MANAGALA MARINE EXIM INDIA PVT. LTD

7/28/2019 MANAGALA MARINE EXIM INDIA PVT. LTD

1/50

REPORT ON FINANCIAL STATEMENT

ANALYSIS AT MANAGALA MARINE EXIM

INDIA PVT. LTD THOPPUMPADY

Project report submitted in partial fulfillment of the requirement for

the award of the Bachelors Degree of Commerce to the

Mahatma Gandhi University, Kottayam

SUBMITTED BY

NIDHIN.T.L : (Reg.no.133872)

NIJAS.K.N : (Reg.no.133873)

NINEESH.K.K : (Reg.no.133874)

UNDER THE GUIDANCE OF

Asst. Prof. LAKSHMISREE.R

DEPARTMENT OF COMMERCE

THE COCHIN COLLEGE

KOCHI 682002

2009-2012


2/50

DECLARATION

We, hereby declare that this project report titled Report on Financial

Statement Analysis at Mangala Marine Exim India Private Limited

has been prepared by us under the guidance of Asst. Prof.

Laksmisree .R, Department of Commerce, The Cochin College,

Kochi.

We also declare that this project report has not been submitted by us

fully or partly for the award of any degree, diploma, and title orrecognition earlier.

Nidhin.T.L

Nijas.K.N

Nineesh.K.K

Place: Kochi

Date:


3/50

CERTIFICATE

This is to certify that this project report on Financial Statement

Analysis of Mangala Marine Exim India Pvt. Ltd is a record of

original work done by Mr. Nidhin.T.L, Nijas.K.N, and Nineesh.K.K

under my supervision and guidance.

Asst. Prof. Lakshmisree.R

Department Of Commerce

The Cochin College

Kochi

Counter signed by

Dr. M. C. Dileep Kumar

Head of The Dept Of Commerce

The Cochin College

Kochi


4/50

ACKNOWLEDGEMENT

It is my privilege to place a word of gratitude to all persons who have helped me forthe successful completion of the dissertation.

Firstly, I would like to express our profound gratitude to our guide Assistant ProfessorMiss. Lakshmisree.R, Faculty Member, Department of Commerce, The CochinCollege, Fortkochi, for her expert advice, constant encouragement, her inspiringguidance, valuable suggestions, corrections, and direction at each stage of my work.

We also express our sincere gratitude to the Principal of our college Shri. Dr.Rajagopal.M and to Dr. M.C.Dileepkumar, Head of the Department of our college fortheir encouragement to carry out this dissertation.

We would also like to express our sincere thanks to Dr.R.Vasanthgopal sir for hisvaluable assistance and co-operation and also for furnishing us the requiredinformation for the completion of the dissertation.We would also like to thank all the respondents who gave me the necessary datawhich was helpful for the successful completion of my dissertation.

Finally, We would also like to express my sincere thanks to our family and our friendsfor their valuable help, co-operation and encouragement for the successful completionof this dissertation.

NIDHIN.T.L

NIJAS.K.N

NINEESH.K.K


5/50

TABLE OF CONTENTS

CHAPTER PARTICULARS

PAGE NO:

1. Introduction

2. Company profile

3. Review of literature

4. Data analysis

5. Findings, Suggestions,

Conclusion and

Bibliography


6/50

LIST OF TABLES

Table no: Particulars Page no:

4.1 Current Ratio

4.2 Quick / Liquid / Acid Test Ratio

4.3 Absolute Liquid Ratio

4.4 Inventory Turnover Ratio

4.5 Debtors Turnover Ratio

4.6 Working Capital Turnover Ratio

4.7 Debt-Equity Ratio

4.8 Fixed Asset To Net worth Ratio

4.9 Gross Profit Ratio

4.10 Operating Profit Ratio

4.11 Net Profit Ratio


7/50

LIST OF FIGURES

Figure no: Particulars Page no:

4.1 Current Ratio

4.2 Quick / Liquid/ Acid Test Ratio

4.3 Absolute Liquid Ratio

4.4 Inventory Turnover Ratio

4.5 Debtors Turnover Ratio

4.6 Working Capital Turnover Ratio

4.7 Debt-Equity Ratio

4.8 Fixed Asset To Net worth Ratio

4.9 Gross Profit Ratio

4.10 Operating Profit Ratio

4.11 Net Profit Ratio


8/50

CHAPTER -I

INTRODUTION


9/50

INTRODUCTION

Finance is defined as the provision of money at the time when it is required. Every

enterprise, whether big, medium or small, needs finance to carry on its operations andto achieve its targets. In fact, finance is so indispensable today that it is rightly said

that it is the life blood of an enterprise. Without adequate finance, no enterprise can

possibly accomplish its objectives. A financial manager is a person who is responsible

in a significant way to carry out the finance functions. In modern enterprise, the

financial manager occupies a key position. He plays a pivotal role in planning

quantum and pattern of fund requirements, procuring the desired amount of funds,

allocating funds so pooled among profitable outlets and controlling the uses of funds.

