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“Patson Chemical Pvt. Ltd.”
A Project Report Submitted in Partial fulfillment
of award of MBA Degree
Project Guide
Prof.Parnika Jha
Submitted By
Ketan P. Dhameliya
Roll No : 22
S. K. PATEL INSTITUTE OF MANAGEMENT AND
COMPUTER STUDIES
Gandhinagar, India
December 2011
1
2
CERTIFICATE
This is to certify that Mr.Ketan Dhameliya of S.K.Patel Institute of Management and
Computer Studies, Gandhinagar has submitted his Winter Project titled, “The Project
Report on Patson Chemical Pvt. Ltd.” in the year 2011-2012 in the partial fulfillment of
Master of Business Administration.
Dr. N N Jani Prof. Sonu Gupta Prof.Parnika jha
Director HOD Project Guide
DECLARATION
3
I, hereby declare that the Winter Project titled, “The Project Report on Patson
Chemical Pvt. Ltd” is original to the best of our knowledge and has not been published
elsewhere. This is for the purpose of partial fulfillment of Kadi Sarva Vishvavidhyalaya
requirements for the award of the title of Master of Business Administration, only.
Signature
Ketan P. Dhameliya
MBA SEM-I
PREFACE
4
The career of the person depends upon many things. One of them is the
knowledge. He/she acquires through theory is not sufficient to develop. His/her
personality and to develop some skills, but now a days, it is no more. Practical training is
necessary to implement the theories & acquire the knowledge, so far this purpose our
institute s k patel institute of management and computer studies affiliated by Kadi
university, Gandhinagar arranged 4 day’s of summer training programmed which is
necessary for any M.B.A. student. That is in order to sharpen our skills and to bridge the
gap of the theory and practice. I completed my training at “PATSON CHEMICALS”.
The training report is made with clear objective of study of “PATSON
CHEMICALS”. How it’s working. The report will give the brief details of all the
department of PATSON CHEMICALS. My report provides you all the information
related to the various departments of PATSON CHEMICALS. Its current affaires and
working. I receive all information and co-operation from the staff members. I hope so,
these reports fulfill need of the educational requirements.
Hence, this report is designed with the objective to gain practical knowledge is
undertaken on a chemical industry. How it’s working and it’s finance department.
5
ACKNOWLEDGEMENT
I am glad to express my profound sentiments of gratitude to all who rendered
their valuable help for the successful completion of this project report titled, “financial
performance of PATSON CHEMICALS”. And to know the functions of Finance and
Accounts department.
I record my deep sense of gratitude to Mr.Mitul Patel, who had given me a chance
to do a project under this root of PATSON CHEMICALS, and given opportunity to know
the functions of finance & accounts department.
I want to say specially thanks to Dr.N N Jani to allow me to under go training the
“PATSON CHEMICALS” and Prof.Parnika Jha provides me to guideline how to make a
good report.
I am very thankful to all the member of the company for giving me necessary
information related to the department at which they are working and giving their valuable
time for guiding and providing lots of information concerning.
My genuine sense of gratitude goes to the respective universities that gave me a
chance to brighten my academic qualification that provided me this opportunity to have a
practical knowledge of relevant fields.
6
EXECUTIVE SUMMARY
This Winter Project Report of the Patson Chemical Pvt. Ltd. includes various
functions like production, marketing, finance and human resource. This report is prepared
after the training of 4 days at the company’s location at Bhavnagar. It includes the
financial analysis of the company and at the end conclusion is given.
The term “Financial Analysis” also known as analysis and interpretation of
financial statements refers to the process of determining financial strength and
weaknesses of the firm by establishing strategic relationship between the items the
balance sheet, profit and loss account and other operative data.
7
INDEX
Sr.
No.PARTICULAR
Page
No.
