Making investment and finance decision-making. The financial information of an enterprise is containing in the financial statement. These financial statements of a great significance to owner, management and investors.

The basic purpose of preparing financial statements is to convey to owner, creditor and the general public about the financial position of the enterprise. All those interested in the enterprise use them as bases for decision. Thus, the management may review the companys progress to date and decide upon the course of action to be taken in future on the basis of information contain in the financial statements. Three basic financial statements are: Balance sheet Profit and loss account Cash flow statement

Financial statements provide a summarized view of the financial position and operation of a firm. Financial statement provide useful information to the extent that the balance sheet act as mirror in presenting financial position on a particular date in terms of the structure of assets liabilities and owners equity and soon the profit and loss account shows the results of operations during a certain period of a time in terms of the revenues and the cost incurred during the year. The main function of analyst is to find out strengths and weakness of the business. The importance of financial analysis is different for different users, such as investor, management, workers, government, creditors etc. SIGNIFICANCE OF RATIO IN FINANCIAL ANALYSIS Ratios are among the best-known and widely used tools of financial analysis. An absolute figure does not convey anything unless it is related with relevant figure. Magnitude of current liabilities of a company does not tell anything about solvency position of the company. Ratios make a humble attempt in this direction. Ratios are significant both in vertical and horizontal analysis. In vertical analysis ratios help the analyst to form a judgment

Whether performance of the firm at a point of time is good, questionable or poor. Likewise, use of ratios in horizontal analysis indicates whether the financial condition of the firm is improving or deteriorating and whether the cost, profitability or efficiency is showing an upward or downward trend. Financial ratios became meaningful to judge financial condition and profitability of the firm only when there is comparison. In fact, analysis of ratio involves two types of comparison. First a comparison of present ratios with past and expected future ratios for the same firm. When financial ratios for several preceding year are computed, the analyst can determine in the financial position of the firm over the period of time. In our report we will use following ratios.

ADVANTAGES OF RATIOS 1)Ratios simplify the comprehension of financial statements.They tell the whole story as a heap of financial data is condensed in them.They indicate the changes in the financial condition of the business.

2)They act as an index of the efficiency of enterprise .As such they serve sa an instrument of management control .It is an instrument for diagnosis of the financial health of an enterprise .The efficiency of the various individual units similarly situated can be judged through interfirm comparisons.

3)The ratio analysis can be if invaluable aid to management in the discharge of its basic functions of forecasting ,planning ,co-ordination ,communication and control .A study of the trend of strategic ratio may help the management in this respect .past ratios indicate trends in cost ,sales ,profit and other relevant facts.

4)The ratio analysis provides data for inter-firm comparison or intra-firm comparison. Comparison cannot be made with absolute figures.net profit of one firm cannot be compared with the net profit of the other firm. But the percentage of net profit s can be compared to evaluate the performance. Similarly performance and efficiency of different departments in the same firm can be compared with the help of ratios.

5) Investment decision can at times be based on the conditions revealed by certain ratios. 6)They make it possible to estimate the other figure when one figure is known.

LIMITATIONS OF RATIO ANALYSIS The ratio analysis technique has got number of advantages ,it attracts disadvantages too.some of the limitations of the ratio analysis technic are as follows:1)The ratios of the other organisation may not be readily available.

2)Different accounting policies may be followed by the constituent organisation in the industry .

3)The constituent organization in the same industry may vary from each other in terms of age ,location ,extent of automation ,quality of management and so on. 4)The technique of ratio analysis may prove to be in adequate in some situation if there Is difference of opinions regarding the interpretation of certain items while computing certain ratios.

CHAPTER II

COMPANY PROFILE

Kirloskar Brothers Limited (KBL) Established in 1888 and incorporated in 1920, Kirloskar Brothers Limited (KBL) is the flagship company of the $2.2 Billion Kirloskar group. The core businesses of KBL are large Infrastructure projects (Water Supply, Power Plants, Irrigation), Project and Engineered Pumps, Industrial Pumps, Agriculture and Domestic Pumps, Valves, Hydro turbines, Power Generation and anti Corrosion Products. KBL Sales in 2006-2007 exceeded US$ 480 Million with a market capitalization of more than US$ 1.4 Billion.

