ABSTRACT

This study attempts basically to measure the financial performance of the

Subramaniya Siva Co-operative Sugar Mills Ltd., for the period 2007-2012 by using the

DuPont system of financial analysis which is based on analysis of return on equity model.

The return on equity model disaggregates performance into three components: net profit

margin, total asset turnover, and the equity multiplier. It was found that the financial

performance of Subramaniya Siva Co-operative Sugar Mills Ltd., is relatively steady and

reflects minimal volatility in the return on equity. Net profit margin and total asset turnover

exhibit relative stability for the period from 2007-2012. The equity multiplier also show

almost stable indicators for the period from 2007-2012 and the ratios declined from 2007-

2012 which indicates that the Subramaniya Siva Co-operative Sugar Mills Ltd., had less

financial leverage in the recent years, which means the bank is relying less on debt to finance

its assets.

Keywords: DuPont, Return on Equity. Net Profit Margin, Equity Multiplier. Asset

Utilization

1

1.1 INTRODUCTION ABOUT THE STUDY

For any business in the private sector there are numerous of models to describe how

well the business is running. Among these the DuPont model was created in the early 1900s

but is still a model valid to use for assessment of the profitability. The model was created by

F. Donaldson Brown.H who came up with the model when he was assigned to clean up the

finances in General Motors and has ever since been an important model for financial analysis.

Remarkably it has not been used in the security community for risk prioritization or impact

analysis. The original DuPont method of financial ratio analysis was developed in 1918 by an

engineer at DuPont who was charged with understanding the finances of a company that

DuPont was acquiring. He noticed that the product of two often-computed ratios, net profit

margin and total asset turnover, equals return on assets (ROA). The elegance of ROA being

affected by a profitability measure and an efficiency measure led to the DuPont method

becoming a widely-used tool of financial analysis Liesz, (2002). In the 197O's, emphasis in

financial analysis shifted from ROA to return on equity (ROE) and the DuPont model was

modified to include the ratio of total assets to equity. Regarding this fact the researcher has

taken the challenge to use this model for Subramaniya Siva Co-operative Sugar Mills Ltd.,

situated at Gopalapuram, Dharmapuri District. Banks and other financial institutions are a

unique set of business firms whose assets and liabilities, regulatory restrictions, economic

functions and operating make them an important subject of research, particularly in the

conditions of the emerging financial sectors. Banks' performance monitoring, analysis and

control needs special analysis in respect to their operation and performance results from the

viewpoint of different audiences, like investors/owners, regulators, customers/clients, and

management themselves. Different versions of financial ratio analysis arc used for the bank

performance analysis using financial statement items as initial data sources.

2

1.2 INDUSTRY PROFILE

The sugar industry is mostly oriented to a single material, namely sugarcane that

forms 60% of the total cost of production. Therefore, the availability of sugar cane and

facilities of transporting raw material of the sugar mill naturally condition the industry of

sugar proximity to. The raw material is essential because the sucrose content of the sugarcane

begins to decrease soon after the cane is cut obtained as the factories for generating power to

use as a by-product during producing. Therefore, power is not at all a dominating factor

determining the location of sugar industry in recent times; techniques feasibility and

economics visibility of the sugar projects have been given importance in the location of sugar

industry. In the words of Dr.M.Mehta, “The location pattern of the sugar industry is greatly

influenced by the character local distribution depends entirely on Physical and a

Geographical factor, nature plays a dominant role in the location industry”.

TOP 10 SUGAR INDUSTRIES IN WORLDCOMPANY 2011 TO 12 OUTPUT

Suedzucker Ag 4.2 million tonsCosan Sa Industria & Comercio 4.1 million tonsBritish Sugar PLC 3.9 million tonsTereos Internacional Sa 3.6 million tonsMitr Phol Sugar Corp 2.7 million tonsNordzucker Gmbh & Co Kg 2.5 million tonsLouis Dreyfus 1.8 million tonsWilmar International Ltd 1.5 million tonsThai Roong Ruang Sugar Group 1.5 million tonsTurkiye Seker Fabrikalari 1.34 million ton

3

1.2.1. ABOUT THE SUGARCANE

Sugarcane is grown as a crop with contractual obligations with the sugar mills which

provide exclusive reserved cane areas for the development of sugarcane. All the sugar mills

are having tie-up arrangements with Co-operative and Commercial Banks facilitating timely

provision of agricultural loan to the farmers.

S.No. Sugar season (from

October toSeptember

Total cane areaRegistered bySugar mills (in lakh hectares)

Total cane crushedBy the sugar mills (in lakh metric tonnes)

CapacityUtilization %

for 172 days of crushing

Recovery %

1 2005-2006 2.51 231.56 125 9.242 2006-2007 2.97 274.49 144 9.253 2007-2008 2.72 229.68 115 9.324 2008-2009 2.26 165.72 73 9.625 2009-2010 2.00 142.99 63 8.886 2010-2011 2.17 178.59 70 9.187 2011-2012 2. 90 272.49 140 9.20

1.2.2. CANE PRICE

The Government of India announces the Fair and Remunerative Price (FRP) on All

India basis from 2009-10 seasons onwards. For the crushing season 2010-2011, the

Government of India have announced a Fair and Remunerative Price (FRP) of Rs.1391.20

per M.T. linked to 9.5% sugar recovery and for every 0.1% increase in sugar recovery a

premium of Rs.14.60 per M.T. as given. The Government of Tamil Nadu have announced the

State Advised Price as Rs.2000/- per M.T. linked to 9.5% sugar recovery, with a premium of

Rs.14.60 per M.T. for every 0.1% increase in recovery inclusive of transport subsidy for the

2011-2012 seasons.

Year Statutory minimum price

linked to 9% recovery

(RS./ M.T.)

State advisedPrice linked to 9%

Recovery (Rs. / m.t)

Average transport

cost(Rs./ m.t.)

Average recovery

(%)

Incentive for increase in

0.1% recovery (rs./ m.t.)

Average incentive towards recovery (rs./ m.t.)

Average cane price (rs./ m.t.)

2005-06 795.00 1014.00 32 9.65 8.80 62 1108.002006-07 802.50 1025.00 80 9.24 9.00 18 1123.002007-08 811.80 1034.00 85 9.25 9.00 27 1146.002008-09 811.80 1100.00 90 9.32 9.00 30 1220.002009-10 1298.40 1537.40 90 9.70 11.30 22.60 1650.002010-11 1391.20 1900.00 100 9.88 14.60 0 2000.002011-12 1400.18 2010.30 120 10.00 15.30 0 2200.00

4

TOTAL CONTRIBUTION TO THE ECONOMY/ SALES GROWTH OF INDIA'S SUGAR INDUSTRY

YearNo. of factories in

OperationInstalled capacity

(lakh tonne)Actual sugar production

(in lakh tonne)1950-1951 139 16.7 11.01955-1956 143 17.8 18.91960-1961 174 24.5 30.21965-1966 200 32.3 35.41973-1974 229 43.1 39.51978-1979 229 59.1 58.41985-1986 339 72.7 70.21990-1991 337 98.5 120.51995-1996 415 127.6 164.31999-2000 423 161.8 182.02000-2001 437 168.2 186.02001-2002 433 176.8 185.32002-2003 453 180.0 201.02003-2004 461 185.0 170.02004-2005 472 190.0 175.02005-2006 480 195.0 180.02006-2007 483 203.0 185.02007-2008 492 215.0 191.02009-2010 502 218.0 200.02010-2011 513 227.0 208.02011-2012 518 233.0 210.0