1 COMPANY PROFILE 9
2 HISTORY OF THE PATSON CHEMICALS 10
3 ABOUT ‘PATSON CHAMICALS’ 11
4 PRODUCT PROFILE 12
5 MANUFACTURING PROCESS 13
6 ORGANISATION STRUCTURE 15
7 OBJECTIVE OF RESEARCH 16
8 SCOPE OF THE STUDY 17
9 LIMITATION OF THE STUDY 18
10 WORKING CAPITAL 19
10.1 CURRENT ASSETS 20
10.2 CURRENT LIABILITIES 21
10.3 WORKING CAPITAL 22
11 COMMON SIZED STATEMENT OF PROFIT & LOSS A/C 23
12 COMMON SIZED STATEMENT OF BALANCE SHEET 24
13 PROFITABILITY RATIOS 25
14 LIQUIDITY RATIOS 28
15 ACTIVITY RATIOS 30
16 SUGGESTIONS 35
17 CONCLUSION 36
18 BIBLIOGRAPHY 37
8
COMPANY PROFILE
Name : PATSON CHEMICALS
Factory Address : Plot no. 92, Phase- 1
G.I.D.C. Chitra,
Bhavnagar 364004
Office Address : As above.
Type of Business : Partnership Firm
Names of Partner : Mr. Mitul M. Mavani,
Mr. Damjibhai M. Patel,
Mr. Valjibhai L. Lathiya,
Mr. Govindbhai D. Malaiya,
Mr. Pankajbhai N. Lathiya,
Miss. Bhanuben C. Malaiya.
Banker : State Bank of India. (Chitra Branch)
Establish : 1981
Contacts (O) : (0278) - 2446097, 2448139
(R) 2447417
Fax : (0278) 2445097
Website : www.patsonchemical.com
E-mail : [email protected]
9
HISTORY OF THE PATSON CHEMICAL
PATSON CHEMICALS has been a leader unit in manufacturing of Bulk Drugs
and Fine chemical since it commenced in 1981. The founder of this unit Mr. D.M. Patel
continuously upgraded the quality of product to the satisfaction of renowned customers
all round India and abroad. Continuous progress has been achieved through the skills of
their workforce, commitment to new technologies and dedication to good customer
service. This has leaded the company to expand its business in Singapore, Canada,
Germany, Bangkok and South Africa.
The Sister concern of Patson Chemical is Patson Laboratories Pvt. Ltd been
engaged in manufacturing of tablets, capsules and liquid orally.
“PATSON CHEMICALS” production unit of the chemicals is sited in the industrial
spot of Bhavnagar i.e. G.I.D.C. Chitra for getting the advantage of locality. It is not
having any branch, offices, factory and warehouse.
The company has been documented as a partnership firm in 1981 by Mr.
N.H.LATHIYA. He was a main founder of PATSON CHEMICALS. Then the control of
the firm was given to DAMJIBHAI PATEL. He had worked hard to accelerate the growth
of the firm and is doing well for the development of the firm. After the smooth function
of the firm, Mr. M. M. Mavani joined the firm in the year of 2000.
10
ABOUT ‘PATSON CHAMICALS’
Young and dynamic technocrats manage the company. They persevere to provide
the best quality and service to their customers. To achieve the highest standards of
quality, and thoroughly inspect the inward goods, in-process materials and finished
products. PATSON CHEMICALS have a well equipped laboratory where they use
modern techniques for research and development of new products. PATSON
CHEMICALS one of the most important strategy is "qualitative business". We
consciously put these actions in our everyday lives.
Achieving customer’s satisfaction is fundamental to business.
Provide products and services of the highest quality.
Practice dignity and equity in relationship, and provide opportunities for people to
realize their full potential.
Foster mutually beneficial relations with all business partners.
Manage operations with high concern for safety and the environment.
Be a responsible corporate citizen.
11
PRODUCT PROFILE
Basically the firm manufactures chemicals for the purpose of making drugs for the
disease. The firm use very complicated process for getting this chemical. Thus procedure
takes 5 days to get prepared.
The PATSON CHEMICALS provide the raw material to the large scale industries.
The products of the firm are as bellow:-
N-BUTILE BROMIDE (chemical)
DIE-ETHILE EMINE (chemical)
OXIPHINE BUTAZONE (drug)
PHENYL BUTAZONE (drug)
The products are raw material for large scale. They made the pain-killer tablet and
drug.
The production of the PHENYL BUTAZONE was initiated in 1987. It was sold in
‘tons’ to pharmaceutical companies. It was exported also in many countries.
As we know that 1992 to 1998 was the golden era of the company. These chemicals
were demanded very much.