KBL is Indias largest manufacturer and exporter of pumps and also the largest infrastructure pumping project contractor in Asia. To its credit KBL has created the worlds largest pumping scheme which will irrigate more than two million hectares of land and supply water to 4620 towns and villages in the state of Gujarat in India (Sardar Sarovar Narmada Nigam Scheme). KBL also commissioned a water pumping scheme called The Devadula Scheme in Warangal a town in Andhra Pradesh with the worlds second highest head, supplying water to 4 drought prone socio-economically backward districts which will bring about a green revolution there.

KBL is one of the worlds leaders in pump technology.

KBL is one of the three manufacturers in the world who have manufactured and installed 200 kW Canned motor pumps for nuclear application .

KBL is the first company to introduce Concrete Volute Pumps in India.

Our subsidiary company in England, SPP Pumps Limited (Acquired in 2003) is the undisputed leader in the Fire-fighting and Water Supply segments in Europe and the Middle East. They have recently launched lowest life cycle cost pumps in the UK successfully with large players like Thames Water preferring these energy efficient products. Together KBL and SPP represent the worlds largest fire fighting pump business for onshore and offshore applications.

Kirloskar Corrocoat Limited is another subsidiary of KBL which produces glass flake coating thus increasing the efficiency of pumps as well as of pipes and ensuring no corrosion. This is a patented product developed by Corrocoat, UK.

KBLs wide range of centrifugal pumps i.e. end suction, split case, submersible, vertical turbine, self priming, multistage etc. cater to various applications including irrigation, water supply, sewage, drainage, fire fighting, booster services, cooling towers, sugar-industries, paper industries, chemical and fertilizer plants, power generation and refinery and petrochemical sectors.

KBL JOURNEY

MAJOR SECTORS CATERED TO

KBL GROUP

Food P harm a S teel & Metal P etrochem Mining Water S upply C hem icals Textile Refineries BuildingIndus try C aptive P owag e S ewag e

Projects & Egg. Pumps Group Turnkey Pumping Projects from Power, Water Supply & Irrigation

Valves Business Group Water Supply, Power Irrigation Sugar Industries

BUSINESS GROUPWISE PRODUCTS

INDUSTRIAL PUMPS End Suction Pumps Process Pumps Solid Handling Pumps Horizontal Splitcase Pumps Multistage Pumps Submersible Sewage Pumps Inline Vertical Multistage Pumps (in Pressed Stainless Steel) Mixed Flow Pumps

AGRICULTURE & DOMESTIC PUMPS Monoblocks Single/Three Phase Self Priming Pumps Jet Pumps Domestic Pumps Bore well Submersible Pumps End Suction Pumps

Vacuum Pumps PROJECTS & ENGD. PUMPS

Concrete Volute Pumps Metallic Volute Pumps Vertical Pumps (Mixed, Axial Flow) Splitcase Pumps (Large) Canned Motor Pumps Condensate Extraction Pump Primary & Secondary Fast Breeder Reactor Pumps for Heat Transfer Hydro Turbines

VALVES Sluice Valves Butterfly Valves Reflux Valves (Non-Return) Foot Valves Kinetic Air Valve

Steam Trap Device

CAPABILITIES - ALL FACILITIES UNDER ONE ROOF

Comprehensive Products Range Research and Engineering System Engineering Procurement Manufacturing Pattern Shop, Foundry, Machining Testing Quality Assurance Project management Erection and Commissioning Operation and Maintenance

STRATEGIC BUSINESS GROUPS (SBUs)

PEPBG

P r o je c ts & E n g in e e r e d P u m p s B u in e s s G ro u p P u n e & K irlo s k a rv a d i