Source: Indian Sugar Mills Association

PRODUCTION OF SUGARCANE IN MAJOR STATES OF INDIAThe following table shows that the level of sugar production (in Lakh Tonnes) in

Indian states:Tamil Nadu Sugar Industry Uttaranchal Sugar Industry

Uttar Pradesh Sugar Industry West Bengal Sugar Industry

Andhra Pradesh Sugar Industry Bihar Sugar Industry

Gujarat Sugar Industry Haryana Sugar Industry

Himachal Pradesh Sugar Industry Karnataka Sugar Industry

Madhya Pradesh Sugar Industry Maharashtra Sugar Industry

Chattisgarh Sugar Industry Manipur Sugar Industry

5

1.2.3 PERFORMANCE OF SUGAR MILLS IN TAMILNADU

During 1994-1996 seasons, the sugarcane was produced in abundance in the state and

the sugar mills faced a glut situation and had to crush 160% and 124% of their capacity

respectively affecting the recovery badly. during1996-97 sessions, the sugar mills had just

sufficient cane to achieve total cane crush of 117.40 lakh tones and in 1997-1998, the mills

crushed 145.92 lakh tones which amount to 7% and 87% of capacity utilization respectively.

The financial performance of cooperative and public sector sugar mills during 1998-1999.

6

1.2.4 THE STEPS INVOLVED IN PRODUCTION OF SUGAR

1.2.4. (A) SUGAR DEVELOPMENT FUND (SDF) FROM GOVERNMENT OF INDIA

The Government of India had enacted the sugar chess act 1984, under which a sugar

chess amount of Rs.14/-per quintal of sugar is levied on each sugar mills in the country. The

above amount is collected as fund with the title ‘sugar development fund’ (SDF) by the

Government of India and is being utilized by the sugar mills as loan for the following

purposes:

Modernization /rehabilitation of sugar mills.

Development of sugar cane in the sugar mills area. Sanction of research grant for the

research and development project connected with sugar industry is also made from

this fund.

From the introduction of the SDF in 1984, 30 sugar mills out of 36 sugar mills in

Tamil Nadu have availed loan from government of India for cane development.

7

Sugar industry is the agro-based industry located in the rural India. About 45 million

sugar cane farmers, their dependents and a large mass of agricultural labor are involved in

sugar cane cultivation harvesting and ancillary and consulting 7.5% of the rural population.

Besides, about 0.5 million skilled and semi-skilled workers, mostly from the rural areas are

engaged in the sugar industry. The industry in India has been a focal point for socio-

economic development in the rural areas by mobilizing rural resources, generating

employment and higher income, transport and communication facilities. Further, many sugar

factories have established school, colleges, medical centers and hospitals for a so welfare

diversified in to by-product based industries and have invested and put up distilleries, organic

plants, paper and board factories and co-generation plants

1.2.4 (B) ROLE OF INDIAN GOVERNMENT ON SUGAR INDUSTRY

The following policy initiatives are taken to boost the sugar industry:

Government declared the new policy on august 20, 1998 with regards to licenses for

new factories, which shows that there will be no sugar factory in a radius of 15km.

Setting up of Indian institute of sugar technology at Kanpur is meant for improving

efficiency in the industry Brazil.

Presently, about million hectares of land is under sugarcane with an average yield of

70 tones paler hectare.

India is the largest single producer of sugar including traditional cane sugar

sweeteners, khan sari and Guru Equivalent to 26 million tons raw value followed by

Brawl in the second place at 18.5 tones.

Even in respect of white crystal sugar, crystal sugar, India has ranked No. 1 position

in 7 out of last 10 years.

8

1.3 COMPANY PROFILE

Subramaniya Siva co-operative sugar mills ltd, was registered as cooperative society

on 25.11.87, based on the letter of intent no. 594/09.10.1987 in Gopalapuram,

Pappireddipatty Taluk, and Dharmapuri District. The capacity of the plant is 2500 TCD. The

extent of the factory premises is 96.12 acres. It started its first crushing on 01.10.1992. The

area of operation is entire Harur Taluk and Pappireddipatty Taluk, and some of the villages in

Dharmapuri Taluk, Salem district and Tiruvannamalai District. The total project cost

Rs.3296.59 lakhs. The government share capital is Rs.1128.75 lakhs. The average recovery is

10.10. They are having two sugar godowns having storage capacity of 3 lakhs quintals and

two steel molasses tanks with a total storage capacity of 12000 MTs. We are having 1.5 MW

co-generation plant producing 34,000 units per day during season. There are about 476

employees working in our mills.

This sugar factory is situated Gopalapuram village, Pappireddipatty Taluk in

Dharmapuri District about 40 Kms from Dharmapuri town and 50 Kms from Salem city. The

location of the mills is 5 Kms from Salem to Vellore main road. The mill has obtained ISO

9001-2000 certificate during 2003 for a period of three years and subsequently renewed up to

June 2009.

Subramaniya Siva co-operative sugar mills ltd, was registered as cooperative society

on 25.11.87, based on the letter of intent no. 594/09.10.1987 in Gopalapuram,

Pappireddipatty Taluk, and Dharmapuri District. The capacity of the plant is 2500 TCD. The

extent of the factory premises is 96.12 acres. It started its first crushing on 01.10.1992. The

9

area of operation is entire Harur taluk and Pappireddipatty Taluk and some of the villages

in Dharmapuri Taluk, Salem District and Tiruvannamalai District. The total project cost

Rs.3296.59 lakhs. The Government Share Capital is Rs.1128.75 lakhs. The average recovery

is 10.10. They are having two sugar godowns having storage capacity of 3 lakhs quintals and

two steel molasses tanks with a total storage capacity of 12000 MTs. We are having 1.5 MW

co-generation plant producing 34,000 units per day during season. There are about 476

employees working in our mills.

This sugar factory is situated at Gopalapuram Village, Pappireddipatty Taluk in

Dharmapuri District about 40 Kms from Dharmapuri town and 50 Kms from Salem city. The

location of the mills is 5 Kms from Salem to Vellore main road. The mill has obtained ISO

9001-2000 certificate during 2003 for a period of three years and subsequently renewed up to

June 2009.

1.3.1 PRODUCT PROFILE

RAW SUGAR – It is essentially the product at the point before the molasses is

removed (what’s left after sugarcane has been processed and refined). Popular types of raw

sugar include demerara sugar from Guyana and Barbados sugar, a moist, fine textured sugar.

Turbinado sugar is raw sugar that has been steam cleaned to remove contaminates, leaving a

light molasses flavored, tan colored sugar.

BROWN SUGAR (light and dark) - Brown sugar retains some of the surface

molasses syrup, which imparts a characteristic pleasurable flavor. Dark brown sugar has a

deeper color and stronger molasses flavor than light brown sugar. Lighter types are generally

used in baking and making butterscotch, condiments and glazes. The rich, full flavor of dark 10

brown sugar makes it good for gingerbread, mincemeat, baked beans, and other full flavored

foods.