12
MANUFACTURING PROCESS
PATSON CHEMICALS manufactures the product as per the UNITED STATE
PHARMACOPOIEA (USP) for the production of PHENYL BUTAZONE. Various raw
materials such as N-BUTYL, DIETHYL MELOLATE, HYDRO BENZENE and
SODIUM METAL are required. Manufacturing process consists of following steps.
N-BUTYL HYDRO SODIUM SODIUM
DIETHYL MELONATE BENZENE METAL SALICYLAIN
---------------------------------------------------------------------------------------
REACTOR
|
CARBON TOWER
|
ACIDIFICATION
|
CENTRIFUGAL FILTER
|
TRAY DRIER
|
GRINDER
|
PACKAGING
WEIGHT INSPECTION
13
1. Mixing of various raw materials
Firstly various raw like N-BUTYL, DIETHYL MELOLATE, HYDRO BENZENE
and SODIUM METAL, SODIUM METANOL, COSTIC SODA, GLACIAL ACIDIC
ACID are mixed.
2. Reacting
In the reactor, different types of chemical reactions are performed on the mixture of
raw material listed in the step1
3. Carbon tower
After the reacting process, the mixture is passed through the carbon tower which
give 99% pure PHENYL BUTAZONE.
4. Acidification
Next acidification is performed on the water link solicitor of PHENYL
BUTAZONE. It gives white colored PHENYL BUTAZONE.
5. Centrifugation
In this step, soft lumpy of PHENYL BUTAZONE are obtained.
6. Drying
In the tray drier “PHENYL BUTAZONE” is passed through
7. Grinding
In the grinder the granules are crushed into fine power.
8. Packaging
After all the earlier steps have been performed, “PHENYL BUTAZONE” is
packaged in the layered bag. Then they are placed in to HDPP (HYDENCITY POLY
PROPALIN) solar resistant drums. These drums are known as CRAFTED DRUMS.
9. Weight inspections
When the PHENYL BUTAZONE powder is to be dispatched, it is packed in the
HDPP bags, because the company is engaged bulk drugs production transporting. So, it is
packed in the powder form in the HDPP bags that have capacity of 25 kg. For the proper
weighting the company uses the electronic weighting machines.
Then these drums are dispatched from the company.
14
ORGANISATION STRUCTURE
Every company’s most important part is organization structure and it plays major
role for any of the successful company.
In PATSON CHEMICAL organization structure is functional type. The authority
line with the top level & flows from top level to bottom level. The responsibility moves
from bottom level to top level. In PATSON CHEMICAL every partners have the
responsibility in the proportion of their authority.
15
PARTNERS
PRODUCTION
MANAGER
PRODUCTION
MANAGER
PRODUCTION
MANAGER
SUPERVISOR SALESMEN ACCOUNTANT
OBJECTIVE OF RESEARCH
Calculate ratio of Patson chemical Ltd. and analyze their financial
situation.
Take into account Patson Chemicals five year’s balance sheet and ratio
to analyze them.
Developing & analyzing Common size income statement.
Determine whether investment in this company is profitable or not.
Determine the financial weakness and strength of the company.
To measure the enterprise's short-term and long-term solvency.
To measure the enterprise's operating efficiency and profitability.
16
SCOPE OF THE STUDY
This project is vital to us in a significant way. It does have some importance for the
company too. These are as follows.
This project will be a learning device for the finance student.
Through this project we would study the various methods of the Financial Analysis.
The project would also be an effective tool for analyzing the company’s position.
This will show the liquidity position of the company and also how do they maintain
a particular liquidity position.
This study will be useful for seeing at what extent of the stage , company is going.
17
LIMITATION OF THE STUDY
Percentages shown in common – size statement analysis give only the change in
proportion of one item to one item. It fails to indicate whether the financial position or
performance over a period of different years is improving or deteriorating.
Final results of the firm also depend upon a number of factors such as general economic
conditions, competition and the policy framed by the government. Hence, before giving
any opinion on the basis of accounting ratios, all such factors must be kept in mind. But
ratio analysis does not take into consideration these factors.
Some accounting ratios are not taken due to lack of information
When comparing performance over time, there is need to consider the changes in price,
changes in technology and changes in accounting policy.
On the basis of only last five year’s balance sheet company’s performance and it’s
evaluation may not be appropriate.