IP B G

Projects & Engineered Pumps Business Group, Pune & Kirloskarvadi

IP P

In d u s tria l Pum ps B uIndustriale s s s in GBusiness Group, r oPumps , up K Kirloskarvadia r v a d i irlo s k

In fra s tru c tu ra l P u m p in g P ro je c ts , P u n e
Infrastructural Pumping Projects, Pune

ADPBG

A g r ic u ltu r a l & D o m e s tic P u m p s B u s in e s s G ro u p , D e w a s a n d S h irv a l

Agricultural & Domestic Pumps Business Group, Dewas and Shirval

VB G
V a lv e s B u s in e s s G ro u p , K o n d h a p u ri

Valves Business Group, Kondhapuri

What is YAMUNA?

The very mention of Yamuna, brings to mind a picture of the river nurturing life along its course from the Champasar Glacier at an altitude of 4421 meters in Uttarakhand, where it originates, till it meets the sea; leaving its imprint on earth, in ice and in water-carved stone. Yamuna it is this name that adorns our new premises in the memory of late Yamuna Kirloskar (fondly called Yamutai) the very embodiment of the nurturing ways of the sacred river, she was named after. Yamutai, soulmate of S L Kirloskar, was a woman of substance. She played an active role in shaping the Kirloskar Group, laying the foundation of sublime values and ethical enterprise; complementing, her husbands legendary business acumen in every which way. The new Business Center at Baner, inaugurated on 10th April, 2009, has been named in Yamutais fond memory and honor. May it continue to inspire us on our way to set many a milestone on the course to success.

CHAPTER III

OBJECTIVES OF THE PROJECT

Objectives of the Project

To understand practical interpretations of financial statement in

organization.

To identify FINANCIAL strength and weakness of the organization.

Analysis of various ratios for improvement of the company.

To identify the current situation of the company.

To obtain a true insight into financial strength of the company. To draw the correct picture of the financial operations of the company in terms of liquidity ,turnover ,profitability ,solvency etc.

CHAPTER IV

THEORETICAL BACKGROUND

INTRODUCTION OF RATIO ANALYSIS Nature of Ratios: Numbers by themselves do not convey anything until they are related. Ratio is defined formally as the indicated quotient of two mathematical expressions. Ratio An operational definition of a financial ratio is the relationship between two financial values. The word relationship implies that a financial ratio is the result of comparing mathematically two values. THEORY OF RATIO Several ratios, calculated from accounting data, can be grouped in to various classes. According to financial activity or functions to be evaluated. Parties are interested in financial analysis are short and long term creditors owners and management. Similarly owners concentrated on the firms profitability and financials condition. Management is interested in evaluating every aspect of a firms performance. They have to protect interest of all parties and see that the firm grows profitably. In view of the requirements of various users of ratios, we may classify them into following.

LIQUIDITY RATIO

A liquidity ratio measures the firms ability to meet current obligations. It is extremely essential for a firm to be able to meet its obligations, as they become due by establishing relationship between cash and other current assets to current obligation, provide a quick measure of liquidity. A firm should insure that it does not suffer from lack of liquidity also that it does not have excess liquidity. It is necessary to strike a proper balance between high liquidity and lack of liquidity. The most common ratios, which indicates the 3extent of liquidity or lack of it are (I) (II) current ratios quick ratios

(I)Current ratios:
Current ratios expresses relationship between current assets(cash, marketable securities, inventories, debtors, accounts receivables) and current liabilities (account payable, creditors, bills payables accrued expenses, short term bank loan ,income tax liabilities etc.) The current ratio is measure of firm s short term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. From management point of view higher current ratio is indicative of poor planning since an excessive amount of funds lie idle. On contrary, a low ratio would mean inadequacy of working capital which may deter smooth functioning of enterprises. Current ratio is calculated by this formula

Current assets Current ratio = ------------------------------------Current liabilities A current ratio of 2:1 is considered as satisfactory for sound business.