Finance function in a business is simply the task of providing funds needed by the

enterprise on terms that are most favourable in the lights of its objectives. Hence

efficient management of every business enterprise is closely linked with efficient

management of its finance.

Analysis and interpretation of financial statement refers to such a treatment of the

information contained in the income statement and balance sheet so as to afford full

diagnosis soundness of the business. This study is extended into the financial

performance of Mangala Marine Exim India Private Limited, Thoppumpady for the

period of 2006-2007 to 2010-2011. The study is completely based on analysis and

interpretation of the published accounts of the concern and personal interviews, of the

important management people.

1. SCOPE OF THE STUDY

The scope of the study is limited to the financial statement analysis. The progress of

financial statement analysis involves the compilation and the study of financial and

operating data and the preparation and interpretation of measuring devices such as

ratios, trend and percentage. Present and past data are used for this purpose. The

quantitative relation of the kind represented by ratio analysis is not an end in them but

is a means to understand firms financial positions.


10/50

2. SIGNIFICANCE OF THE PROBLEM

The study is intended to bring to light the efficiency of financial performance of the

company. Also this is an attempt to find out the weak areas in the performance of the

company and to suggest remedial measures, so as to improve the efficiency of the

company.

3. OBJECTIVES OF THE STUDY

The main objective of the study is to evaluate the financial performance of the

company. Other specific objectives are:

1. To know about the profitability performance of the company.

2. To measure the ability of the firm to meet its current obligations.

3. To study about the debt content in the capital structure and debt servicing

capacity of the firm.

4. To examine the source of funds.

5. To examine efficient utilization of the assets of the company.

4. METHODOLOGY

The research methodology is a method to solve systematically the research problem.

The study exhibits both descriptive and analytical chapter. Regarding the theoretical

concepts it is descriptive. Since it interprets and analyses the secondary data in order

to arrive at appropriate conclusions it is also analytical chapter. The research

methodology refers to the behaviors and instruments used in performing the research

operations such as making observations, recording data, and the techniques of

processing data and the like. The method and techniques are selected to suit the scope

of the study. Hence the techniques of ratio analysis are used. Ratio analysis is a

powerful tool for financial analysis.

The relationship between two accounting figures expressed mathematically is known

as financial ratios. Ratio helps the analyst to make quantitative judgment about the

firms financial position and performance.

The easiest way to evaluate the performance of the firm is to compare its present ratio

with past ratio. Such a comparison would indicate the direction of change and reflects


11/50

whether the firms financial position and performance have improved, deteriorated or

remain constant.

5. STATISTICAL TOOLS USED

Analysis of data can be done through various techniques. Ratio analysis is one of the

important tools for the data analysis that helps to get complete idea about the

performance of the organization.

6. METHODS OF DATA COLLECTION

Following are the main sources of data collection.

Primary data: primary data are those, which are collected for the first time and are

original in nature. Primary data is collected by way of direct interview with the staff.

Secondary data: secondary data on the other hand are those are already been

collected and analyzed from someone else. Secondary data is collected from audited

annual reports of the company, websites, journals, magazines etc.

7. PERIOD OF STUDY

The time utilized for the present study is from January 2012 to March 2012. The

present study is to analyze the financial performance of Mangala Marine Exim India

Private Limited is for a period of five years from 2006-2007 to 2010-2011.

8. LIMITATIONS OF THE STUDY

In this study the main source of financial data is audited financial accounts of the

company, as such it is subject to the limitations of secondary data. Financial

statements are generally based on historical or original cost. The actual position may

be slightly different. The time limitation was one of the constraint, hence in-depth

study was not possible.

9. SCHEME OF THE STUDY

The whole study contains five chapters:-

First chapter is the introductory chapter. This chapter out lines the scope of the study,

significance of the problem, objective of the study, methodology, statistical tools

used, methods of data collection, period of study and the limitations faced.


12/50

Second chapter deals with the company profile, profile of Mangala Marine Exim

India Private Limited.

Third chapter explains the theoretical framework about finance, financial statements

and financial analysis.

Fourth chapter contains an analysis and interpretation of the financial position of the

company by using the technique of ratio analysis. It highlights the important ratios of

the firm and its interpretation. It also gives graphical presentation for illustrating the

analyzed data.

Fifth chapter presents the conclusions derived from the study. A few suggestions also

presented to improve the working of the company by highlighting its defects and

inefficiencies.


13/50

CHAPTER -II

COMPANY PROFILE


14/50

Name : Mangala Marine EXIM India Private Limited

Address: Bhat Memorial Building, Thoppumpady, Kochi 682005.

Status : Company

Nature of: Processing and Export of Marine Products Business

Business

BRIEF HISTORY

The Mangala group of companies began in the year 1967 with a young man named

M.V. Ramachandra Bhat. In 1985, Mangala sea products were established at Aroor,

Alleppey. Today the hard earned success of the mangalagroup can be clearly

ascertained from the fact that it handles about 125000 MT per annum in its own

factories and another 2500 MT per annum by trading, doing a total business of nearly

US $ 40 Million annually.

