Project Chapters

8/4/2019 Project Chapters

1/60

KMT

1

Chapter 1

1 . 1 C o m p a n y P r o f i l e

Name of Organisation:- Kiran Machine Tools Ltd.(KMT)

Registed Office:- 6,Dhake Colony, Jilha Peth, Jalgaon 425001

Plant:- I-1, MIDC Area, Ajanta Road,Jalgoan 425003

Telphone Number:- 91-0257-2211989

Fax:- 91-0257-2212869

Email ID:- [email protected], [email protected]

Website:- www.kmtsprings.com

Nature of Production:- All types of springs and tools required for automobilebrakes.


2/60

KMT

2

1.2 Corporate Profile

Kiran Machine Tools Limited (KMT) believes in delivering

performance to the Best level By maintaining top-notch quality product and

service in consistent manner. That is way Kiran machine Tools Ltd team today is

trusted by global brands such as Honda, Bosch, Renault, and Maruti etc. Till

date, we have materialized our reputation by careful selection of material, state of

the art production facility, continuous monitoring of production process, qualified

and experience team, ISO9001 quality control procedures and our persistence to

deliver customer satisfaction to the fullest extent.

Ours is a public limited Company established in the year 1995, by founder

and managing director Dr.Ramesh B Chaudhari (BE-Mech,UNO Hon

Doctorate) who has over thirty year of experience in engineering industry and is

distinguished by many prestigious awards including International Quality

Excellence award by International Business Prod forum, India and many other

KMTs highly professional and technocrat engineers team today is managing

supply of 2,000,000 qty per month involving over three hundred spring designs on

Direct Online (DOL) basis to existing customer, Recent addition of Mr. Chetan R

Chaudhari as executive director (BE-Mech, MS-USA), who has received

outstanding academic achievement award from IIT Chicago and having three

years of experience as design engineer in USA, has further consolidated the

promise for growth and companys ability to provide quality solutions.

We are ISO 9001-2000 company manufacturing highly precision products.

Our company is located on state high way at Jalgaon, Maharashtra, India,

comprising Plot area 16225sq.m and built up area 1226.20sq.m in green

environment. There are two major divisions:


3/60

KMT

3

I. Springs Division:

II. Tool Room Division.

I. In Spring Division we are manufacturing all types of spring required for

automobile brakes & for other assembly, Railways etc.

II. A) In Tool Room Division we are manufacturing Die Pillar sets required

for thermoplastics machine which are used to manufacture (use and

throw ) cups, dish and containers for food packaging.

B) Jig fixtures, gauges and SPM.

SPRING DIVISION:

In spring division, we are manufacturing compression, tension,torsion springs ranging from 0.2-8.0 mm used for applications such as two , three

and four wheelers automobile brakes, rail ways, automobile suspension etc. we are

sole suppliers to BOSCH CHASSIS SYSTEM INDIA LTD, Jalgaon and BOSCH

CHASSIS SYSTEM INDIA LTD Chakan, Pune where in these brakes are used as

OEM by automobile manufacturers like Maruti Udyog Ltd , M & M , Tata Motors,

Bajaj Auto & Honda Motors etc. Our springs are supplied to BOSCH CHASSIS

SYSTEM INDIA LTD on Direct Online (DOL) basis.

We are also proud to inform you that our springs have been already

approved by world leaders such as BOSCH-JAPAN and HONDA meeting their

stringent quality norms. General Motors is also using our springs for Panther

vehicle, after performing extensive testing and inspections, our springs etc. We have

achieved the 100% schedule and 99.8% Vendor Rating with our existing suppliers.

It demonstrates our commitment to Quality and timely service.

For spring our sales is increasing by more than 25% every year. We are keen

to collaborate with Multinational Company for spring production and marketing.

Because of our in spring manufacturing, today we are sole supplier to BOSCH

CHASSIS SYSTEM INDIA LTD. Very soon we are expanding our OEM customer

base we are keen to be one of the national and international players, and feel

confident to achieve our goals with key tools such as expert team, quality and cost

advantage.


4/60

KMT

4

TOOL ROOM DIVISION:

In Tool room division we manufacture Die Piller Sets, Jigs, Fixtures,

Gauges special purpose machines etc. we are a major supplier of M/s Wonder pack

industries Pvt. Ltd. who has collaborated with American firm M/s IRWIN and is

growing its markets very fast globally. The products of these machines are used in

various applications such as Cups and Mugs Dishes and packaging Industries. There

is a tremendous demand for these machine in India as well as overseas. We have

supplied jigs, fixtures to M/s Bajaj Auto Ltd and attained 100% vendor rating.

As we have now developed the skill and expertise for manufacturing world class

quality spring fixtures, gauges and die sets and we feel confident to serve ourcustomers to the global level.