18
WORKING CAPITAL OF PATSON CHEMICAL
PARTICULARS 2007 2008 2009 2010 2011
current assets:
Inventories 4361404 2842430 1386110 2612451.59 3355921.91
Sundry debtors 2061029 4272202 1257662 2549772 2467034
Bank & cash 186403.02 242077.4 2324687.8 658249.99 776850.91
Loan &
advances870167.38 1910605.02 968699.3 965984.16 625687.52
total current
assets7479009.4 9267314.42 5937159.09 6786457.74 7225494.34
less
current liability:
Sundry creditors
for goods1711954 3590915 1261064 1777147 166114
Other current
liabilities- 31434 21423 35220.50 60803
Provisions 49529 57957 65701 66563 91023
total current
liabilities:1761483 3680306 1348188 1878930.50 317940
working capital
total application
of funds
5717526.4 5587008.42 4588971.09 4907527.24 2194946.22
19
20
1).Current assets
A current asset means the assets in the form of cash or can be readily converted
in to the cash within a shorter time. They include cash, bank balance, stock,
debtors, bills receivable, prepaid expenses, accrued income, and readily
marketable securities etc.
Current assets
As the current asset is given in the above table. We can see that in the
year 2007 the current asset is of Rs.7479009.4.then in next year in 2008 the
current asset is increase to 9267314.42.it increases in compare to the previous
year.In the year 2009 current assets again decrease by 3330155.33 and reaches
to 5937159.09.And in the year 2010 current assets increase by 849298.65 and
reaches to 6786457.74. And finally in the year 2011 current assets increase by
439036.6 and reaches to 7225494.34.
So we can find that the in the Patson chemical the current assets is the
fluctuating year by year that shows poor working capital management in Patson
chemical. Company should improve its working capital.
YEAR RS.
2007 7479009.4
2008 9267314.42
2009 5937159.09
2010 6786457.74
2011 7225494.34
21
2).Current liability
Current liability includes the liability which company has to pay
within the period of one year. It includes creditors, deposits, provision for tax, and
all other provisions.
CURRENT LIABILITY
From the above table we find that in the year 2007 the current
liability was1761483, in the 2008 it increase by 1918823 and reaches to
3680306. The next year in 2009 it decreases by 2332118 and reaches to
1348188. And in the year 2010 it increase by 530742.50 and reaches to
1878930.50. And finally in the year 2011 it decreases by 1560990.5 and reaches
to 317940.
From 2010 to 2011 current liability decrease by 1560990.5. It
ensures the negative effect to the progress of the company.
Patson chemical should try to reduce its current liabilities so as to
have the effective working capital for the smooth operating of the business.
YEAR RS.
2007 1761483
2008 3680306
2009 1348188
2010 1878930.50
2011 317940
22
3).Working capital
Business capital is broadly divided in to two groups fixed capital
and working capital. fixed capital refers to the funds invested in to such fixed or
permanent asset as land, building, machinery etc.
WORKING CAPITAL
As shown in the above table we can see that in 2007 the
working capital of Patson chemical is 5717526.4, and the next year in 2008 we
can see that the working capital decreases and reaches to 5587008.42.and the
next year 2009 we can see that the working capital decreases and reaches to
4588971.09. And in the year 2010 it can be increases and reaches to
4907527.24. And finally in the year 2011 it can be decreases and reaches to
2194946.22.
Form the above statement of working capital we can understand
that the working capital decrease day by day in Patson chemical. Patson
chemical should try to increase its working capital.
YEAR RS.