MANGALA MARINE EXIM INDIA (P). LTD, DIVISIONS

1. Mangala Sea Products, Aroor, Alleppey.

HACCP Implemented

Approved to export to all countries including EU

Holders of USFDA Green list

FACILITIES

Cold Storage 250 MT

Plate Freezer 15 TPD

Blast Freezer 5 TPD

Flake Ice 20 TPD

Block Ice 12 TPD


15/50

2. Bhatsons Aquatic Products, Aroor, Alleppey.

HACCP Implemented


Holder of USFDA Green list

FACILITIES

Cold Storage 600 MT


Trolley Freezer 15 TPD

Flake Ice 50 MT

Cryogenic Freezer 500 Kgs / Hr

3. Blue Water Foods & Exports Pvt. Ltd., Mangalore.

HACCP Implemented


FACILITIES

Cold Storage 1200 MT


Trolley Freezer 42 TPD

Flake Ice 50 TPD

4. Frozen Freeze, Thoppumpady.

FACILITIES

Cold STORAGE 800 MT

5. Mangala Marine Exim India Pvt. Ltd., Edakochi.

HACCP Implemented


Holders of USFDA Green list


16/50

FACILITIES

Cold Storage 300 MT

Full line IQF Raw and cooked Products

Capacity 500 Kg/hr

6. Mangala Marine Exim Pvt. Ltd., Gujarat.

HACCP Implemented


FACILITIES

Cold Storage 500 MT

Plate FREEZER 17 TPD

Blast Freezer 20 TPD

Flake Ice 20 TPD

7. Bhatsons Business Associates, Thoppumpady.

This is the marketing and trading division of the Group and it provides the market

with best possible quality of products. It also gives upcoming suppliers an opportunity

to prove their strengths in the global markets with HACCP quality standards.

PRODUCT PORTFOLIO

Product portfolio features a broad spectrum of products such as double horse, Top

Fish, Royal treat, Srerja & Blue diamond. Mangala Marine Exim India Pvt. Ltd.

Export world class products to countries like USA, Europe, Far East, Middle East,

Africa etc.

BUSINESS GROWTH:-

The overall performance of the group displayed 35% growth in 2006-07. In terms of

quality, performance is recognized by international markets. In short the performance

is encouraging.


17/50

GLOBAL EXCELLENCE:-

In the fast changing global scenarios, successful existence is a challenge sensing the

pulse of changes they have implemented high and production practices to maintain

feet hold in global scene. All of the production facilities conforms to HACCP and

standards. Thats why Mangala Marine Exim India Pvt. Ltd., make head ways in

global market.

ACHIEVEMENTS:-

Along with many performance and excellence award received by the Group during

the past 35 year. The Best performance award for Marine Export from State Bank of

India.OB, Cochin for the last 3 consecutive year and also for excellence in marine

product export from India chamber of commerce 7 industry for the last 3 consecutive

year.


18/50

ORGANISATIONAL CHART OF MANGALA MARINE EXIM

INDIA (P) LTD

BOARD OF DIRETORS

DCMN & ADMN (MGR) FNCE (MGR)

GENERAL MANAGER (OPERATION)

PLT (MGR) PLT (MGR) PLT (MGR) PLT (MGR)

SUPERVISORS SUPERVISORS SUPERVISORS SUPERVISORS

ABBREVIATIONS

DCMN & ADMN (MGR) - DOCUMENTATION AND ADMINISTRTION MANAGER

FNCE (MGR) - FINANCE MANAGER

PLT (MGR) - PLANT MANAGER


19/50

CHAPTER III

REVIEW OF LITERATURE


20/50

FINANCIAL PERFORMANCE ANALYSIS

Introduction

Finance is the foundation stone of every business in the present day set up. The

success of every business depends upon adequate source of finance. Financial

management refers to the part of the management activity which is concerned with the

planning and controlling of firms financial resources. The financial resources are

always scarce and limited which need proper planning and control to achieve the best

result out of the complex situation of risk and uncertainty prevailing in the business

world. The financial management deals with finding out various resources for raising

funds for the firm. In other words, financial management means the entire efforts

devoted to the management of finance both its sources and use of funds also reforms a

part of financial management.

Financial management is applicable to every type of organization irrespective of its

size, kind or nature. It is useful to small concerns as well as big units. The financial

management has to take decisions in various fields involving financial implications

such as new financing- whether through shares or debentures or temporary

borrowings through banks and other sources, inventory management and capital

budgeting. Therefore, for analyzing the overall performance of a concern and for

studying the past and present position, the financial records are essential in taking

various decisions.

In short, the technique of financial analysis is typically devoted to evaluate the past,

current and projected performance of a firm. Broadly the term is applied to almost

every kind of detailed enquiry into financial data like to evaluate the past

performance, present financial position, liquidity situation, enquire into profitability

of the firm and to plan for future operations. For all we need is to study the

relationship among various financial variables in a business as disclosed in various

financial statements. The analysis of financial performance is an attempt to determine

the significance and meaning of financial statements data so that the forecast may be

of the future prospect for earnings, ability to pay interest and debt maturities and

profitability.