GRANULATED SUGAR – Also called table sugar or white sugar. This is the sugar

most known to consumers, is the sugar found in every home’s sugar bowl, and most

commonly used in home food preparation. It is the most common form of sugar and the type

most frequently called for in recipes. Its main distinguishing characteristics are a paper-white

color and fine crystals. Sugar cubes – They are made from moist granulated sugar that is

pressed into molds and then dried.

LIQUID SUGARS - There are several types of liquid sugar. Liquid sugar (sucrose) is

white granulated sugar that has been dissolved in water before it is used. Liquid sugar is ideal

for products whose recipes first require sugar to be dissolved. Amber liquid sugar is darker in

color and can be used in foods where brown color is desired.

11

1.3.2 CANE INFORMATION

Sugarcane is a traditional crop of India and it’s under cultivation since time

immemorial in the Indo- Gangetic belt. There are numerous mentions of sugarcane in several

of our ancient books such as “Atharva Veda”, “Rig Veda” etc dating back to 1000 BC TO

3000 BC. Foreign travelers to India, about 2000 years ago, have mentioned about sugar cane.

Buddhist literature has several mentions of sugarcane and sugar.

1.3.3 CANE PARTICULARS

A. Cane divisional office: Area of operation of the mills consisting of 8 divisional offices

1. Millsite office 2. Harur (North)

3. Harur (South) 4.Morappur

5. Pappireddipatti 6.Bommidi

7. Ayothiyapattanam 8.Gobonathampatti koot road

B. CANE VARIETY:

1. High sugar variety : CO 86032 – 99.53%

2. Medium sugar variety : COC 22- 0.22%

3. Low sugar variety : CO – 94045 – 0.25

1.3.4 CRUSHING PROGRAMMED FOR SEASON 2010-2011:

Cane target : 14000 acres

Achievement : 12912 acres

Total cane estimate : 300000 tones

Actual cane crushed : 316640 tones

Date of crushing start : 15.11.2010

Date of closure : 08.04.2010

1.3.5 CANE DEVELOPMENT ACTIVITIES AND FUTURE PLAN:

1. Chip buds seedlings planting : Low cost technology

2. Wider row spacing planting : Facilitate mechanical harvesting

3. Mechanized inter cultural operation : Labours saving and timely operation

12

4. Drip irrigation : Water saving technology

5. Precision farming : Do

6. Vermin compost production : Enrich soil organic matter

7. Parasite breeding : To control shoot borer pest.

1.3.6 POWER GENERATION AND EXPORT:

Capacity : 5MWS

Production per day : 95000 units

Consumption by mills : 62000 units

Exporting to TNEB grid : 33000 units per day

Rate paid by TNEB : Rs. 3.15 per unit

For full crushing season of 172 days 56,76,000 units can be exported with revenue of

Rs.178.79 lakhs per season.

CO-GENERATION – POWER EXPORT DETAILS:

Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Co-generation power

(in Units)

2455960 6308160 5902040 5949760 5287560 3391400

100% co-generation plant is in active stage for commissioning along with

modernization of the plants

1.3.7 GODOWN CAPACITY:

Godown No.1 : 2 lakh qtls.

Godown No.2 : 1 lakh qtls.

Additional sugar godown : 50000 quintals under construction.

Molasses tanks : 2 Nos. each 6000 M.T. capacity.

13

1.3.8 ORGAINSATION STURUCTURE:

ORGAINSATION CHART

Administration

Special officer

Administration account (C.F) CCO (cane) engineering manufacturing

Establishment purchase security time office dispensary

General material budget cane sales &God own

Farm R & D cane supply irrigation

Civil factory house mill house boiler boiling workshop

Processing LAB packing clarification panboilingsulphictation

14

2.1 RESEARCH METHODOLOGY

The term ‘research’ refers to the systematic method consisting of enunciating the

problem, formulating a hypothesis, collecting the facts or data, analyzing the facts and

reaching certain conclusions either in the form of solutions(s) towards the concerned problem

or in certain generalizations for some theoretical formulation.

2.1.1RESEARCH DESIGN:

Research design states that “A research design is the arrangement of conditions for

collections and analysis of data in a manner that aims to combine relevance to the research

purpose with economy in procedure.” Research design Analytical in Nature which has been

used for his study.

2.1.2 METHODS OF DATA COLLECTION

Secondary data has been utilized in this study. This secondary data is obtained from

The five year financial data of the organization is taken from the annual report from the

year 2007 to 2011.

The interview method also followed to elicit opinion and verify the facts of the case Edith

regard to the financial performance of the organization.

2.1.3 ANALYTICAL TOOLS USED

The financial analysis which was used to arrive the accurate result is Du Pont

Analysis.

2.1.4 LISTS OF STATISTICAL TOOLS APPLIED FOR THIS STUDY

1. Spearman’s Rank Correlation Coefficient

2. Trend analysis

3. Leverages

4. Coefficient of Correlation

5. Comparative Balance sheet

15

2.2REVIEW OF LITERATURE:

Marianna Botika (2012)1

This paper comprehensively explores the DuPont components in order to demonstrate

which of three areas influences stock's abnormal behavior the most. The results show an

interesting evolution: in 2007 the strong dependence between cumulated abnormal returns

and profitability and ROA were founded. The 2008 and 2009 were a middle years which

made investors to be unpredictable. The 2010 may be viewed as a returned year, all the data

are extremely similar with 2007 year but with different elements. The research is indicating

the fact that DuPont components represent an important and viable form of stock's abnormal

returns analysis.

Almazari, Ahmed Arif (2012)2

This study attempts basically to measure the financial performance of the Jordanian

Arab commercial bank for the period 2000-2009 by using the DuPont system of financial

analysis which is based on analysis of return on equity model. The return on equity model

disaggregates performance into three components: net profit margin, total asset turnover, and

the equity multiplier. Arab bank is one of the largest financial institutions in the Middle East

and is ranked amongst the largest international financial institutions. The bank witnessed a

continuation of challenges brought on by the global financial crisis. It was found that the

financial performance of Arab Bank is relatively steady and reflects minimal volatility in the

return on equity. Net profit margin and total asset turnover exhibit relative stability for the

period from 2001 to 2009.The equity multiplier also show almost stable indicators for the

period from 200l-2005 and the ratios declined from 2006-2009 which indicates that the Arab

bank had less financial leverage in the recent years, which means the bank is relying less on

debt to financial its assets.

1 Marianna Botika (2012),” The use of DuPont Analysis in Abnormal Returns Evaluation: Empirical Study of

Romanian Market” journal of Economics and Management , issue I Vol.41,Page No:85 to 112.

2 Almazari, Ahmed Arif (2012),” Financial Performance Analysis of the Jordanian Arab Bank by Using the

DuPont System of Financial Analysis “, International Journal of Economics & Finance , issue 4 Vol. 4, Page

No: 86 to 94.16

Collier, Henry W, McGowan Jr., Carl B, and Muhammad, Junainal (2010)3

This paper presents a model for the financial analysis of a bank in a rapidly changing

environment based on the DuPont system of financial analysis. The DuPont system of

financial analysis is based on analysis of return on equity which is disaggregated into net

profit margin, total asset turnover and the equity multiplier. AFFIN Bank Malaysia is one of

the largest banks in Malaysia and is one of the core banks from the consolidation process of

the banking industry in response to the Southeast Asian economic crisis in 1997-98. The

analysis covers begins in 1999 which is the year that AFFIN Bank was formed until 2006.