(ii)Quick ratio
It is a measure of judging immediate ability of the company to pay off its current obligations. Quick ratio, also called as acid test ratio, establishes a relationship between quick, and liquid and liabilities. An asset is liquid if it can be converted in to cash immediately or reasonable soon without a loss of value. Cash is most liquid asset. Thus quick current asset consist of cash, marketable securities and accounts receivables. Inventories are excluded from quick assets because they are slower to converting to cash and generally exhibit more uncertainly as to the conversion price. By using this ratio as a measure of immediate ability to pay off its short term obligations. Quick ratio is calculated by Quick Ratio = Current assets-inventories -----------------------------------Current liabilities

A quick ratio of 1:1 is usually considered adequate.

LEVERAGE RATIO: Leverage ratio are generally design to measure the contribution of company owners vis-vis the funds provided by its creditors. The leverage ratio are capital structure ratio

may be defined as financial ratio which throw light long term solvency of the firm as reflected in its ability to assure long term lenders with regard to

(A) Periodic payment of interest during the period of loan and (B) Repayment of principal on maturity or in pre determined installment at due dates. To judge long term financial position of firm, financial leverage or capital structure ratios are calculated. As a general rule there should be an appropriate mix of debt and owners equity in financing the firm assets. Following is the type of leverage ratio

(I)Debt equity ratio:

Debt-equity ratio reflects the relative claims of creditors and shareholders against the assets of the firm. Alternatively this ratio indicates the relative proportion of debt and equity in financing the asset of the firm. Relationship describing the lenders contribute for each rupee of the owners contributes is called debt-equity ratio.

It is computed by dividing total debt by total net worth i.e.

Debt Equity Ratio =

Total debts ------------------Net worth

If the ratio is greater it would mean creditors have more invested in the business than the owners. These mean creditors would suffer more in times of distress than owners. That is why creditors prefer low debt equity ratio. TURNOVER RATIO: Funds of creditors and owners are invested in various assets to generate sales and profits. The better management of asset, larger the amount of sales. Turnover ratios are employed to evaluate the efficiency with which the firm manages and utilizes its assets. This ratio indicates the speed with which assets are being converted or turn over in to sales. It involves relationship betwee4n sales and assets. A proper balance between sales and assets generally reflects that assets are managed well.

Following several activity ratios can be calculated Working capital turnover ratio Inventory turnover ratio Total assets turnover ratio

Working capital turnover ratio The ratio camper the net sales with net working capital. The indication given by the ratio is number of times working capital is turned around in a particular period. It is calculated by dividing sales by net working capital.

Sales Working Capital Turnover = ---------------------------Net Working Capital The higher the ratios the better is the utilization of working capital as well as lower the investment in working capital. However, a very high working capital turnover ratio is a sign of overtrading and a firm may face shortage of working capital.

Inventory Turnover Ratio: This ratio indicates the no of times inventory is replaced during the year. It measures the relationship between the costs of goods sold and inventory level. This ratio indicates the efficiency of the firm in producing and selling its product. It is calculated as follow.

Sales Inventory Turnover Ratio = --------------------Inventory High inventory turnover ratio is indicative of good inventory management.

Total Asset Turnover Ratio: Assets are used to generate sales. The relationship between sales and assets is called Total Asset Turnover Ratio. Asset turnover ratio measure the efficiency of a firm in managing and utilizing its assts. It is calculated as follow. Sales Total Asset Turnover Ratio = --------------------Total Assets The higher the total asset turnover ratio the more efficiency of a firm in managing utilization of assts while low turnover ratio are indicative of under utilization of available resource and presence of idle capacity.

PROFITABILITY RATIO: A company should earn profit to survive and grow over a long period of time. Profits are essential. Profit is the difference between revenue and expenditure over a period of time. Profitability ratios are calculated to measure the operating efficiency of the company. Following are the different types of ratio.