21/50

SCOPE OF FINANCIAL ANALYSIS

The term financial analysis, known as analysis and interpretation of financial

statements, refers to the process of determining financial strengths and weakness of

the firm by establishing strategic relationship between the items of Balance sheet,

P&L a/c and other operative data.

The purpose of financial analysis is to diagnose the information contained in financial

statements so as to judge the profitability and financial soundness of the firm. The

analysis and interpretation of financial statements is essential to bring out the mystery

behind the figures in financial statements so that the forecast may be of the future

prospect for earnings, ability to pay interest and debt maturities and profitability.

The financial statement analysis includes both analysis and interpretation. While

the term analysis is used to mean the simplification of financial data by methodical

classification of data given in the financial statements , interpretation

meansexplaining,the meaning significance of the data so simplified.

Analyzing financial statement is a process of evaluating the relationship between

component parts of a financial statement to obtain better understanding of a firms

position and performance

-Metcalf and Titard

In short, the technique of financial analysis is typically devoted to evaluate the past,

current and projected performance of a financial firm. Broadly the term is applied to

almost every kind of detailed enquiry into financial data like to evaluate the past

performance, present financial position, liquidity situation, enquire into profitability

of the firm and to plan for future operations

OBJECTIVES

Financial performance of an organization can be analyzed for different requirements

or for different objective. A number of people are interested in getting information

about the organization like managers, owners, creditors, employees, and other

stakeholders.


22/50

Following are the main objectives of analyzing the financial statements

To estimate the earning capacity of the firm

To gauge financial position and financial performance of the firm

To determine the debt capacity of the firm

To determine the long term liquidity of funds as well as solvency

To decide about the future prospects of the firm

PROCEDURE FOR ANALYSIS

Financial analysis can be done by taking the following steps:-

1. DECIDING UPON THE EXTENT OF ANALYSIS:-

First of all depth, object and extent of analysis will be determined by the analyst. The

determination of these basic facts determines the scope of analysis, tools of analysis

and the amount and quality of data to be required. For example, to measure the

financial position of the firm, the Balance sheet of the firm will be analyzed

2. COLLECTION OF NECESSARY INFORMATION:-

All other necessary and useful information should be collected from the management,

which has been revealed in the published financial statements.

3. GOING THROUGH THE FINANCIAL STATEMENTS:-

Before analyzing the composing financial ratios, it is necessary for the analyst to go

through the various financial statements of the firm.

4. REARRANGING OF FINANCIAL DATA:-

Before making actual analysis and interpretation the analyst must rearrange the data

provided by these statements in a useful manner. The appropriation of figures,

reclassification and consolidation of items may be done as preliminary step to actual

analysis.


23/50

5. FINAL ANALYSIS:-

A cause effect relationship between various financial data is established after a

thorough examination.

6. INTERPRETATION AND PRESENTATION:-

After analyzing the statements the interpretation made and the inference drawn from

the analysis are presented in the shape of reports to the management etc.


24/50

TYPES OF FINANCIAL ANALYSIS

FinancialAnalysis

Accordingto material

used in

analysis

Accordingto objectivesof analysis

Accordingto modus

operandi of

analysis

ExternalAnalysis

InternalAnalysis

Long-termAnalysis

Short termAnalysis

HorizontalAnalysis

VerticalAnalysis


25/50

1. External analysis:-

Analysis of financial statements may be carried out on the basis of published

information that is, information made available in the Annual report of the enterprise

or other such available information, such analysis is called external analysis. This

analysis is done by outsiders who do not have access to the detailed internal

accounting records of the firm such as investors, banks, creditors, credit agencies and

general public.

2. Internal analysis:-

The analysis conducted by persons who have access to the internal accounting records

of a business firm is known as internal analysis. Such analysis is a detailed one and is

carried on behalf of the management for purpose of providing necessary information

for decision making. Such analysis emphasis on the performance appraisal and

accessing the profitability of different activities.

3. Long term analysis:-

In the long term, a company must earn a minimum amount sufficient to maintain a

reasonable rate on the investment to provide for the necessary growth and

development of the company and to meet cost of capital. Financial planning is alsodesirable for the continued success of the company. Thus in the long term analysis,

the stability and earning potentiality of the concern is analyzed.

4. Short term analysis:-

It is mainly concerned with the working capital analysis. In the short run a company

must have ample funds readily available to meet its current needs and sufficient

borrowing capacity to meet the contingencies. In short analysis, current assets and

current liabilities are analyzed and liquidity is determined.

5. Horizontal analysis:-

Horizontal analysis refers to the comparison of data of a company for several years.

The figures of this type of analysis are presented horizontally over a number of

columns. The figures of various years are compared with standard or the base year. A

base year is a year chosen as beginning point. The horizontal analysis makes it

possible to focus attention on the items that have changed significantly during the


26/50

period under review Comparatative statements and trend percentage are two tools

employed in horizontal analysis.

6 .Vertical analysis:-

Vertical analysis refers to the study of relationship of the various items in the financial

statement of one accounting period. In this type of analysis the figures from financial

statement of a year are accomplished with a base selected from the same years

statement. Common-size financial statements and financial ratios are the tools

employed in vertical analysis.