2007 5717526.4
2008 5587008.42
2009 4588971.09
2010 4907527.24
2011 2194946.22
23
COMMON SIZED STATEMENT OF PROFIT & LOSS ACCOUNT
OF PATSON CHEMICAL
PARTICULAR
31-Mar-1131-Mar-10 31-Mar-09 31-Mar- 08 31-Mar-07
Amount % Amount % Amount % Amount % Amount %
Income
Sales 2020985785.6
217728587 86.76 21488292 93.36 14648225 83.64 14841475
97.3
6
Closing stock 3355921.9114.2
22612451.59 12.79 1386110 6.02 2842430 16.23 314554 2.06
Other income 37588.18 0.16 92045.06 0.45 142809.66 0.62 22249 0.12 87049 0.57
Total
income(A)23603367.09 100 20433103.65 100 23017212 100 17512904 100 15243078 100
Expenditure
Opening stock 2612451.5911.8
91386110 7.51 2842430 13.19 4361404 25 723997 5.12
Purchase of
raw material16472155.75
74.9
914644766.26 79.39 15869254 73.64 10932378 62.69 11283719
79.7
9
Manufacturing
exp.1593956.84 7.26 1281419.83 6.95 1516759.5 7.04 1365776 7.83 1478981.1
10.4
6
Administration
& other exp.910492.11 4.14 698301.15 3.78 1059175 4.91 418306.6 2.4 295044.27 2.08
Finance exp. 69480 0.32 121000 0.66 31277.16 0.14 187929 1.07 155672 1.1
Depreciation 308390 1.40 315107 1.71 231925 1.08 173233 1 203835 1.44
Total
expenditure(B)21966926.29 100 18446704.24 100 21550821 100 17439027 100 14141248 100
NET PROFIT
(A-B)1636440.80 7.45 1986399.41 10.77 14,66,391 6.8 73,877 0.42 11,01,829.7 7.79
24
COMMON SIZED STATEMENT OF BALANCE SHEET OF PATSON
CHEMICAL
PARTICULAR31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-08 31-Mar-07
Amount % Amount % Amount % Amount % Amount %
Capital account
of partner8076065.21 85.73 6926305.41 75.04 5994112.44 72.83 5208681.84 48.78 5586603.15 61.71
Secured loan 911435.35 9.67 309483.05 3.35 773226.87 9.39 1673912.8 15.68 1566758.3 17.31
Un secured loan 115000 1.22 115000 1.25 115000 1.40 115000 1.08 137485 1.52
Current
liabilities &
Provision
Sundry creditor
for goods166114 1.76 1777147 19.25 1261064 15.32 3590915 33.63 1711954 18.91
Other liabilities 60803 0.65 35220.50 0.38 21423 0.26 31434 0.29 - -
Provision 91023 0.97 66563 0.72 65701 0.80 57957 0.54 49529 0.55
TOTAL
LIABILITIES9420440.56 100 9229718.96 100 8230527.31 100 10677900.64 100 18240072.45 100
Fixed asset2194946.22 23.30 2443261.22 26.47 2293368.22 27.86 1410586.22 13.21 1573320.05 17.38
Current asset
Inventories 3355921.91 35.65 2612451.59 28.30 1386110 16.84 2842430 26.62 4361404 48.18
Sundry debtors 2467034 26.19 2549772 27.63 1257662 15.28 4272202 40 2061029 22.77
Cash & Bank 776850.91 8.25 658249.99 7.13 2324687.79 28.25 242077.4 2.27 186409.02 2.06
Loan & Advance
& Deposits625687.52 6.64 965984.16 10.47 968699.3 11.77 1910605.02 17.89 870167.38 9.61
TOTAL ASSETS 9420440.56 100 9229718.96 100 8230527.31 100 10677900.64 100 9052329.45 100
(A) PROFITABILITY RATIOS
25
1). Gross profit ratio
Gross Profit Ratio = Gross Profit * 100
Sales
2007 2008 2009 2010 2011
1669331.72
*100/14841475
831097.08*100
/14648225
2645958.59*100
/21488292
3028742.5*100/
17728587
2887214.73*100
/20209857
11.23% 5.67% 12.31% 17.08% 14.29%
From the above calculation of ratio that shows in 2006-07 the ratio is
11.23% , in 2007-08 the ratio is 5.67% we can see that the ratio is decrease in 2007-
08.And in 2008-09 the ratio is 12.31 %.the gross profit ratio is increase in 2008-09. In the
year 2009-10 the ratio is 17.08%, so the gross profit ratio is increased in 2009-10.And
finally in the year 2010-11 the ratio is 14.29%, so the gross profit ratio is decreased in
2010-11.
This ratio of Patson chemical is low it indicates that the cost of sales is
high or that the purchasing is inefficient. In such case the management of Patson chemical
must investigate the causes and try to bring up this ratio.
26
2).Operating ratio
Operating ratio= Cost of goods sold + operating expenses * 100
Net sales
2007 2008 2009 2010 2011
13622859.55*100/
14841475
14423358.49*100/
14648225
19932785.56*100/
21488292
17032565*100/
17728587
15939561.84*100/
20209857
91.79% 98.46% 92.76% 96.07% 78.87%
The ratio displayed in above table we find that in 2006-07 the operating ratio
is 91.79% then it increases to 98.46% and in the year 2008-09 it increases to 92.76%.In
the year 2009-10 it increased to 96.07%.And finally in the year 2010-11 it decreased to
78.87%.There is no specific trend in above 3 year in Patson Chemical.