 Gross Profit Ratio. Net Profit Ratio. Return on asset. Gross Profit Ratio: Gross Profit Ratio reflects the efficiency with which management produces each unit of product. This ratio indicates average spread the cost of goods sold and the sales revenue. It is calculated as follow. EBIT Gross Profit Ratio = ------------------Sales A high gross profit ratio is sign of good management.

Net Profit Ratio

Net Profit Ratio establishes relationship between net profit and sales and indicates managements efficiency in manufacturing, administrating and selling the products. This ratio is the overall measure of the firms ability to turn each rupee of sale into net profit. This ratio also indicates the firms capacity to withstand adverse economic condition. It is calculated as follow. Net Profit Ratio = PAT ----------------Sales

A firm with a high net margin ratio would be in an advantageous position to survive in the face of falling selling prices, rising cost of production or declining demand for the product.

Return on investment: The term investment may refer assets or net assets. The funds employed in net assets as capital employed. The conventional approach of calculating return on investment is to divide PAT by investment. Investment represents pool of funds supplied by share holders and lenders, while PAT represents residue income of share holder. Therefore PAT dose not reflect the return on investment.

CHAPTER V

RESEARCH METHODOLOGY

Research
Research is a careful investigation or inquiry through search for the new facts in any branch of knowledge. it is a systemized effort to gain more knowledge.

Research Methodology
Research Methodology is a way to systematically solve the research problem .It includes not only research methods, but also logic behind using the methods .It shows the type of sample design used, its size and the procedure used to draw the sample. Collection of data is very important activity. If data is inaccurate and inadequate the whole analysis may be faulty and decision taken should be wrong so to avoid this data should be accurate. There are two types of data 1) Primary Data 2) Secondary Data

1)

SOURCES OF PRIMARY DATA:

Primary data were obtained from the officers of various departments of the company by way of interviews and formal discussion. By conducting an interview of the finance head, information was collected about the working of the finance department, types of ratios to be calculated, and the

number of the years for which the comparison is to be made. The information about the organization structure of the company, number of employees has been obtained from personal manager, Mr. Rajawade by the way of personal interview. Discussions with the staff of the company were also held for additional information whenever required during the project. 2) SOURCES OF SECONDARY DATA:-

The important sources of the secondary data were annual reports, financial statements and reference books. The balance sheets and profit and loss accounts for the past three years were taken from the annual reports of the company, which were made available to me by account department. I was also given access to financial records of the company for required data. Other information was collected from the various reference books, which were available in the college library. Research Methodology This study is based mainly on the data collected from the annual report of the company. This study cover a period of 3 year taking into account for consideration the relating to the financial year 2006-2007 to 2008-09. Primary source: For study of ratio analysis data is made available discussions with staff members of the organization.

 Secondary source: As the companys reports and records provide the information about the past business performance. Information about the companys progress is collected through companies financial statements i.e. balance sheet and profit and loss account. The data is secondary in nature in the form of annual reports of the company.

CHAPTER VI

DATA ANALYSIS

DATA ANALYSIS

Current Ratio Current assets Current Ratio= ----------------------------Current liabilities Year Current assets Current liability Current ratio (Rs. In lakhs) 2006-07 2007-08 2008-09 10464465 1110634 10464465 0 7937904 7923787 9491467 1.31 1.40 1.10

1.4 1.2 1 0.8 0.6 0.4 0.2 0

1.31

1.4 1.1

2006-07

2007-08
C urrent Ratio

2008-09

INTERPRETATION: Current ratio of Kirloskar Brothers limited for period is in increment trend which indicates company is running in sound condition. INVENTORY Year 2006-07 inventory 870812 2007-08 1329886 2008-09 1556655

1600000 1400000 1200000 1000000 800000 600000 400000 200000 0

1556655 1329886 870812

2006-07

2007-08
Inventory

2008-09

INTRPRETATION: This graph show increase in inventory in every year increasing but there are increases in year 2008-09.