Methods or devices of financial analysis

1. Comparatative Statement

2. Trend Analysis

3. Common Size Statement

4. Fund Flow Analysis

5. Cash Flow Analysis

6. Ratio Analysis

7. Cost Volume Profit Analysis

1. Comparatative statement

The comparatative financial statements are statements of the financial position at

different periods of time.

2. Trend analysis

The financial statement may be analysis by computing trends of series of information.

This method determines the direction upward or downward and involves the

computation of the percentage relationship that each statement item bears to the same

item in base year.

3. Common size statement


27/50

The common size statements balance sheet and income statement are shown in

analytical percentage. The figures are shown as percentage to total sales, total

liabilities and total sales.

RATIO ANALYSISRatio analysis is a technique and interpretation of financial statement. It is the

process of establishing and interpreting various ratios for helping in making

certain decisions. Ratio analysis is done to develop meaningful relationship

between the two interrelated accounting figures as gross profit to sales, current

asset to current liabilities, loaned capital to owned capital etc. Ratio analysis is not

an end in itself. It is only a means of better understanding of financial strength andweakness of a firm. There are a number of ratios which can be calculated from the

information given in the financial statement but the analyst has to select the

appropriate data and calculate only a few appropriate ratio from the same keeping

in mind the objective of analysis. The ratio analysis is one of the most powerful

tools of financial analysis. It is used as a device to analyze and interpret the

financial health of enterprise

Functional classification in view of financial management

1. Liquidity ratios

2. Long term solvency and leverage ratios

3. Activity ratios

4. Profitability ratios

1. Liquidity ratios

Liquidity refers to the ability of a concern to meet its current obligations as and when

these become due. The short term obligations are met by releasing amount fromcurrent, floating or circulating assets. The current obligations are of short term


28/50

nature. Liquidity ratios are calculated for testing short term financial position. It

include current ratio, acid test ratio or quick ratio and absolute liquid ratio.

a) Current ratio

Current ratio may be defined as the relationship between current assets and current

liabilities. This ratio, also known as working capital ratio, is a measure of general

liquidity and is most widely used to make the analysis of short term financial position

or liquidity of a firm. It is calculated by dividing the total of current assets by total of

the current liabilities.

Current ratio= Current assets

Current liabilities

b) Quick or acid test or liquid ratio

Quick ratio, also known as acid test or liquid ratio is a more rigorous test of liquidity

than the current ratio. The term Liquidity refers to the ability of a firm to pay its short-

term obligations as and when they become due. Quick ratio may be defined as the

relationship between quick/liquid assets and current or liquid liabilities.

Quick/liquid or acid test ratio= Quick/liquid assets

Current liabilities

c) Absolute liquid ratio or cash ratio

Although receivables, debtors and bills receivables are generally more liquid than

inventories, yet there may be doubts regarding their realization into cash immediately

or in time. Hence some authorities are of the opinion that the absolute liquid ratio

should also be calculated together with current ratio and acid test ratio so as to


29/50

exclude even receivables from the current assets and find out the absolute liquid

assets.

Absolute liquid ratio= Absolute liquid assets.

Current liabilities

Cash ratio= cash & bank+ short-term securities

Current liabilities

2. Long term Solvency and Leverage ratios

Firm should have a strong short as well as long term financial position. To judge the

long term financial position of the firm, financial leverage or capital structure, ratios

are calculated. These ratios indicate mix of funds provided by owners and lenders.

Many variations of these ratios exist but all these ratios indicate the sale thing the

extent to which the firm has relied on debt in financing assets. It includes equity ratio,

debt-equity ratio, funded debt to total capitalization ratio, solvency ratio and fixed

assetsratio

a) Proprietory ratio or Equity ratio

A variant to the debt-equity ratio is the proprietory ratio which is also known as

Equity Ratio or Shareholders to Total Equities Ratio or Net worth to Total Assets

Ratio. This ratio establishes the relationship between shareholders funds to total

assets of the firm. The ratio of proprietors funds to total funds (Proprietors +

outsiders funds or total funds or total assets) is an important ratio for determining

long-term solvency of a firm. The components of this ratio are Shareholdes Funds or

Proprietors Funds and Total Assets. The shareholders funds are Equity Share

Capital, Preference Share Capital, undistributed profits, and reserves and denote total

resources of the concern. The ratio can be calculated as under:


30/50

Proprietory Ratio or Equity Ratio = Shareholders Funds

Total Assets

b) Debt-Equity ratio

Debt-Equity Ratio, also known as External Internal Equity Ratio is calculated to

measure the relative claims of outsiders and the owners (i.e., shareholders) against the

firms assets. This ratio indicates the relationship between the external equities or the

outsiders funds and the internal equities or the shareholders funds, thus:

Debt-Equity Ratio = Outsiders Funds

Shareholders Funds

Or Debt to Equity Ratio = External Equities

Internal Equities

c) Fonded debt To Total Capitalization ratio

The ratio establishes a link between the long-term funds raised from outsiders and

total long-term funds available in the business. The Two words used in this ratio are

(i) Funded Debt, and (ii) Total Capitalisation.