In year 2006-07 the operating ratio shows that is 91.79% it means that the
operating expense is 92 rs. per 100rs goods .in 2007-08 the ratio is 98.46% that shows not
good operating position the high ratio will be gives lower profit. in 2008-09 the ratio
decreases to 92.76% so it is not good position Patson Chemical should try to decreases
operating ratio.
27
3). Net profit ratio
Net Profit Margin = Profit after Tax* 100
Sales
2007 2008 2009 2010 2011
1101829.45 * 100/
14841475
73877.52 * 100/
14648225
1466391.1* 100/
21488292
1986399.41* 100/
17728587
1636440.80*100/
20209857
7.42% 0.50% 6.82% 11.20% 8.10%
From the above calculation we find that in 2006-07 the ratio is 7.42 and in
2007-08 is 0.50 and in the year 2008-09 the net profit ratio is 6.82.In the year 2009-10
the ratio is 11.20.And finally in the year 2010-11 the ratio is 8.10, so the ratio is
decreased in 2010-11.
We can find that the ratio trend slaps down and up word from the above
figure. The higher ratio, the batter will be the profitability in order to have batter idea
of profitability
(B) LIQUIDITY RATIOS
28
1) Current assets ratio
Current asset ratio = Current assets
Current liability
2007 2008 2009 2010 2011
7479009.4/
1761483
9267314.42/
3680306
5937159.09/
1348088
6786457.74/
1878930.50
7225494.34/
317940
4.24 2.52 4.40 3.61 22.73
In 2006-07 the current assets ratio is 4.24 and it is decreases to 2.52 in the year
2007-08.The current assets ratio in 2008-09 it increases to 4.40. In the year 2009-10 the
ratio is 3.61, so the ratio is decreased in 2009-10.In the year 2010-11 the ratio is 22.73, so
the ratio is increased in 2010-11.
The adequacy of this ratio depends upon a number of factors like the nature of
business, the efficiency of collection department etc. if the turnover is quick and the
collection is efficient, the business may be successfully carried on with a low current
ratio.
The current ratio of Patson chemical is considered as satisfactory level the ratio of
4.40 shows that for the payment of the one liability the company had 4.40 rs. it’s shows
the strong financial position of Patson chemical.
2) Quick ratio or acid-test ratio
29
Quick Ratio = Quick Assets
Quick Liabilities
2007 2008 2009 2010 2011
870167.38/
1761483
1910605.02/
3680306
968699.30/
1348188
965984.16/
1878930.50
625687.52/
317940
0.49 0.52 0.72 0.51 1.97
The above table shows that in 2006-07 the quick ratio is 0.49 in 2007-08
the ratio increases and become 0.52 and in the year 2008-09 the ratio is 0.72. In the year
2009-10 the ratio is 0.51. In the year 2010-11 the ratio is 1.97, so the ratio is increased in
2010-11.
The measure of absolute liquidity may be obtained by comparing only
cash and bank balance as well as readily marketable securities with liquid liabilities this is
very exacting standard of liquidity and it is satisfactory if the ratio is 0.5:1.
(C) ACTIVITY RATIOS
1). Fix asset turnover ratio
30
Fix assets turnover ratio = sales
Fixed assets
2007 2008 2009 2010 2011
14841475/
1573320.05
14648225/
1410586.22
21488292/
2293368.22
17728587/
2443261.22
20209857/
2194946.22
9.43 times 10.38 times 9.37 times 7.26 times 9.21 times
From the above table we can see that in the year 2006-07 the fixed asset turn over
ratio is 9.43. In the year 2007-08 it becomes 10.38. And in the year 2008-09 is 9.37. In
the year 2009-10 the ratio is 7.26 and in the year 2010-11 the ratio is 9.21, so the ratio is
increased in 2010-11 in compare to 2009-10.
This ratio is higher it means the fixed assets are being used effectively to earn
profit in Patson Chemical. The ratio in the year 2009-10 increases in compare to the
previous year 2008-09 and in the current year ratio become increased to 9.21 this ratio is
good for position in Patson Chemical.