CASH AND BANK BALANCE (Rs. In lakhs) 2007-08 2008-09 758728 99949

Year Cash & bank balance

2006-07 494807

1000000 800000 600000 400000 200000 0 2006-07 2007-08 494807 758728

999490

2008-09

cas & bank h

INTERPRTATION: Cash & bank balance is increasing per year and its good sign for liquidity For working capital expenditure. Quick Ratio
(Current Assets-Prepaid Exp) i.e.

Quick Ratio= ---------------------------------------------(Current Liability Bank Overdraft) Year Quick assets Current liability Quick ratio 2006-07 9593653 6292661 1.52 2007-08 9776454 7923787 1.23 (Rs. In lakhs) 2008-09 8907810 9491467 0.938

1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

1.52 1.23 0.94

2006-07

2007-08
Quick Ratio

2008-09

INTERPRETATION: Quick Ratio is more penetrating from the year 2006-07. As higher the liquid ratio better will be the situation of the company . Debt Equity Ratio Debt equity ratio= Long term debts -----------------------------------------------------------Share holders funds + Reserves & surplus 2006-07 1352964 6020254 0.224 2007-08 1566515 6576519 0.238 (Rs. In lakhs) 2008-09 1808661 6999327 0.258

Year L. T. Debts S.H. Fund Ratio

0.2 6 0.2 5 0.2 4 0.2 3 0.2 2 0.2 1 0.2 2006-07 2007-08 D Equity R ebt atio 0.22 0.24

0.26

2008-09

INTERPRETATION:

Debt equity ratio should not be more than twice the equity. This indicates the company is taking efforts to reduce their debts. This shows that company is depend on internal resources as compare to external borrowings. SECURED LOAN Year secured loan 2006-07 1352964 (Rs. In lakhs) 2007-08 2008-09 1566515 1808661

2000000 1500000 1000000 500000 0 1352964 1566515

1808661

2006-07

2007-08

2008-09

s ecured loan

INTERPRETATION:

There is decrease in secured loan in 2006-07. There is high increase in secured loan in 2007-08 because of taking high amount of loan from bank. Working capital turnover ratio Net sales Working capital turnover ratio = -------------------------------Net working capital (Rs. In lakhs) 2007-08 2008-09 1525146 1 18309447 1960371 2526561 7.78 7.25

Year Net Sales Net W.C Ratio

15.28

2006-07 1339951 2 876767 15.28

16 14 12 10 8 6 4 2 0

7.78

7.25

2006-07

2007-08 WOR ING C K APITAL

2008-09

INTERPRETATION: From above table we see that ratio has increased from 2006-07 and there is a fall in year 2007-08 & 2008-09.Higher the ratio better utilization of working capital as well as lower the investment in working capital. There is lower W.C turnover ratio in 200607 & 2008-09 which shows that company is not using properly there working capital.

NET SALES Year sales

200000 150000 100000 50000 0 133990 152140

2006-07 133990

(Rs. In lakhs) 2007-08 2008-09 152140 183094

183094

2006-07

2007-08 s ales

2008-09

INTERPRETATION:

Sales of the company is increased per year ,that indicates continuos change are made in product marketing division &company is increasing market potential.

WORKING CAPITAL 2006-07 876767 (Rs. In lakhs) 2007-08 2008-09 1960371 2526561

Year Working capital

3000000 2500000 2000000 1500000 1000000 5000 00 0 2006-07 2007-08 2008-09 8767 67 1960 371 25265 61

workingcapital

INTERPRETATION: There is increase in working capital. This shows that there is working capital Blockage Inventory turnover ratio

Sales Inventory Turnover Ratio: ------------------------Inventory (Rs. In lakhs) Year Sales Inventory Ratio 2006-07 13399512 870812 15.38 2007-08 15251461 1329886 11.46 2008-09 18309447 1556655 11.76