EXPANSION PLANS:

Soon we are expanding our OEM customer base by implementing infrastructure,

latest machinery and testing equipments to full fill the customer needs.


5/60

KMT

5

Valuable Customer:

1. BOSCH CHASIS SYSTEMS INDIA LTD.JALGAON2. BOSCH CHASIS SYSTEMS INDIA LTD.CHAKAN3. BOSCH CHASIS SYSTEMS INDIA LTD.MANESAR4. BOSCH CHASIS SYSTEMS INDIA LTD.SITARGANJ5. KBX MOTORBIKE6. DEVLAL FLOWTECH, PUNE7. VIRGO, PUNE8. MODERN THERMOPLASTICS , MUMBAI9. SUPRAJIT ENGINEERING , PUNE10.JAIN IRRIGATION SYSTEMS LTD.11.TATA AUTOCAMP SYSTEMS, PUNE12.INDIAN RAILWAYS13.WONDER PACK INDUSTRIES PVT LTD NASIK14.BAJAJ AUTO AURANGABAD15.SPECTRUM FABRICATORS


6/60

KMT

6

HIGHLIGHTS

y Almost 60% Vehicles in India are using our springs in their brake systemsy Honda, General motors, Renault, Toyota, Maruti-Suzuki, Tata, Bajaj,

Piaggio, M&M , Railways etc. are our producers and users.

y Supplying on DOL (Direct Outline) basis to BOSCHy Honored byGovt. Of India Ministry of company affairs with Quality

Excellence Award, Hon.Doctiratr by UNO-Colombo Etc

y Producing world class quality springs meeting BOSCH (global) norms.y Fast product developments due toInhouse Standard Tool room setupy Also Manufacturing Value springs, rectangular wire springs, SS springs etc.


7/60

KMT

7

Chapter 2

2.1Objective Of The Study

The major objectives of the resent study are to know about financial

strengths and weakness of Kiran Machine Tools Ltd. through FINANCIAL RATIO

ANALYSIS.

The main objectives of resent study aimed as:

To evaluate the performance of the company by using ratios as a

yardstick to measure the efficiency of the company. To understand the liquidity,

profitability and efficiency positions of the company during the study period. To

evaluate and analyze various facts of the financial performance of the company. To

make comparisons between the ratios during different periods.

OBJECTIVES

1. To study the present financial system of company.2. To determine the Profitability, Liquidity Ratios.3. To analyze the capital structure of the company with the help of

Leverage ratio.

4. To offer appropriate suggestions for the better performance of theorganization


8/60

KMT

8

2.2RESEARCH METHODOLOGY

The information is collected through secondary sources during the

project. That information was utilized for calculating performance evaluation and

based on that, interpretations were made.

Sources of secondary data:

1. Most of the calculations are made on the financial statements of the companyprovided statements.

2. Referring standard texts and referred books collected some of theinformation regarding theoretical aspects.

3. Method- to assess the performance of the company method of observation ofthe work in finance department in followed.


9/60

KMT

9

2.3LIMITATION OF THE STUDY

1. The study provides an insight into the financial, personnel, marketing andother aspects of Kiran Machine Tools. Every study will be bound with

certain limitations.

2. The below mentioned are the constraints under which the study is carriedout.

3. One of the factors of the study was lack of availability of ample information.Most of the information has been kept confidential and as such as not assed

as art of policy of company.

Time is an important limitation. The whole study was conducted in a

period of 60 days, which is not sufficient to carry out proper interpretation

and analysis.


10/60

KMT

10

2.4 RATIO ANALYSIS

FINANCIAL ANALYSIS

Financial analysis is the process of identifying the financial strengths

and weaknesses of the firm and establishing relationship between the items of the

balance sheet and profit & loss account.

Financial ratio analysis is the calculation and comparison of ratios,

which are derived from the information in a companys financial statements. The

level and historical trends of these ratios can be used to make inferences about a

companys financial condition, its operations and attractiveness as an investment.

The information in the statements is used by

y Trade creditors, to identify the firms ability to meet their claims i.e. liquidityposition of the company.

y Investors, to know about the present and future profitability of the companyand its financial structure.

y Management, in every aspect of the financial analysis. It is the responsibilityof the management to maintain sound financial condition in the company.


11/60

KMT

11

RATIO ANALYSIS

The term Ratio refers to the numerical and quantitative relationship

between two items or variables. This relationship can be exposed as

y Percentagesy Fractionsy Proportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret

the financial statements. So that the strengths and weaknesses of a firm, as well as its

historical performance and current financial condition can be determined. Ratio

reflects a quantitative relationship helps to form a quantitative judgment.

STEPS IN RATIO ANALYSIS

y The first task of the financial analysis is to select the information relevant tothe decision under consideration from the statements and calculates

appropriate ratios.

y To compare the calculated ratios with the ratios of the same firm relating tothe pas6t or with the industry ratios. It facilitates in assessing success or

failure of the firm.

y Third step is to interpretation, drawing of inferences and report writingconclusions are drawn after comparison in the shape of report or

recommended courses of action.