Funded debt = Debentures + Mortgage loans + Bonds + Other long-term loans.

Total Capitalisation = Equity Share Capital+ Preference Share Capital+

Reserves and Surplus+ Other Undistributed Reserves+

Debentures+ Mortgage Loans+ Bonds+ Other long-term loans.

Funded debt is that part of total capitalization which is financed by outsiders.

Funded Debt to Total Capitalisation Ratio = Funded Debt x 100

Total Capitalisation


31/50

Though there is no rule of thumb but still the lesser the reliance on outsiders the

better it will be. If this ratio is smaller, better it will be, up to 50% or 55% this ratio

may be to tolerable and not beyond.

d) Solvency ratio or The ratio of Liabilities to Total Assets

This ratio is small variant of equity ratio and can be simply calculated as 100-equity

ratio, i.e., continuing the example taken for the equity ratio, solvency ratio =100-

66.67 says 33.33%. The ratio indicates the relationship between the total liabilities to

outsiders to total assets of a firm and can be calculated as follows:

Solvency Ratio = Total Liabilities to Outsiders

Total Assets

e) Fixed Assets to Total Long Term Funds or Fixed Assets Ratio

A variant to the ratio of fixed assets to net worth is the ratio of fixed assets to long-

term funds which is calculated as:

Fixed Assets Ratio = Fixed Assets (After depreciation)

Total Long-term Funds

3. Current asset movement or efficiency/activity ratios

Funds are invested in various assets in business to make sales and earn profit. The

efficiency with which assets are managed directly affects the volume of sales. The


32/50

better the management of assets, the larger is the amount of sales and the profits.

Activity ratio measures the efficiency or effectiveness with which a firm manages its

resources or assets. These assets are converted or turned over into sales.

a) Inventory Turnover or Stock Turnover Ratio

Every firm has to maintain a certain level of finished goods so as to be able to meet

the requirements of the business. But the level of inventory should neither be too high

nor too low.

Inventory Turnover Ratio = Cost of Goods Sold

Average Inventory at Cost

b) Debtors or Receivable Turnover Ratio and Average Collection Period

A Concern may sell goods on cash as well as on credit. Credit is one of the important

elements of sales promotion. The volume of sales can be increased by following a

liberal credit policy. But the effect of a liberal credit policy may result in typing up

substantial funds of a firm in the form of trade debtors (or receivables, i.e., debtors

plus bills receivables). Trade debtors are expected to be converted into cash within a

short period and are included in current assets. Hence, the liquidity position of a

concern to pay its short-term obligations in time depends upon the trade debtors.

Debtors Turnover Ratio = Total Sales

Debtors

c) Creditors/Payable Turnover Ratio

In the course of business operations, a firm has to make credit purchases and incur

short-term liabilities. A supplier of goods, i.e., creditor, is naturally interested in


33/50

finding out how much time the firm is likely to take in repaying its trade creditors.

The analysis for creditors turnover is basically the same as of debtors turnover ratio

except that in place of trade debtors, the trades creditors are taken as one of the

components of the ratio and in place of average daily sales, average daily purchases

are taken as the other component of the ratio. Same as debtors turnover ratio,

creditors turnover ratio can be calculated in two forms:

Creditors/Payable Turnover Ratio = Net Credit Annual Purchases

Average Trade Creditors

Average Payment Period Ratio = Average Trade Craditors (Craditors+Bills Payable)

Average Daily Purchases

4. Analysis of Profitability or Profitability Ratios

General Profitability Ratios

(i) Gross Profit Ratio

(ii) Operating Ratio

(iii) Operating Profit Ratio

(iv) Expenses Ratio

(v) Net Profit Ratio

(vi) Cash Profit Ratio

i. Gross Profit Ratio

Gross profit ratio measures the relationship of gross profit to net sales and usually

represented as a percentage. Thus, it is calculated by dividing the gross profit by sales:

Gross Profit Ratio = Gross Profit x 100

Net Sales


34/50

= Sales-Cost of Goods Sold x 100

Sales

ii. Operating Ratio

Operating ratio establishes the relationship between cost of goods sold and other

operating expenses on the one hand the sales on the other. In other words, it measures

the cost of operating per rupee of sales. The ratio is calculated by dividing operating

costs with the net sales and its generally represented as a percentage.

Operating Ratio = Operating Cost x 100

Net Sales

= Cost of goods sold + Operating expenses x 100

Net Sales

iii. Operating Profit Ratio

This ratio is calculated by dividing operating profit by sales. Operating profit is

calculated as:

Operating Profits Ratio = Operating Profit x 100

Sales

iv. Net Profit Ratio

Net Profit ratio establishes a relationship between net (after taxes) and sales, and

indicates the efficiency of the management in manufacturing, selling, administrative

and other activities of the firm. This ratio is the overall measure of firms profitability

and is calculated as:

(i) Net Profit Ratio = Net Profit after tax x 100

Net Sales


35/50

(ii) Net Profit Ratio = Net Operating Profit x 100

Net Sales

v. Cash Profit Ratio

The net profits of a firm are affected by the amount/method of depreciation charged.