The DuPont system of financial analysis shows the impact of the Asian financial crisis and

the restructuring of the banking industry in Malaysia on the financial performance of AFFIN

Bank and the gradual recovery of AFFIN Bank to return to steady performance over the past

eight years.

McGowan Jr., Carl B, Stambaugh, Andrew R, and Sulong, Zunaidah

(2011)4

This paper presents a model for the financial analysis of a bank based on the DuPont

system of financial analysis. The DuPont system of financial analysis is derived from an

analysis of return on equity that consists of three parts: 1) operating efficiency as measured

by profit margin, 2) asset use efficiency as measured by total asset turnover, and 3) financial

leverage as measured by the equity multiplier. The analysis covers the period from mid 2005

to 2009. The DuPont system of analysis assesses the performance of the Arabian institution

since its establishment in the Spring of 2005

3 . Collier, Henry W, McGowan Jr., Carl B, and Muhammad, Junainal (2010)” Evaluating The Impact Of A

Rapidly Changing Economic Environment On Bank Financial Performance Using The DuPont System Of

Financial Analysis” Journal of Finance & Banking Research , Issue 4 Vol. 4, Page No: 25 to 35.

4 McGowan Jr., Carl B , Stambaugh, Andrew R , and Sulong, Zunaidah (2011) “financial analysis of bank al

bilad” Journal of International Business & Economics Research , Issue 3 Vol. 10 , Page No: 9 to 16.

17

Sheela, S. Christina (2011)5

The researcher carried out the study with the objective of finding out the financial

performance of WHEELS INDIA LTD, Chennai for the financial year 2005-2009. The

researcher is interested in finding out the major factors that determine the financial

performance of the organization. The researcher carried out the study with Analytical type of

research design in the study with the help of secondary data collection method. For this

purpose the researcher took past 5years balance sheet into consideration. The data is checked

out for the validity and reliability before conducting the study. The researcher used the

following financial tool namely ratio analysis, comparative balance sheet and DuPont

analysis and also statistical tools such as trend analysis and correlation. The study reveals that

the financial performance is satisfactory. Ratios help to summarize large quantities of

financial data to make quantitative judgment about the financial performance of the firm s.

Profitability ratios indicate there is a decrease in the profit level, utilization of fixed assets

and working capital in the last financial year. Thus the company can take necessary steps to

improve sales and profit.

Veronique D. N.(2011)6

The ambition to develop Delhi as a global city is rooted in the liberalization reforms

of the 1990s. Parts of the city region were integrated with the global economy, providing

international firms with investment opportunities and outsourced services, while the

metropolitan area emerged as a significant agglomeration of Export Processing Zones. The

development of modern infrastructure, high-end residential complexes and exclusive

shopping malls, in line with the rise of consumerism and middle-class ideology, has

spectacularly transformed the urban landscape.

5 Sheela, S. Christina (2011) “A Study On Financial Performance of Wheels India Limited-Chennai”

Interdisciplinary Journal of Contemporary Research in Business, Issue 10 Vol. 2, Page No: 231-239.

6 Veronique D. N.(2011)” The Dream of Delhi as a Global City” .International Journal of Urban & Regional

Research Issue 3 Vol. 35, Page No:533 to 554.18

Gardner, John C ,McGowan J r, Carl B and Moeller, Susan E

(2011)7

The purpose of this paper is to provide a case example to teach students how to

estimate a company's sustainable growth by using an extension of the DuPont System of

financial analysis on Coca-Cola Corporation. The DuPont system is based on a company's

return on equity that is decomposed into three components: net profit margin, total asset

turnover, and the equity multiplier. The extended DuPont system of financial analysis

multiplies return on equity by the earnings retention rate to calculate sustainable growth.

Sustainable growth is the highest level of growth in sales that a company can achieve using

internally generated funds only.

Shepherd, Bryan E , Gilbert, Peter B , and Charles T. (2011)8

In Randomized studies researchers may be interested in the effect of treatment

assignment on a time-to-event outcome that only exists in a subset selected after

randomization. For example, in preventative HIV vaccine trials, it is of interest to determine

whether randomization to vaccine affects the time from infection diagnosis until initiation of

antiretroviral therapy. Earlier work assessed the effect of treatment on outcome among the

principal stratum of individuals who would have been selected regardless of treatment

assignment.

7 . Gardner, John C ,McGowan J r, Carl B and Moeller, Susan E (2011)” Using Accounting Information For

Financial Planning And Forecasting: An Application Of The Sustainable Growth Model Using Coca-Cola”

journal of Business Case Studies, Issue 5 Vol. 7, Page No:9 to15.8 . Shepherd, Bryan E , Gilbert, Peter B , and Charles T. (2011)” Sensitivity Analyses Comparing Time-to-Event

Outcomes Only Existing in a Subset Selected Post randomization and Relaxing Monotonicity “Journal

International Biometric Society, Issue 3 Vol. 67, Page No:1100 to 1110.

19

NyoNyo Aung Kyaw, and Hla Theingi (2009)9

This paper documents the performance differences between Wholly-Owned

Subsidiaries (WOS) and Joint Ventures (JV) in electrical and electronics industry in Thailand

for the period of 2000 to 2004. Unlike other studies, we analyse the performance differences

using DuPont analysis. The impact of capital structure on the profitability of WOS and JV is

further studied in this paper. We find that WOS have significantly higher sales growth, have

more efficient asset management and carry higher debt ratios. On the other hand, JV are more

efficient in cost control and thus have better performance in term of ROS. Consistent with

managerial overinvestment agency theory, debt ratio is positive and highly significantly

related to ROE. In addition, better asset management and higher leverage of WOS lead to

higher profitability. On the other hand, JV's better ROS performance helps them enhance

their ROE.

Nucci, Marcio , Anaissie, Elias ,and Kovanda, Laura(2010)10

Background. Patients with candidemia frequently have a central venous catheter (CVC) in

place, and its early removal is considered the standard of care methods. We performed a

subgroup analysis of 2 phase III, multicenter, double-blind, randomized, controlled trials of

candidemia to examine the effects of early CVC removal (within 24 or 48 h after treatment

initiation) on the outcomes of 842 patients with candidemia. Inclusion criteria were

candidemia, age 116 years, CVC at diagnosis, and receipt of ⩾1 dose of the study drug. Six

outcomes were evaluated: treatment success, rates of persistent and recurrent candidemia,

time to mycological eradication, and survival at 28 and 42 days. Univariate and multivariate

analyses were performed, controlling for potential confounders eradication or rates of

persistent or recurrent candidemia but was associated with better treatment success and

survival.