12/60

KMT

12

BASIS OR STANDARDS OF COMPARISON

Ratios are relative figures reflecting the relation between variables.

They enable analyst to draw conclusions regarding financial operations. They use of

ratios as a tool of financial analysis involves the comparison with related facts. This

is the basis of ratio analysis. The basis of ratio analysis is of four types.

y Past ratios, calculated from past financial statements of the firm.y Competitors ratio, of the some most progressive and successful competitor

firm at the same point of time.

y Industry ratio, the industry ratios to which the firm belongs toy Projected ratios, ratios of the future developed from the projected or pro

forma financial statements

NATURE OF RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of

financial statements. It is the process of establishing and interpreting various ratios

for helping in making certain decisions. It is only a means of understanding of

financial strengths and weaknesses of a firm. There are a number of ratios which can

be calculated from the information given in the financial statements, but the analyst

has to select the appropriate data and calculate only a few appropriate ratios. The

following are the four steps involved in the ratio analysis.

y Selection of relevant data from the financial statements depending upon theobjective of the analysis.

y Calculation of appropriate ratios from the above data.y Comparison of the calculated ratios with the ratios of the same firm in the

past, or the ratios developed from projected financial statements or the ratios

of some other firms or the comparison with ratios of the industry to which

the firm belongs.


13/60

KMT

13

INTERPRETATION OF THE RATIOS

The interpretation of ratios is an important factor. The inherent

limitations of ratio analysis should be kept in mind while interpreting them. The

impact of factors such as price level changes, change in accounting policies, window

dressing etc., should also be kept in mind when attempting to interpret ratios. The

interpretation of ratios can be made in the following ways.

y Single absolute ratioy Group of ratiosy Historical comparisony Projected ratiosy Inter-firm comparison

GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS

The calculation of ratios may not be a difficult task but their use is

not easy. Following guidelines or factors may be kept in mind while interpreting

various ratios are

y Accuracy of financial statementsy Objective or purpose of analysisy Selection of ratiosy Use of standardsy Caliber of the analysis


14/60

KMT

14

IMPORTANCE OF RATIO ANALYSIS

y Aid to measure general efficiencyy Aid to measure financial solvencyy Aid in forecasting and planningy Facilitate decision makingy Aid in corrective actiony Aid in intra-firm comparisony Act as a good communicationy Evaluation of efficiencyy Effective tool

LIMITATIONS OF RATIO ANALYSIS

y Differences in definitionsy Limitations of accounting recordsy Lack of proper standardsy No allowances for price level changesy Changes in accounting proceduresy Quantitative factors are ignoredy Limited use of single ratioy Background is over lookedy Limited usey Personal bias


15/60

KMT

15

CLASSIFICATIONS OF RATIOS

The use of ratio analysis is not confined to financial manager only.

There are different parties interested in the ratio analysis for knowing the financial

position of a firm for different purposes. Various accounting ratios can be classified

as follows:

1. Traditional Classification2. Functional Classification3. Significance ratios

1.Traditional Classification

It includes the following.

y Balance sheet (or) position statement ratio: They deal with the relationshipbetween two balance sheet items, e.g. the ratio of current assets to current

liabilities etc., both the items must, however, pertain to the same balance

sheet.

y Profit & loss account (or) revenue statement ratios: These ratios deal with therelationship between two profit & loss account items, e.g. the ratio of gross

profit to sales etc.,

y Composite (or) inter statement ratios: These ratios exhibit the relation between a profit & loss account or income statement item and a balance

sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.

2. Functional Classification

These include liquidity ratios, long term solvency and leverage ratios,

activity ratios and profitability ratios.


16/60

KMT

16

3. Significance ratios

Some ratios are important than others and the firm may classify them

as primary and secondary ratios. The primary ratio is one, which is of the prime

importance to a concern. The other ratios that support the primary ratio are called

secondary ratios.

IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE

RATIOS ARE

1. Liquidity ratio

2. Leverage ratio

3. Activity ratio

4. Profitability ratio


17/60

KMT

17

1. LIQUIDITY RATIOS

Liquidity refers to the ability of a concern to meet its current

obligations as & when there becomes due. The short term obligations of a firm can

be met only when there are sufficient liquid assets. The short term obligations are

met by realizing amounts from current, floating (or) circulating assets The current

assets should either be calculated liquid (or) near liquidity. They should be

convertible into cash for paying obligations of short term nature. The sufficiency

(or) insufficiency of current assets should be assessed by comparing them with

short-term current liabilities. If current assets can pay off current liabilities, then

liquidity position will be satisfactory.