Further, depreciation being non-cash expense, it is better to calculate cash profit ratio.

This ratio measures the relationship between cash generated from operations and net

sales. Thus,

Cash Profit Ratio = Cash Profit x 100

Net Sales


36/50

CHAPTER-IV

DATA ANALYSIS


37/50

RATIO ANALYSIS

Current Ratio

Current Ratio = Current Assets

Current Liabilities

Years Current Assets

(Rs )

Current Liabilities

(Rs)

Ratio

2006-07 1270681.3 1380958.46 0.92

2007-08 3115762.04 1587402.94 1.96

2008-09 3666736.08 1783518.22 2.05

2009-10 3831327.37 1821005.85 2.10

2010-11 5259013.63 2499218.51 2.10

Table no: 4.1

Source: Annual report of the company.

0

0.5

1

1.5

2

2.5

2006-07 2007-08 2008-09 2009-10 2010-11

R

A

T

IO

YEAR

Ratio

Figure no: 4.1

Interpretation:-


38/50

A relatively high current ratio is an indication that the firm is liquid and has the ability

to pay of its current liabilities in time as and when they become due. In this the ratio is

increasing year by year.

Quick/Liquid or Acid Test Ratio

Quick/Liquid or acid test Ratio = Quick or Liquid Assets

Current Liabilities

Years Net Sales

(Rs)

Inventory

(Rs)

Ratio

2006-07 744808.03 1380958.46 0.53

2007-08 444224.52 1587402.94 0.27

2008-09 639977.88 1783518.22 0.35

2009-10 633392.03 1821005.85 0.34

2010-11 1075997.56 2499218.51 0.43

Table no: 4.2


0

0.1

0.2

0.3

0.4

0.5

0.6

2006-07 2007-08 2008-09 2009-10 2010-11

R

A

T

I

O

YEAR

Ratio

Figure no: 4.2

Interpretation:

The above table shows that a decreasing trend in quick ratio. It indicates that the firm

is not liquid and has no ability to meet its current liabilities or liquid liabilities in time.


39/50

Absolute Liquid Ratio

Absolute Liquid Ratio = Absolute Liquid Assets

Current Liabilities

Years Absolute Liquid

Assets (Rs)

Current Liabilities

(Rs)

Ratio

2006-07 27618590.44 1380958.46 0.15

2007-08 15510.33 1783518.22 0.012008-09 131573.82 1587402.94 0.08

2009-10 169876.43 1821005.85 0.09

2010-11 174600.58 2499218.51 0.06

Table no: 4.3

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

2006-07 2007-08 2008-09 2009-10 2010-11

R

A

T

I

O

YEAR

Ratio

Figure no: 4.3

Interpretation:

In the above table we get a decreasing trend, which is not satisfactory for the

company.


40/50

Inventory Turnover Ratio

Inventory Turnover Ratio = Net Sales

Inventory

Years Net Sales

(Rs)

Inventory

(Rs)

Ratio

2006-07 13331194.68 154228.80 8.64

2007-08 14027501.95 1969958.48 7.12

2008-09 12636086.32 2182783.61 5.78

2009-10 13051348.59 2437586.98 5.35

2010-11 13786109.14 3237514.82 4.25

Table no: 4.4


0

1

2

3

4

5

6

7

8

9

10

2006-07 2007-08 2008-09 2009-10 2010-11

R

A

T

I

O

YEAR

Ratio

Figure no: 4.4

Interpretation:

The above graph establishes relationship between net sales during a given period and

the amount of inventory held during the period.

Debtors Turnover Ratio


41/50

Debtors Turnover Ratio = Total Sales

Debtors

Years Total Sales

(Rs)

Debtors

(Rs)

Ratio

2006-07 13331194.68 468622.13 28.44

2007-08 14027501.95 312650.70 44.86

2008-09 12636086.32 464467.55 27.20

2009-10 130513348.59 463515.60 28.15

2010-11 13786109.14 901396.98 15.29

Table no: 4.5

Source: Annual report of the company

0

5

10

15

20

25

30

35

40

45

50

2006-07 2007-08 2008-09 2009-10 2010-11

R

A

T

I

O

YEAR

Ratio

Figure no: 4.5

Interpretation:

Debtors turnover ratio is showing a decreasing trend.

Working Capital Turnover Ratio

Working Capital = Sales

Net working capital


42/50

Years Sales

(Rs)

Working Capital

(Rs)

Ratio

2006-07 13331194.68 1561886.73 8.53

2007-08 14027501.95 1951058.68 7.18

2008-09 12636086.32 2395895.89 5.272009-10 13051348.59 2896190.89 4.50

2010-11 13786109.14 3686559.66 3.73

Table no: 4.6


0

1

2

3

4

5

6

7

8

9

2006-07 2007-08 2008-09 2009-10 2010-11

R

A

T

I

O

YEAR

Ratio

Figure no: 4.6

Interpretation:

The above table depicts the number of times working capital is turned over in a stated

period.