9 .NyoNyo Aung Kyaw, and Hla Theingi (2009)” A Performance Analysis Of Wholly Owned Subsidiaries And

Joint Ventures: Electrical And Electronic Industry In Thailand” International Journal of Business Studies, Issue

1 Vol. 17, Page No:107 to 125.10 . Nucci, Marcio , Anaissie, Elias ,and Kovanda, Laura(2010)” Early Removal of Central Venous Catheter in

Patients with Candidemia Does Not Improve Outcome: Analysis of 842 Patients from 2 Randomized Clinical

Trials”journal of Clinical Infectious Diseases, Issue 3 Vol. 51, Page No:295 to 303.20

2.3 RESEARCH GAP

Research gap is focusing on systematic research approach to find out the uncovered

area for the present study. The review of literature mainly focused on ROA, ROE, Net profit

margin, Total asset ratio, Equity Multiplier and so on.

Thus, the researcher found that the uncovered area is profitability level, financial

stability, financial position, etc. This study intends to analyse these issues in depth to provide

information for the better of the management.

21

2.4 STATEMENT OF THE PROBLEM

The problem is to analysis the overall financial performance of Subramaniya Siva

Co-Operative Sugar Mills Ltd. This is to find out the financial performance of the

Subramaniya Siva co-operative sugar mills. But Subramaniya Siva Co-Operative Sugar Mills

Ltd has difficulty to analysis the current assets and current liability from the period of study.

In order to measure the financial performance and efficiency the trading, profit and loss A/C,

and balance sheet has been analyzed. The organization wants to know about their financial

performance on the basis of their return on assets. So taking these problems into

considerations that proposed study was targeted towards the DuPont analysis.

22

2.5 OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE

The Primary Objective of the Study is to analyze the Financial Performance of the

Subaramaniya Siva Sugar Mills Ltd by means of Applying Du Pont Model.

SECONDARY OBJECTIVE

To analyse the financial position of Subramaniya Siva co-operative sugar mills ltd.

To ascertain the profitability level and current financial position.

To find out financial stability and weakness of the Subramaniya Siva co-operative

sugar mills ltd.

To suggest suitable measures for improving the financial position of the company.

23

2.6 SCOPE OF THE STUDY

It helps the bank to know the financial position with the help of Dupont Analysis.

It is highly informative for the bank to achieve the favorable results.

The findings of the study reveal that the important aspects like Rations, Profitability,

Liquidity and so on.

It is highly benefit to other banks.

24

2.7 LIMITATIONS OF THE STUDY

The data is utilized for the study is secondary in nature. So if there as any bias in them

reflects over the analysis and conclusion.

Being the government organization they are inhibited to provide the financial details.

The study is limited to the period of five years.

Due to inadequate time it is not possible to analyze all aspects relevant to the study.

25

3.1 ANALYSIS AND INTERPRETATION OF THE DATA

DU PONT MODEL OF SUBRAMANIYA SIVA COOP. SUGAR MILLS LTD,

Application of DuPont model for measuring the financial performance for the year ending 31st march 2007.

TOTAL COST:

Total cost = cost of goods sold + selling & administrative expenses + Interest expenses + Income tax.

= 142000 + 15406767 + 52556510 +5266548

= Rs 73371825.

NET INCOME:

Net Income = Sales-Total Cost

= 936911383-73371825 = Rs 863539558.

NET PROFIT MARGIN

Net Profit Margin = Net Income/Sales

= 863539558/936911383

= 0.92

CURRENT ASSETS

Current Assets = Cash + Inventories Other (Sundry Debtors)

= 116493235 + 366748889 + 12142262

= Rs 495384386.

26

NON-CURRENTS ASSETS

Fixed Assets = Land + Building + Machinery + Equipment

= 995000 + 6524800 + 204838600 + 25638000

= Rs 237996400.

TOTAL ASSETS

Total Assets = Current Assets + Non Current Assets

= 495384386 + 237996400

= Rs 733380786.

TOTAL ASSETS TURNOVER

Total Asset Turnover = Sales / Total Assets

= 936911383 / 733380786.

= 1.27

RETURN ON ASSETS

Return on Assets = Net Profit Margin * Total Assets Turnovers

= 0.92 *1.27

=1.16

RETURN ON ASSETS (%)

ROA =

=

= 72.44 %

27

The Du-Pont Chart can also be indicated with the help of the following diagram.

-

+

-/-

*

-/-

+

28

Cash116493235

Inventories366748889

Debtors12142262

Land, Machinery, Building etc...237996400.

Cost Of Goods Sold142000

Selling & Administrative Expenses15406767

Interest Expenses52556510

Total cost73371825

Sales936911383

Current assets495384386

Non- current assets237996400

Total Assets733380786

Total Assets Turn Over 1.27

Sales936911383

Net Income863539558

Sales936911383

Return on Assets1.16

Net Profit Margin 0.92

Return on Assets In %72.44

Income tax5266548

3.1.2 DU PONT MODEL OF SUBRAMANIYA SIVA COOP. SUGAR MILLS LTD,

Application of DuPont model for measuring the financial performance for the year ending 31st March 2008.

TOTAL COST:

Total cost = cost of goods sold + selling & administrative expenses + Interest expenses + Income tax.

= 42000+30231808+ 66198081 +5866500

=Rs 102338389.

NET INCOME:

Net Income = Sales-Total Cost

= 513686269-102338389.

= Rs 411347880.

NET PROFIT MARGIN

Net Profit Margin = Net Income/Sales

= 411347880 / 513686269

= 0.80

CURRENT ASSETS

Current Assets = Cash + Inventories Other (Sundry Debtors)

= 3201819+733801086+ 7271230 = Rs 744274135NON-CURRENTS ASSETS

Fixed Assets = Land +Building + Machinery + Equipment

= 1986800+6524800+204839800+35638650

= Rs 248990050.29

TOTAL ASSETS

Total Assets = Current Assets + Non Current Assets

= 744274135 +248990050

= Rs 993264185.

TOTAL ASSETS TURNOVER

Total Asset Turnover = Sales / Total Assets

= 513686269 / 993264185.

= 0.51

RETURN ON ASSETS

Return on Assets = Net Profit Margin * Total Assets Turnovers

= 0.80*0.51

= 0.40

RETURN ON ASSETS (%)

ROA =

0.80

= * 100

0.51

= 156%

30

The Du-Pont chart can also be indicated with the help of the following diagram.

-

+

-/-

*

+

-/-

+

31

Cash3201819

Inventories733801086

Debtors7271230

Land, Machinery, Building etc..248990050

Cost of Goods Sold42000

Selling & Administrative Expenses30231808

Interest Expenses66198081

Total cost102338389

Sales513686269

Current assets744274135

Non- current assets248990050

Total Assets993264185.

Total Assets Turn Over 0.51

Sales513686269

Net Income863539558

Sales513686269

Return on Assets0.40

Net Profit Margin 0.80

Return On assets In %156 %

Income tax5866500

3.1.3 DU PONT MODEL OF SUBRAMANIYA SIVA COOP. SUGAR MILLS LTD,

Application of DuPont model for measuring the financial performance for the year ending 31st March 2009.

TOTAL COST:

Total cost = cost of goods sold + selling & administrative expenses + Interest expenses + Income tax.

= 58600 + 33271274+ 64873947 + 6065500

= Rs 104269321.

NET INCOME:

Net Income = Sales-Total Cost

= 1170712641-104269321.