To measure the liquidity of a firm the following ratios can be

calculated

y Current ratioy Quick (or) Acid-test (or) Liquid ratioy Absolute liquid ratio (or) Cash position ratio


18/60

KMT

18

(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 a

short-term financial position (or) liquidity of a firm.

Current assets

Current ratio =

Current liabilities

Components of current ratio

CURRENT ASSETS CURRENT LIABILITIES

Cash in hand Outstanding or accrued expenses

Cash at bank Bank over draft

Bills receivable Bills payableInventories Short-term advances

Work-in-progress Sundry creditors

Marketable securities Dividend payable

Short-term investments Income-tax payable

Sundry debtors

Prepaid expenses


19/60

KMT

19

(b) QUICK RATIO

Quick ratio is a test of liquidity than the current ratio. The term

liquidity refers to the ability of a firm to pay its short-term obligations as & when

they become due. Quick ratio may be defined as the relationship between quick or

liquid assets and current liabilities. An asset is said to be liquid if it is converted into

cash within a short period without loss of value.

Quick or liquid assets

Quick ratio =Liquid liabilities

Components of quick or liquid ratio

QUICK ASSETS CURRENT LIABILITIES

Cash in hand Out standing or accrued expenses


Bills receivable Bills payable

Sundry debtors Short-term advances

Marketable securities Sundry creditors

Temporary investments Dividend payable

Income tax payable


20/60

KMT

20

(c) ABSOLUTE LIQUID RATIO

Although receivable, debtors and bills receivable are generally more

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

immediately or in time. Hence, absolute liquid ratio should also be calculated

together with current ratio and quick ratio so as to exclude even receivables from the

current assets and find out the absolute liquid assets.

Absolute liquid assets

Absolute liquid ratio =Absolute liquid liabilities

Absolute liquid assets include cash in hand etc. The acceptable forms

for this ratio is 50% (or) 0.5:1 (or) 1:2 i.e., Rs.1 worth absolute liquid assets are

considered to pay Rs.2 worth current liabilities in time as all the creditors are nor

accepted to demand cash at the same time and then cash may also be realized from

debtors and inventories.

Components of Absolute Liquid Ratio

ABSOLUTE LIQUID ASSETS CURRENT LIABILITIES

Cash in hand Out standing or accrued expenses


Interest on Fixed Deposit Bills payable

Short-term advancesSundry creditors

Dividend payable

Income tax payable


21/60

KMT

21

2. LEVERAGE RATIOS

The leverage or solvency ratio refers to the ability of a concern to

meet its long term obligations. Accordingly, long term solvency ratios indicate

firms ability to meet the fixed interest and costs and repayment schedules

associated with its long term borrowings.

The following ratio serves the purpose of determining the solvency of

the concern.

y Proprietory ratio(a) PROPRIETORY RATIO

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

known as equity ratio. This ratio establishes relationship between share holdersfunds to total assets of the firm.

Shareholders funds

Proprietory ratio =

Total assets

SHARE HOLDERS FUND TOTAL ASSETS

Share Capital Fixed Assets

Reserves & Surplus Current Assets

Cash in hand & at bank

Bills receivable

Inventories

Marketable securities

Short-term investments

Sundry debtors

Prepaid Expenses


22/60

KMT

22

3. ACTIVITY RATIOS

Funds are invested in various assets in business to make sales and

earn profits. The efficiency with which assets are managed directly effect the

volume of sales. Activity ratios measure the efficiency (or) effectiveness with whicha firm manages its resources (or) assets. These ratios are also called Turn over

ratios because they indicate the speed with which assets are converted or turned

over into sales.

y Working capital turnover ratioy Fixed assets turnover ratioy Capital turnover ratioy Current assets to fixed assets ratio


23/60

KMT

23

(a) WORKING CAPITAL TURNOVER RATIO

Working capital of a concern is directly related to sales.

Working capital = Current assets - Current liabilities

It indicates the velocity of the utilization of net working capital. This

indicates the no. of times the working capital is turned over in the course of a year.

A higher ratio indicates efficient utilization of working capital and a lower ratio

indicates inefficient utilization.

Working capital turnover ratio=cost of goods sold/working capital.

Components of Working Capital

CURRENT ASSETS CURRENT LIABILITIES

Cash in hand Outstanding or accrued expenses


Bills receivable Bills payable

Inventories Short-term advances

Work-in-progress Sundry creditors

Marketable securities Dividend payable

Short-term investments Income-tax payable

Sundry debtors

Prepaid expenses


24/60

KMT

24

(b) FIXED ASSETS TURNOVER RATIO

It is also known as sales to fixed assets ratio. This ratio measures the

efficiency and profit earning capacity of the firm. Higher the ratio, greater is the

intensive utilization of fixed assets. Lower ratio means under-utilization of fixed

assets.