INTERPRETATION: It is clear from table that the inventory turnover ratio is maintained at the optimum level, which will help the company having lesser stock holding period. Higher inventory turnover ratio indicates that maximum sales turn over is achieved With minimum investment in inventory.s

PROFITABILITY RATIOS GROSS PROFIT RATIO EBIT ---------------- x 100 Sales

Gross Profit Ratio =

(Rs. In lakhs) Year EBIT sales Ratio 2006-07 3750135 13399512 27.98 2007-08 1500406 15251461 9.83 2008-09 982203 18309447 5.36

30 25 20 15 10 5 0

27.98

9.83 5.36

2006-07

2007-08
G .R .P atio

2008-09

INTERPRITATION: As gross profit is increased in 2006-07 it is able to produce or purchase at a Relative lower cost .In 2007-08 ,2008-09 gross profit decreased that indicates the Organization is able to produce or purchase at a relatively higher cost.

NET PROFIT RATIO

PAT Net profit ratio= ------------------- x 100 Sales (Rs. In lakhs) Year PAT Sales Ratio 2006-07 3364917 13399512 25.11 2007-08 1101366 15251461 7.22 2008-09 670286 18309447 3.66

30 25 20 15 10 5 0

25.11

7.22 3.66 2006-07 2007-08 N.P. R atio 2008-09

INTERPRITATION: In year 2006-07s net profit increases more than double as compared to last year. There is fall in net profit in year 2008-09. As a consequence net profit will decline unless operating expenses decrease significantly.

RETURN ON TOTAL ASSET Net profit after tax *100 Total asset Year PAT
TOTAL ASSETS

2006-07 3364917 3817032 88.15

2007-08 1101366 3285148 33.52

2008-09 670286 4322670 15.50

Ratio

90 80 70 60 50 40 30 20 10 0

88.15

33.52 15.5 2006-07 2007-08 return on as et s 2008-0 9

CHAPTER VII

OBSERVATION AND FINDINGS

OBSERVATIONS AND FINDIDNGS

Current ratio of KBL is increasing but not up to the marks. This means the

current assets are more than current liability that indicates funds are blocking in inventory. A high debt equity rate may indicate that the financial stake of creditors is more than that of owner .A low debt equity ratio may mean that the borrowing capacity of the organization is being under utilized.
Working capital turnover ratio indicates that company is investing more in

working capital,but there is blockage in inventory. Inventory turnover ratio states that presently company is not attending on the cost reduction that is why the inventory turnover ratio is low.
There is fluctuation in total assets turnover ratio. But in the year 2008-09 it is

decrease as compared to previous year which indicates that assets are not utilized properly.
There is a huge increase in gross profit for the year, 2006-07.but in the year 2008-

09 gross profit is low because company is incurring more in direct expenses.

CHAPTER VIII

CONCLUSION AND SUGGESTION

CONCLUSIONS
From the overall study of the ratio analysis of the Kirloskar Brothers limited we can conclude that Kirloskar Brothers Limiteds financial strength, liquidity, profitability and efficiency is sound. And the company is moving towards the achieving the new heights in the coming years. Financial position of the company is sound which will help to generate funds available to the company, and the demand of the market share will be good. The company has got sufficient assets to pay off short term debts as and when they fall due thus has sufficient short term liquidity.

Suggestions Kirloskar Brothers Limited should examine present level of fixed cost which is very high. Find out ways of earning more revenue by effective use of fixed assets. Other Assets should be used in full capacity. Company has blocked its money in inventory which should be reduced. Working capital management is also requiring for a company to reduce the investment in working capital. Company should focus on improving inventory management.

ANNEXURE

BIBILOGRAPHY

BIBLIOGRAPHY

Company Annual Report

www.kbl.co.in

Google Search Engine.

Books Referred

Financial Management - Khan & Jain

Financial Management - Prof.N. M. Vechalekar

Financial Management Prof. S. M. Inamdar