= Rs 1066443320

NET PROFIT MARGIN

Net Profit Margin = Net Income / Sales

= 1066443320 / 1170712641

= 0.91

CURRENT ASSETS

Current Assets = Cash + Inventories Other (Sundry Debtors)

= 56589209 + 537072961+ 7835367 = Rs 601497537

NON-CURRENTS ASSETS

Fixed Assets = Land +Building + Machinery + Equipment

= 1986000+6024500+174839800+30638650

32

= Rs 213488950

TOTAL ASSETS

Total Assets = Current Assets + Non Current Assets

= 601497537 + 213488950

= Rs 814986487

TOTAL ASSETS TURNOVER

Total Asset Turnover = Sales / Total Assets

= 1170712641 / 814986487.

= 1.43

RETURN ON ASSETS

Return On Assets = Net Profit Margin* Total Assets Turnovers

= 0.91 * 1.43

= 1.30

RETURN ON ASSETS (%)

ROA =

0.91

= * 100

1.43

= 63%.

33

The Du-Pont chart can also be indicated with the help of the following diagram.

-

+

-/-

*

+

-/-

+

34

Cash56589209

Inventories537072961

Debtors7835367

Land, Machinery, Building etc..213488950

Cost of Goods Sold58600

Selling & Administrative Expenses33271274

585107969Interest Expenses64873947

Total cost

104269321.

Sales1170712641

Current assets601497537

Non- current assets213488950

Total Assets814986487

Total Assets Turn Over 1.43

Sales1170712641

Net Income1066443320

Sales1170712641

Return on Assets1.30

Net Profit Margin 0.91

Return On assets In %63%

Income tax6065500

3.1.4 DU PONT MODEL OF SUBRAMANIYA SIVA COOP. SUGAR

MILLS LTD,

Application of DuPont model for measuring the financial performance for the year ending 31st March 2010.

TOTAL COST:

Total cost = cost of goods sold + selling & administrative expenses + Interest expenses + Income tax.

= 60300 + 38777523 + 65532819 +7065300

= Rs 111435942

NET INCOME:

Net Income = Sales - Total Cost

= 1428622305-111435942

= Rs 1317186363

NET PROFIT MARGIN

Net Profit Margin = Net Income/Sales

= 1317186363/1428622305

= 0.92

CURRENT ASSETS

Current Assets = Cash +Inventories Other (Sundry Debtors)

= 643475772 + 455982169 + 12238540 = Rs 1111696481

NON-CURRENTS ASSETS

35

Fixed Assets = Land + Building + Machinery + Equipment

= 1986000+6024500+100839800+31038650

= Rs 139888950

TOTAL ASSETS

Total Assets = Current Assets + Non Current Assets

= 1111696481+139888950

= Rs 1251585431.

TOTAL ASSETS TURNOVER

Total Asset Turnover = Sales / Total Assets

= 1428622305 /1251585431.

= 1.14

RETURN ON ASSETS

Return On Assets = Net Profit Margin * Total Assets Turnovers

= 0.92 * 1.14

= 1.04

RETURN ON ASSETS (%)

ROA =

0.92 * 100 1.14

= 80%.

36

The Du-Pont chart can also be indicated with the help of the following

diagram.

-

+

-/-

*

+

-/-

37

Cash643475772

Inventories455982169

Debtors12238540

Cost of Goods Sold60300

Selling & Administrative Expenses38777523

585107969Interest Expenses65532819

Total cost111435942

Sales1428622305

Current assets1111696481

Total Assets1251585431.

Total Assets Turn Over 1.14

Sales1428622305

Net Income1317186363

Sales1428622305

Return on Assets1.04

Net Profit Margin 0.92

Return On assets In %80%

Income tax7065300

+

3.1.5 DU PONT MODEL OF SUBRAMANIYA SIVA COOP. SUGAR MILLS LTD,

Application of DuPont model for measuring the financial performance for the year ending 31st March 2011.

TOTAL COST:

Total cost = cost of goods sold + selling & administrative expenses + Interest expenses + Income tax.

= 70566 + 41184348 + 106397275 +7160000

= Rs 154812189

NET INCOME:

Net Income = Sales-Total Cost

= 841237082 – 154812189

=Rs 686424893

NET PROFIT MARGIN

Net Profit Margin = Net Income/Sales

= 686424893/841237082

= 0.81

CURRENT ASSETS

Current Assets = Cash + Inventories Other (Sundry Debtors)

= 651531395 + 495657704 + 14812249

= Rs 1162001348

38

Land, Machinery, Building etc..139888950

Non- current assets139888950

NON-CURRENTS ASSETS

Fixed Assets = Land + Building + Machinery + Equipment

= 1986000 + 6024500 + 90839800 + 31038650

= Rs 129884950

TOTAL ASSETS

Total Assets = Current Assets+Non Current Assets

= 1162001348 + 129884950

=Rs 1291886298

TOTAL ASSETS TURNOVER

Total Asset Turnover = Sales / Total Assets

= 841237082 /1291886298

= 0.65

RETURN ON ASSETS

Return on Assets = Net Profit Margin* Total Assets Turnovers

= 0.81 * 0.65

= 0.82

RETURN ON INVESTMENT

ROA =

0.81

= * 100

0.65

39

= 124%.

The Du-Pont chart can also be indicated with the help of the following diagram.

-

+

-/-

*

+

-/-

40

Cash651531395

Inventories495657704

Debtors14812249

Cost of Goods Sold70566

Selling & Administrative Expenses41184348

585107969Interest Expenses106397275

Total cost154812189

Sales841237082

Current assets1162001348

Total Assets1291886298

Total Assets Turn Over 0.65

Sales841237082

Net Income686424893

Sales841237082

Return on Assets0.82

Net Profit Margin 0.81

Return On assets in %124%

Income tax7160000

+

TABLE NO: 3.1.6

TABLE SHOWING TOTAL COST

Source: Secondary DataINFERENCE

The table showing 2006-2007 was total cost was low , and 2007- 2008 was the total

cost was increased , and 2008-2009 was increase the total cost, and 2009-2010 was increase

the total cost, and 2010-2011 was increase the total cost i.e. nearly 2.5 times it increased.

CHART NO: 3.1.6TOTAL COST

41

Land, Machinory, Bullding etc..139888950

YEARTOTAL COST

Rs

2006-2007 73371825

2007-2008 102338389

2008-2009 104269321

2009-2010111435942

2010-2011 154812189

Non- current assets

129884950

TABLE NO: 3.1.7TABLE SHOWING NET INCOME

42

YEARNET INCOME

RS

2006-2007 863539558.

2007-2008 744274135

2008-2009 1066443320

2009-2010 1317186363

2010-2011686424893

Source: Secondary Data

INFERENCEThe Net income was increasing the year of 2006-2007, and 2007-2008, 2010- 2011

was decreasing. The Net income increased the year of 2008- 2009 and 2009-2010 from

10crores to 13 crores i.e. nearly 1.76 times it increased.

CHART NO:3.1.7 NET INCOME

TABLE NO: 3.1.8 TABLE SHOWING NET PROFIT MARGIN

43

Source: Secondary Data

INFERENCE

The table showing 2006-2007 was the net profit margin was 0.92% , and 2007- 2008

was the net profit margin was decreased 0.80% , and 2008-2009 was increase the net profit

margin 0.91% , and 2009-2010 was increase the net profit margin, and 2010-2011 was

decrease the net profit margin i.e. nearly 1.5 times it increased.