Sales

Fixed assets turnover ratio =

fixed assets

Cost of Sales = Income from Services

Fixed Assets = Fixed Assets - Depreciation


25/60

KMT

25

(c) CAPITAL TURNOVER RATIOS

Sometimes the efficiency and effectiveness of the operations are

judged by comparing the cost of sales or sales with amount of capital invested in the

business and not with assets held in the business, though in both cases the same

result is expected. Capital invested in the business may be classified as long-term

and short-term capital or as fixed capital and working capital or Owned Capital and

Loaned Capital. All Capital Turnovers are calculated to study the uses of various

types of capital.

Sales

Capital turnover ratio =

Capital employed

Sales = Income from Services

Capital Employed = Capital + Reserves & Surplus


26/60

KMT

26

(d) CURRENT ASSETS TO FIXED ASSETS RATIO

This ratio differs from industry to industry. The increase in the ratio

means that trading is slack or mechanization has been used. A decline in the ratio

means that debtors and stocks are increased too much or fixed assets are more

intensively used. If current assets increase with the corresponding increase in profit,

it will show that the business is expanding.

Current Assets

Current Assets to Fixed Assets Ratio =

Fixed Assets

Component of Current Assets to Fixed Assets Ratio

CURRENT ASSETS FIXED ASSETS

Cash in hand Machinery

Cash at bank Buildings

Bills receivable Plant

Inventories Vehicles

Work-in-progress

Marketable securities

Short-term investments

Sundry debtors

Prepaid expenses


27/60

KMT

27

4. PROFITABILITY RATIOS

The primary objectives of business undertaking are to earn profits.

Because profit is the engine, that drives the business enterprise.

y Net profit ratioy Return on total assetsy Reserves and surplus to capital ratioy Earnings per sharey Operating profit ratioy Price earning ratioy Return on investments


28/60

KMT

28

(a) NET PROFIT RATIO

Net profit ratio establishes a relationship between net profit (after tax)

and sales and indicates the efficiency of the management in manufacturing, selling

administrative and other activities of the firm.

Net profit

Net profit ratio=

Sales

Net Profit = Net Profit () Depreciation () Interest () Income Tax

Sales = Income from Services

It also indicates the firms capacity to face adverse economic

conditions such as price competitors, low demand etc. Obviously higher the ratio,

the better is the profitability.


29/60

KMT

29

(b) RETURN ON TOTAL ASSETS

Profitability can be measured in terms of relationship between net

profit and assets. This ratio is also known as profit-to-assets ratio. It measures the

profitability of investments. The overall profitability can be known.

Net profit

Return on assets =

Total assets

Net Profit = Earnings before Interest and Tax

Total Assets = Fixed Assets + Current Assets


30/60

KMT

30

(c) RESERVES AND SURPLUS TO CAPITAL RATIO

It reveals the policy pursued by the company with regard to growth

shares. A very high ratio indicates a conservative dividend policy and increased

ploughing back to profit. Higher the ratio better will be the position.

Reserves& surplus

Reserves & surplus to capital =

Capital

(d) EARNINGS PER SHARE

Earnings per share is a small verification of return of equity and is

calculated by dividing the net profits earned by the company and those profits after

taxes and preference dividend by total no. of equity shares.

Net profit after tax

Earnings per share =

Number of Equity shares

The Earnings per share is a good measure of profitability when

compared with EPS of similar other components (or) companies, it gives a view of

the comparative earnings of a firm.


31/60

KMT

31

(e) OPERATING PROFIT RATIO

Operating ratio establishes the relationship between cost of goods

sold and other operating expenses on the one hand and the sales on the other.

Operating Profit

Operation ratio =

Net sales

However 75 to 85% may be considered to be a good ratio in case of a

manufacturing under taking.

Operating profit ratio is calculated by dividing operating profit by

sales.

Operating profit = Gross Profit - Operating Expenses

Operating profit

Operating profit ratio =

Sales


32/60

KMT

32

(f) PRICE - EARNING RATIO

Price earning ratio is the ratio between market price per equity share

and earnings per share. The ratio is calculated to make an estimate of appreciation in

the value of a share of a company and is widely used by investors to decide whether

(or) not to buy shares in a particular company.

Generally, higher the price-earning ratio, the better it is. If the price

earning ratio falls, the management should look into the causes that have resulted

into the fall of the ratio.

Market Price per Share

Price Earning Ratio =

Earnings per Share

Capital + Reserves & Surplus

Market Price per Share =

Number of Equity Shares

Earnings before Interest and Tax

Earnings per Share = Number of Equity Shares


33/60

KMT

33

(g) RETURN ON INVESTMENTS

Return on share holders investment, popularly known as Return on

investments (or) return on share holders or proprietors funds is the relationship

between net profit (after interest and tax) and the proprietors funds.

Net profit

Return on shareholders investment=

Shareholders funds

The ratio is generally calculated as percentages by multiplying the above with 100.