Debt-Equity Ratio

Debt-Equity Ratio = Outsiders Fund

Shareholders Fund

Years Outsiders Fund

(Rs)

Shareholders Fund

(Rs)

Ratio

2006-07 1380958.46 615887.96 2.242007-08 1587402.94 773190.14 2.05


43/50

2008-09 1783518.22 1005953.6 1.77

2009-10 1821005.85 1640396.47 1.11

2010-11 2499218.51 1476334.84 1.69

Table no: 4.7


0

0.5

1

1.5

2

2.5

2006-07 2007-08 2008-09 2009-10 2010-11

R

A

T

I

O

YEAR

Ratio

Figure no: 4.7

Interpretation:

The above table depicts that both shareholders funds and outsiders funds are

showing increasing trend.

Fixed Assets to Net Worth Ratio

Fixed Assets to Net worth Ratio = Fixed Assets

Share holders Fund

Years Fixed Assets

(Rs)

Share Holders Fund

(Rs)

Ratio

2006-07 1251715.05 615887.96 2.03

2007-08 1669794.11 773196.14 2.152008-09 1760877.86 1005953.6 1.75


44/50

2009-10 2157706.23 1646396.47 1.31

2010-11 2219014.50 1476334.84 1.50

Table no: 4.8


0

0.5

1

1.5

2

2.5

2006-07 2007-08 2008-09 2009-10 2010-11

R

A

T

I

O

YEAR

Ratio

Figure no: 4.8

Interpretation:

From the above table it is clear that the fixed assets of the company are increasing

throughout the years. But the ratio is decreasing.

Gross Profit Ratio

Gross Profit Ratio = Gross Profit x 100

Sales

Years Gross Profit

(Rs)

Sales

(Rs)

Ratio

2006-07 1070295.54 13331194.68 8.02

2007-08 517637.5 14027501.95 3.69

2008-09 1237647.58 12636086.32 9.79

2009-10 699245.09 13051348.59 5.35

2010-11 811556.8 13786109.14 5.88

Table no: 4.9



45/50

0

2

4

6

8

10

12

2006-07 2007-08 2008-09 2009-10 2010-11

R

A

T

I

O

YEAR

Ratio

Figure no: 4.9

Interpretation:

The above table shows the gross profit ratio for five years. Higher the ratio, better the

profit position is. Gross profit ratio for 2010-11 is low when compared to that of

2006-07.

Operating Profit Ratio

Operating Profit Ratio = Operating Profit x 100

Sales

Years Operating Profit

(Rs)

Sales

(Rs)

Ratio

2006-07 2333152.79 13331194.68 17.50

2007-08 1583303.91 14027501.95 11.28

2008-09 3507883.93 12636086.32 27.76

2009-10 2124049.48 13051348.59 16.27

2010-11 2134432.22 137861093.14 15.48

Table no: 4.10



46/50

0

5

10

15

20

25

30

2006-07 2007-08 2008-09 2009-10 2010-11

R

A

T

I

O

YEAR

Ratio

Figure no: 4.10

Interpretation:

The above table shows a decreasing trend and the operating profit ratio for 2010-11 is

low when compared to that of 2006-07.

Net Profit Ratio

Net Profit Ratio = Net Profit after Tax x 100

Net Sales

Years Net Profit After Tax

(Rs)

Net Sales

(Rs)

Ratio

2006-07 62064.49 1333194.68 4.652007-08 146705.92 14027501.95 1.04

2008-09 84093.45 12636086.31 0.66

2009-10 179091.83 13051348.59 1.37

2010-11 132445.78 13786109.14 0.96

Table no: 4.11



47/50

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2006-07 2007-08 2008-09 2009-10 2010-11

R

A

T

I

O

YEAR

Ratio

Figure no: 4.11

Interpretation:

The above table depicts that net profit ratio is reducing throughout the years. The

lower is the net profit per rupee of sales, lower will be the sales efficiency. Higher the

ratio, the better it is because it gives ideas of improved efficiency of the concern.

CHAPTER-V


48/50

FINDINGS,

SUGGESTIONS,

CONCLUSION

&

BIBLOGRAPHY

FINDINGS There is a reduction in gross profit ratio during 2009-10 and2010-

11


49/50

Operating profit ratio is increased to 27.76 in the year 2008-09.

After that it is showing decreasing tendency.

Net profit ratio is reduced to 0.96 in the year 2010-11. It is a huge

decrease from the year 2006-07 when the ratio was 4.65.


50/50

SUGGESTIONS

The company should try to decrease the operating expenses,

thereby increasing net profit.

The company should try to increase net profit ratio. High net profit

ratio shows improved efficiency of the concern.

In order to increase the profitability and protect the interest of

shareholders, the company should implement a good profit policy

and should try to increase their turnover which is presently not up

to the expected level.

High operating expenses of the company proves a major worry to

the company and hence affecting the profitability of the company.

All unnecessary expenses should be waived off and only expenses

required and which are unavoidable should be encouraged.

Date post:	03-Apr-2018
Category:	Documents
Upload:	nineeshkk
View:	218 times
Download:	0 times

MANAGALA MARINE EXIM INDIA PVT. LTD

Documents