NET PROFIT MARGIN

CHART NO:3.1.8

TABLE NO: 3.1.9TABLE SHOWING CURRENT ASSETS

44

YEAR NET PROFIT MARGIN (%)

2006-20070.92

2007-20080.80

2008-20090.91

2009-20100.92

2010-2011 0.81

Source: Secondary DataINFERENCE

The table showing 2006-2007 was the current assets was low , and 2007- 2008 was

the current assets was increased , and 2008-2009 was decrease the current assets , and 2009-

2010 was decrease the current assets, and 2010-2011 was increase the noncurrent assets i.e.

nearly 2.34 times it increased.

CHART NO: 3.1.9

CURRENT ASSETS

TABLE NO: 3.1.1045

YEAR CURRENT ASSETSRs

2006-2007495384386

2007-2008744274135

2008-2009601497537

2009-20101111696481

2010-2011 1162001348

TABLE SHOWING NON- CURRENTS ASSETS

Source: Secondary Data

INFERENCEThe table showing 2006-2007 was the noncurrent assets was low , and 2007- 2008

was the noncurrent assets was increased , and 2008-2009 was decrease the noncurrent assets

and 2009-2010 was decrease the noncurrent assets, and 2010-2011 was increase the

noncurrent assets. i.e. nearly 1.9 times it increased

CHART NO: 3.1.1 NON- CURRENTS ASSETS

TABLE NO: 3.1.11

46

YEAR NON-CURRENTS ASSETS Rs

2006-2007237996400

2007-2008248990050

2008-2009213488950

2009-2010 139888950

2010-2011 129884950

TABLE SHOWING TOTAL ASSETS

Source: Secondary data

INFERENCEThe table showing 2006-2007 was the total assets was low , and 2007- 2008 was the

total assets was increased , and 2008-2009 was decrease the total assets , and 2009-2010 was

increase the total assets, and 2010-2011 was increase the total assets for. i.e. nearly 1.76 times

it increased

CHART NO:3.1.11 TOTAL ASSETS

TABLE NO:3.1.1247

YEAR TOTAL ASSETSRs

2006-2007733380786

2007-2008993264185

2008-2009814986487

2009-2010 1251585431

2010-2011 1291886298

TABLE SHOWING TOTAL ASSETS TURNOVER

Source:

Secondary Data

INFERENCEThe table showing 2006-2007 was the total assets turnover ratio was 1.27%, and

2007- 2008 was the total turnover ratio decreased 0.51%, and 2008-2009 was increase the

total assets turnover ratio was 1.43%, and 2009-2010 was decrease the total current assets,

and 2010-2011 was decrease the total assets turnover ratio for0.65%. I.e. nearly 2.0 times it

increased.

CHART NO:3.1.13 TOTAL ASSETS TURNOVER

48

YEAR TOTAL ASSETS TURNOVER (%)

2006-20071.27

2007-2008 0.51

2008-20091.43

2009-20101.14

2010-20110.65

TABLE NO:3.1.14.

TABLE SHOWING RETURN ON ASSETS

Source: Secondary Data

INFERENCE:

The table showing 2006-2007 was the return on investment was 72.44%, and 2007-

2008 was the return on investment increased 156%, and 2008-2009 was decrease the return

on investment in 63%, and 80% &124% increase the return on investment for the year of

2009 to 2011. I.e. nearly 2.47 times it increased.

CHART NO:3.1.15 RETURN ON ASSET

49

YEAR RETURN ON ASSETS (%)

2006-20071.16

2007-20080.40

2008-20091.30

2009-20101.04

2010-20110.82

TABLE NO:3.1.16

TABLE SHOWING RETURN ON ASSETS (%)

Source: Secondary DataINFERENCE:

The table showing 2006-2007 was the return on investment was 72.44%, and 2007-

2008 was the return on investment increased 156%, and 2008-2009 was decrease the return

on investment in 63%, and 80% &124% increase the return on investment for the year of

2009 to 2011. I.e. nearly 2.47 times it increased.

CHART NO:3.1.17 RETURN ON INVESTMENT

50

YEAR RETURN ON ASSETS (%)

2006-2007 72.44

2007-2008 156

2008-200963

2009-2010

80

2010-2011 124

3.2 STATISTICAL TOOLS

3.2.1 SPEARMAN’S RANKTABLE SHOWING SPEARMAN’S RANK

Year CATA ROA(RI-R2)D D2% RANK 1 % RANK 2

2006-2007 67 5 116 2 3 92007-2008 74 3 40 5 -2 42008-2009 73 4 130 1 3 92009-2010 88 2 104 3 -1 12010-2011 89 1 82 4 -3 9

D2=32Source: Secondary data

Correlation Coefficient (r) = 1 - 6D2

N (n2-1)

= 1-(6X32)

5(52-1)

= 1-(192)

5(25-1)

= 1-(192)

5(24)

=1-192

120

=0.6

INTERPRETATION:

In table an effort has been made to measure the extent of relationship between

liquidity and profitability of Subramanian Siva co-operative sugar mills ltd. For this purpose,

the ratio of current assets and total assets (CATA) has been used as the return on assets. The

correlation co-efficient obtained by the spearman’s method is 0.6 this indicates that the

liquidity ratio (CATA) and the (ROA) are positively correlated.

51

3.2.1 TREND ANALYSIS

TABLE NO: 3.2.2 (A)TABLE SHOWING TREND ANALYSIS

Xt Y t =y-2009 t 2 Yt

2006-2007 130 -2 4 -2602007-2008 180 -1 1 -1802008-2009 320 0 0 02009-2010 345 1 1 3452010-2011 380 2 4 760

Y=1355 t =0 t2=10 Yt=665

TABLE NO: 3.2.2 (B)TABLE SHOWING TREND VALUE PROJECTION FOR FORTH COMING YEARS.

T y t =y-2010 t 2 Yt2006-2007 130 -3 9 -3902007-2008 180 -2 4 -3602008-2009 320 -1 1 -3202009-2010 345 0 0 02010-2011 380 1 1 3802011-2012 438 2 4 8762012-2013 496 3 9 1488

Y=2289 t =0 t2=14 Yt =1674

INTERPRETATION

In trend analysis the amount of current assets was increased year by year loans and

advance are increased from the year2007-2011.the entire current assets are showed a

downward trend except loans and advances.

52

3.2.3 LEVERAGES

TABLE NO: 3.2.3 (A)

TABLE SHOWING ON OPERATING LEVERAGES

PARTICULAR YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011Sales 936911383 513686269 1170712641 1428622305 841237082

(-) Variable cost 226421326 24825808 287973786 273177584 283604502

Contribution 710490057 488860461 882738855 1155444721 557632580

(-) Fixed cost 267833088 230161316 258346942 267833088 294693873

Operating profit 422686969 258699145 624391873 887611633 262938707

Operating leverage 1.68 1.89 1.41 1.30 2.12

INTERPRETATION:

From the above table, it is observed that operating leverage for the year 2006-2007 is

1.68, for the year 2007-2008 is 1.89, for the year 2008-2009 is 1.41, for the year 2009-2010 is

1.30 and for the year 2010-2011 is 2.12.