34/60

KMT

34

Chapter 3

3.1L T RAT

1. CURRE T RAT

(Amount in Rs.)

Current Ratio

Year Current Assets Current Liabilities Ratio

2008 12739426 4741815 2.69

2009 18898733 5535069 3.41

2010 21265913 5756315 3.69

Table 1

GRAPHICAL REPRE E TATION

Chart 1

Interpretation

As a rul t current rati wit 2:1 (or) more is consi ered as

satisfactory position oft e firm.When compared with 2008, there is an increase in

the provision for tax, because the debtors are raised and for that the provision is

created.The sundry debtors have increased due to the increase to corporate taxes.

In the year 2008, the cash and bank balance is reduced because that is used

for payment of dividends. In the year 2010, the loans and advances include majorly

the advances to employees and deposits to government. The loans and advances

reduced because the employees set offtheir claims. The other current assets include

0

1

2

3

4

2008 2009 2010

Current Ratio

Current Ratio


35/60

KMT

35

the interest attained from the deposits. The deposits reduced due to the declaration of

dividends. So the other current assets decreased.

The huge increase in sundry debtors resulted an increase in the ratio,

which is above the benchmark level of 2:1 which shows the comfortable position of

the firm.


36/60

KMT

36

2. QUICK RATIO

(Amount in Rs.)

Qui Ratio

Year Liquid Assets Liquid Liabilities Ratio

2008 7438505 4741815 1.57

2009 13391615 5535069 2.42

2010 15482024 5756315 2.69

Table 2

GRAPHICAL REPRE ENTATION

Chart 2

Interpretation

Quick assets are those assets which can be converted into cash with

in a short period of time, say to six months. So, here the sundry debtors which are

with the long period does notinclude in the quick assets.

Compare with 2007, the Quick ratio is increased because the sundry

debtors are increased due to the increase in the corporate tax and for that the

provision created is also increased. So, the ratio is also increased with the 2007.

0

2

3

200 200 20 0

Series 1

S

ri

s


37/60

KMT

37

3. ABOSULTELIQUIDIT RATIO

(Amount in Rs.)

Absolute Cash Ratio

Year Absolute Liquid Assets Current Liabilities Ratio

2008 1436023 4741815 0.30

2009 1079066 5535069 0.19

2010 1596026 5756315 0.27

Table 3

GRAPHICAL REPRESENTATION

Chart 3

Interpretation

The current assets which are ready in the form of cash are considered

as absolute liquid assets. Here, the cash and bank balance and the interest on fixedassts are absolute liquid assets.

In the year 2008, the cash and bank balance is decreased due to

decrease in the deposits and the current liabilities are also reduced because of the

payment of dividend. That causes a slightincrease in the current years ratio.

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

200 200 2010

Liq id Ra i

Liquid Rati


38/60

KMT

38

3.2LE ERAGE RATIOS

4. PROPRIETORY RATIO

(Amount in Rs.)

Proprietory Ratio

Year Share Holders Funds Total Assets Ratio

2008 12767683 27698067 0.46

2009 14527055 32614743 0.45

2010 15913727 42779327 0.37

Table 4


Chart 4

Interpretation

The proprietary ratio establishes the relationshi p between

shareholders funds to total assets. It determines the long-term solvency ofthe firm.

This ratio indicates the extentto which the assets ofthe company can be lost without

affecting the interest ofthe company.

Higherthe proprietary ratio better forthe company. In case of Kiranmachine tools ltd. proprietary ratio is not favorable to the company. It shows the

solvency position ofthe firm. Here the ratio is in decreasing trend. Itis as 0.46, 0.45,

and 0.37 respectively. It shows poor working conditions.

0

0.1

0.2

0.3

0.

0.5

200 200 2010

Pr perie ry Ra i

Pr p ri t ry Rati


39/60

KMT

39

3.3ACTIVITY RATIOS

5. WORKING CAPITALTURNOVER RATIO

(Amount in Rs.)

Working CapitalTurnover Ratio

Year Turnover Working Capital Ratio

2008 24213468 7997490 3.03

2009 27398567 13363664 2.05

2010 35344784 15509598 2.28

Table 5


Chart 5

Interpretation

Income from services is greatly increased due to the extra invoice for

Operations & Maintenance fee and the working capitalis also increased greater due

to the increase in from services because the huge increase in current assets.

The income from services is raised and the current assets are also

raised together resulted in the decrease ofthe ratio of 2007 compared with 2008.

0

0.5

.5

2

2.5

3

3.5

200

200

20

0

Activity Rati

Activit Ratio


40/60

KMT

40

6. FIXED ASSETS TURNOVER RATIO

(Amount in Rs.)