2).stock turnover ratio
Stock turnover = cost of goods sold
Average stock
31
2007 2008 2009 2010 2011
1054210/
519275.5
69877190/
3601917
13637041/
2114270
29469399/
1999280.80
32546112/
11411154.29
2.03 times 19.40 times 6.45 times 14.74 times 2.85 times
Stock turnover in 2006-07 is 2.03 it means that total turnover of goods is 2 times
in a year and in 2007-08 the ratio is 19.40 and in the year 2008-09 the ratio is 6.45. In the
year 2009-10 the ratio is 14.74 and finally in the year 2010-11 the ratio is 2.85.
The higher turnover, the more profitable the business would be. The firm in such a
case will be able to trade on small margin of gross profit.
3). Debtors ratio
Debtors ratio = Debtors + Bills receivable
Average daily sales
32
2007 2008 2009 2010 2011
2061029/
40661.57
4272202/
40132.12
1257662/
58872.03
2549772/
48571.47
2467034/
55369.47
51 Days 106 Days 21 Days 52 Days 45 Days
Debtors’ ratio in 2006-07 is 51 days it means that they credit sales is collected in
51 days. 2007-08 the ratio is 106 days it means that credit collection policy is weak. In
2008-09 the ratio is 21 days and in 2009-10 the ratio is 52 days.And finally in the year
2010-11 the ratio is 45 days it means that credit collection policy is good.
The higher this ratio, the more unsatisfactory position it shows. It suggests that the
credit and collection policy is weak. This would result into unsatisfactory state of working
capital and weak liquid position.
4). Creditors ratio
Creditors ratio = Creditors + Bills payable
Average daily purchase
2007 2008 2009 2010 2011
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1711954/
30914.30
3590915/
29951.72
1261064/
43477.41
1777147/
40122.65
166114/
45129.19
55 Days 120 Days 29 Days 44 Days 3 Days
Creditor’s ratio in 2006-07 is 55 days it means that they do not take full advantage
of credit period. 2007-08 the ratio is 120 days it means that they take full advantage of
credit period. 2008-09 the ratio is 29 days and in 2009-10 the ratio is 44 days. And finally
in the year 2010-11 the ratio is 3 days it means that they do not take full advantage of
credit period.
5).Total assets turnover ratio
Total assets turnover ratio = Sales
Total assets
2007 2008 2009 2010 2011
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14841475/
9052329.45
14648225/
10677900.64
21488292/
8230527.31
17728587/
9229718.96
20209857/
9420440.56
1.64 times 1.37times 2.61 times 1.92 times 2.15 times
From the above table we can see that in the year 2006-07 the total assets turn
over ratio is 1.64 times. In the year 2007-08 it becomes1.37 times And in the year 2008-
09 is 2.61 times. In the year 2009-10 the ratio is 1.92 times. And finally in the year 2010-
11 the ratio is 2.15 times, So the ratio is increased in compare to 2009-10.
This ratio is important to know the over-all efficiency of the business. The
higher this ratio, it shows that with less amount of investment in total assets, the business
has a capacity to sell more and as such its profitability is also more.
SUGGESTIONS
Company’s profit margin is very fluctuating year-on-year. There should be
consistency in the up or down of the profit. A huge fluctuation is not healthy for
the company.
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PATSON CHEMICALS needs to decrease its operating expanses so that the net
profit can be enhanced.
Company should increase the proprietors capital than borrowings. As it reduces
the burden of interest.
Currently, company is selling their products only in domestic market. But
company should also go in the international market. So that company’s products
can be sold at premium rate.
Company should try to reduce finance expenses. Because it has been increasing
every year, which absorbs a part of the net profit.
CONCLUSION
The focus of financial analysis is on key figures contained in the
financial statements and the significant relationship that exits. In company there is a vast
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amount of data available. But it’s very difficult to see each & every data to analyze them.
As a alternative Ratio Analysis will be a very useful devices to make the efficient and
rapid utilization of available data to interprets.
BIBLIOGRAPHY
The following sources become very much helpful for me to prepare this project
report.
ADVANCED ACCOUNTANCY
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WWW.PATSON CHEMICAL.COM
WWW.WIKIPEDIA.COM
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