53

TABLE NO: 3.2.3 (B)

TABLE SHOWING ON FINANCIAL LEVERAGES

PARTICULAR YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011Operating profit 422686969 258699145 624391873 887611633 762938707

(-) debtors 366748889 733801086 7835367 12238540 495657704

Profit before tax 55938080 475101941 616556506 875373093 232718997

Financial leverage 7.55 0.54 1.01 1.01 3.27

INTERPRETATION:

From the above table, it is observed that financial leverage for the year 2006-2007 is

7.55, for the year 2007-2008 is 0.54, for the year 2008-2009 is 1.01, for the year 2009-2010 is

1.01 and for the year 2010-2011 is 3.27.

54

TABLE NO: 3.2.3 (C)

TABLE SHOWING ON COMBINED LEVERAGE:

PARTICULAR YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011Contribution 710490057 488860461 882738855 1155444721 557632580

(/) Profit before tax 55938080 475101941 616556506 875373093 232718997

Combined leverage 12.70 1.02 1.43 1.31 2.39

INTERPRETATION:

From the above table, it is observed that combined leverage for the year 2006-2007 is

12.70, for the year 2007-2008 is 1.02, for the year 2008-2009 is 1.43, for the year 2009-2010

is 1.31 and for the year 2010-2011 is 2.39.

55

3.2.4 COEFFICIENT OF CORRELATION

MEASURE THE DEGREE OF RELATIONSHIP BETWEEN TOTAL ASSETS TURNOVER AND RETURN ON ASSETS

X Y Dxy dX² dY²

1.27 1.16 1.47 1.61 1.340.51 0.68 0.34 0.26 0.461.43 1.30 1.85 2.0 1.691.14 1.04 1.18 1.29 1.080.65 0.82 0.53 0.42 0.67

x=5 y=5 ∑dxy=5.39 ∑dx²=5.64 ∑dy²=5.25

r= N∑dXY-(∑dX)(∑dY)

_____________________

N-∑dX2-(∑X)2 * ∑dY2- (∑dY)2

5*(5.39)-(5*5)

r=

5(5.64)-(5)2 * (5*5.25) –(5)2

1.95

r=

2

r=0.99

INTERPRETATION:

By using the correlation for finding the relation between Total assets turnover ratio

and return on assets it was found that there is a positive correlation between these factors i,e

the value is 0.99.

56

3.2.5 COMPARATATIVE ANALYSIS OF BALANCE SHEET FOR 5 YEARS i.e.,

FROM 2007-2008 TO 2011-2012

Particulars 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012LIABILITIESSources of funds: Share capital Share deposit Reserves & surplus

189795600 7481201179436907

201894200 7666133179688211

201894200 9313062179688211

2018942009313062

180592882

2018942009313062

180592782Subtotal(A)loan funds:secured loansunsecured loan

376713708

81600000239911000

389248544

81600000239907000

390895473

160727000239907000

391800144

160727000239902000

391800044

127757410239902000

Subtotal(B) 321511000 321507000 400634000 400629000 367659410

Total liabilities=(A)+(B 698224708 710755544 791529473 792429144 759459454

Application of funds:Fixed assetsGross blockLess: accumulated depreciationNet blockCapital work in progress

382099469324322225 57777244

0.00

385272952329520161 55752791

5537172

394766907335513445 59253462 558246

404541321344120218 60421103 483940

419529405350019160695102451970697

Subtotal(A)Investment &deposit (B)InventoriesSundry debtorsCash & bank balanceLoan& advances

57777244 899026366748889 12142262

116493235 14584536

61289963 958905733801086

7271230 3201819

32819452

598117081016655

537072961 7835367 56589209 39849342

60905043 766085

455982169 12238540 643475772 43783919

71480942843667

49565770414812249

6515313955633545

Less: current liabilities & allocation

509968922425844435

777093587822106790

641346879529397332

1155480400643658065

1239959502695366738

Subtotal(C)

Net profit & loss Subtotal (D)

84124487

555423951

-45013203

693519879

111949547

618751563

511822335

218935681

544592764

-164166690

Total assets =(A)+(B)+(C)+(D)

698224708 710755544 791529473 792429144 759459454

INTERPRETATION:

From the above table it was inferred that the total liabilities and total assets were

increased from 698224708 to 792429144 from the year 2007 – 2008 to 2010 – 2011 and then

decreased to 759459454 for the year 2011-2012.

57

4.1 FINDINGS

It was found that the high of total cost was spend in the year 2010-2011 as Rs. 154812189

crores and low as Rs. 73371825 crores in the year 2006-2007

It was found that the high of net income was earned in the year 2009-2010 of Rs.

1317186363 crores and low of Rs. 686424893 crores in the year 2010-2011

It was found that the high of net income margin was earned in the year 2006-2007 &

2009-2010 of 0.92% and low of 0.80 % in the year 2007-2008

It was found that the high of net income margin was earned in the year 2006-2007 &

2009-2010 of 0.92% and low of 0.80 % in the year 2007-2008

It was found that the high of current assets of Rs. 1162001348 crores in the year 2010-

2011 & and low of Rs. 495384386 crores in the year 2006-2007

It was found that the high of non- current assets of Rs. 248990050 crores in the year

2007-2008 & and low of Rs. 129884950 crores in the year 2010-2011

It was found that the high of total assets of Rs. 1291886298 crores in the year 2010-2011

& and low of Rs. 733380786 crores in the year 2006-2007

It was found that the high of total assets turnover of 1.43 % in the year 2008-2009 & and

low of 0.51 in the year 2007-2008

It was found that the high of return on assets of 1.30 % in the year 2008-2009 & and low

of 0.40 in the year 2007-2008

It was found that high of operating leverage for the year for the year 2010-2011 is 2.12

and low for the year 2009-2010 is 1.30.

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It was found that high of operating leverage for the year 2006-2007 is 7.55 and low for

the year 2007-2008 is 0.54.

It was found that high of operating leverage for the year 2006-2007 is 12.70 and low for

the year 2007-2008 is 1.02.

It was found that total liabilities and total assets were increased from 698224708 to

792429144 from the year 2007 – 2008 to 2010 – 2011 and then decreased to 759459454

for the year 2011-2012.

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4.2 SUGGESTIONS

The company may avoid the unnecessary expenses to reduce the total cost.

A necessary step can be taken to increase the net profit margin.

The net profit margin may be increased to have a good return on investment.

The measures of the assets can be done effectively to produce revenues.

The measures of investments in working capital assets needed for sustaining ongoing

operations.

The proper measures can be taken in investments in long-term, revenue producing assets.

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4.3 CONCLUSION

Thus, the performance of the firm has been measured by its financial results, i.e.,

by its size of earnings Riskiness and profitability are two major factors which jointly

determine the value of the concern. Financial decisions which increase risks will

decrease the value of the firm and on the other hand, financial decisions which

increase the profitability will increase value of the firm. Thus, this model can be used by

the purchasing and sales department to examine or demonstrate the ROA which was earned.

It gives an idea to the people about a basic understanding about the company results.

This model can be easily linked to compensation schemes. Thus, it has been

concluded that this model can be used to convince management that certain steps have

to be taken to professionalise the purchasing or sales function. It will takeover to

compensate the lack of profitability by increasing turnover and trying to achieve

synergy.

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