Fi ed Assets Turnover Ratio

Year Income From Services Net Fixed Assets Ratio

2008 24213468 24747316 0.98

2009 27398567 25452609 1.08

2010 35344784 27432500 1.29

Table 6

GRAPHICAL REPRSENTATION

Chart 6

Interpretation

Fixed assets are used in the business for producing the goods to be

sold. This ratio shows the firms ability in generating sales from all financial

resources committed to total assets. The ratio indicates the account of one rupee

investmentin fixed assets.

The income from services is greaterly increased in the current year

due to the increase in the Operations & Maintenance fee due to the increase inextra

invoice and the net fixed assets are reduced because of the increased charge of

depreciation. Finally, that effected a huge increase in the ratio compared with the

previous years ratio.

0

0.

.

! 008 ! 009 ! 0 " 0

Fixed Assets T r ver Rati

Fix # d Ass # ts Turn $ % # r Rati $


41/60

KMT

41

7. CAPITALTURNOVER RATIO

(Amount in Rs.)

CapitalTurnover Ratio

Year Income From Services Capital Employed Ratio

2008 24213468 12767683 1.89

2009 27398567 14527055 1.88

2010 35344784 15913727 2.22

Table 7


Chart 7

Interpretation

This is another ratio tojudge the efficiency and effectiveness of the

company like profitability ratio.

The income from services is greaterly increased compared with the

previous year and the total capital employed includes capital and reserves & surplus.

Due to huge increase in the net profit the capital employed is also increased alongwith income from services. Both are effected in the increment ofthe ratio of current

year.

1.7

1.&

1. '

2

2.1

2.2

2.3

200& 200( 2010

Capital T r ver Rati

Capital Turn) 0 1

r Rati)


42/60

KMT

42

8. CURRENT ASSETS TO FIXED ASSETS RATIO

(Amount in Rs.)

Current Assets To Fi ed Assets Ratio

Year Current Assets Fixed Assets Ratio

2008 7997490 19700577 4.05

2009 13363664 19251079 0.69

2010 21265913 27432500 0.77

Table 8


Chart 8

Interpretation

Current assets are increased due to the increase in the sundrydebtors

and the net fixed assets ofthe firm are decreased due to the charge of depreciation

and there is no majorincrementin the fixed assets.

The increment in current assets and the decrease in fixed assets

resulted an increase in the ratio compared with the previous year

0

1

2

3

4

5

2002 2003 2010

Curre tAssets T Fixed Assets Rati

Curr4

nt Ass4

ts T5

Fix4

d Ass4

ts

Rati5


43/60

KMT

43

3.4 PROFITABILITY RATIOS

GENERAL PROFITABILITY RATIOS

9. NET PROFIT RATIO

(Amount in Rs.)

Net Profit Ratio

Year Net Profit After Tax Sales Ratio

2008 2147828 24213468 8.87

2009 2547217 27398567 9.30

2010 2077933 35344784 5.88

Table 9


Chart 9

Interpretation

The net profit ratio is the overall measure ofthe firms ability to turn

each rupee ofincome from services in net profit. Ifthe net margin is inadequate the

firm will failto achieve return on shareholders funds. High net profit ratio will helpthe firm service in the fall of income from services, rise in cost of production or

declining demand.

The net profit is increased because the income from services is

increased. The increment resulted a slightincrease in 2008.

It decreases in current year, which may create problem forthe company in future.

0

2

4

6

8

10

2008 2006

2010

NetPr fit Rati

N 7 t Pr8 fit Rati 8


44/60

KMT

44

10. OPERATING PROFIT

(Amount in Rs.)

Operating Profit

Year Operating Profit Sales Ratio

2008 3312579 24213468 0.13

2009 3069468 27398567 0.11

2010 3025655 35344784 0.085

Table 10


Chart 10

Interpretation

The operating profit ratio is used to measure the relationship between

net profits and sales of a firm. Depending on the concept, it will decide.

The operating profit ratio is decreased compared with the last year.

The earnings are decreased due to the decrease in the income from services because

ofRecessioin. So, the ratio is decreased slightly compared with the previous year.

0

0.05

0.1

0.15

2009 200 @ 2010

Operati g Pr fit

Op A rating Pr B fit


45/60

KMT

45

11. RETURN ON TOTAL ASSETS RATIO

(Amount in Rs.)

Return on Total Assets Ratio

Year Net Profit After Tax Total Assets Ratio

2008 2147828 36522353 5.88

2009 2547217 42779327 5.95

2010 2077933 43188593 4.81

Table 11


Chart 11

Interpretation

This is the ratio between net profit and total assets. The ratio indicates

the return on total assets in the form of profits.

The net profitis increased in the 2008 because ofthe incrementin the

income from services. The fixed assets are reduced due to the charge of depreciation

and no majorincrements in fixed assets butthe current assets are increased because

of sundry debtors and that effects an increase in the ratio compared with the last year

i.e. 2007.

0

1

2

3

C

5

D

7

2008 2009 2010

Retur T tal Assets Rati

RE

turnF

n TF

tal AssE

ts RatiF


46/60

KMT

46

12. RESERVES & SURPLUS TO CAPITAL RATIO

(Amount in Rs.)

Reserves & Surplus To Capital Ratio

Year Reserves & Surplus Capital Ratio

2008 5267683 7500000 0.70

2009 7027055 7500000 0.93

2010 8413727 7500000 1.12

Table 12


Chart 12

Interpretation

The ratio is used to revealthe policy pursued by the company a very

high ratio indicates a conservative dividend policy and vice-versa. Higher the ratiobetter will be the position.

The reserves & surplus is decreased in the year 2007, due to the

payment of dividends and in the year 2008 the profitis increased. Butthe capitalis

remaining constant from the year 2007. So the increase in the reserves & surplus

caused a greaterincrease in the current years ratio compared with the older.

0

0.2

0.G

0.H

0.8

1

1.2

2008 2009 2010

Reserves & Surplus T Capital Rati

RI

sI

rP I

s & Surplus TQ

Capital

RatiR


47/60

KMT

47

3.5OVERALL PROFITABILITY RATIOS

13. EARNINGS PER SHARE

(Amount in Rs.)

Earnings Per Share

Year Net Profit After Tax No of Equity Shares Ratio

2008 2147828 7500000 0.29

2009 2547217 7500000 0.34

2010 2077933 7500000 0.27

Table 13


Chart 13

Interpretation

Earnings per share ratio are used to find out the return that the shareholders earn

from their shares. After charging depreciation and after payment of tax, the

remaining amount will be distributed by allthe shareholders.

EPS is small variant of return on equity capital. It gives a view of

comparative earnings of firm. High ratio is favorable to the shareholders of

company. In case of Kiran machine tools ltd. it is very poor. In two years it in

increasing trend, butin year 2009. It shows fluctuations in ratio.

EPS in Kiran machine tools ltd. is not favorable to the shareholders.

0

0.1

0.2

0.S

0.4

2008 2009 2010

Ear i gs Per Share

Earnings PT

r SharT


48/60

KMT

48

14. PRICEEARNINGS (P/E) RATIO

(Amount in Rs.)

Pri e Earning (P/E) Ratio

Year Market Price Per Share Earnings Per Share Ratio

2008 17.023 4.05 4.20

2009 19.36 4.69 4.12

2010 21.21 3.14 6.75

Table 14


Chart 14

Interpretation

The ratio is calculated to make an estimate of application in the value

of share of a company.

The market price per share is increased due to the increase in the

reserves & surplus. The earnings per share are also increased greaterly compared

with the last year because of increase in the net profit. So, the ratio is increased

compared with the previous year.

0

1

2

U

4

5

V

7

8

2008 2009 2010

Price Ear i g (P/E) Rati

PriW X

Earning (P/E) RatiY


49/60

KMT

49

15. RETURN ON INVEST ENT

(Amount in Rs.)

Return on Investment

Year Net Profit After Tax Share Holders Fund Ratio

2008 2147828 36522353 5.88

2009 2547217 42779327 5.95

2010 2077933 43188593 4.81

Table 15


Chart 15

Interpretation

This is the ratio between net profits and shareholders funds. The ratio

is generally calculated as percentage multiplying with 100.

The net profit is increased due to the increase in the income from

services and the shareholders funds are increased because of reserve & surplus. So,

the ratio is decreased in the current year due to recession.

0

1

2

4

5

a

7

2008 2009 2010

Retur I vestme t

Rb

turnc

n Ind b

stmb

nt


50/60

KMT

50

Chapter 4

4.1FINDINGS OF THE STUDY

1. The current ratio has shown in a fluctuating trend as 3.69, 3.41, and 2.69during 2009 of which indicates a continuous increase in both current assets

and current liabilities.

2. The quick ratio is also in a increasing trend throughout the period 2009 10resulting as 1.57, 2.42 and 2.69. The companys present liquidity position is

satisfactory.

3. The absolute liquid ratio has been decreased from 0.30 to 0.19.the period2008 07.

4. The proprietary ratio has shown a fluctuating trend. The proprietary ratio isdecreased compared with the last year. So, the long term solvency of the firm

is satisfactory.

5. The working capital increased from 2.05 to 2.28 in the year 2009 10.6. The fixed assets turnover ratio is in increasing trend from the year 2008 10

(0.98,1.08 and 1.29). It indicates that the company is efficiently utilizing the

fixed assets.

7. The capital turnover ratio is increased form 2008 10 (1.89, 1.88, and 2.22)and decreased in 2009 to 1.88, It increased in the current year as 0.34.

8. The current assets to fixed assets ratio is increasing gradually from 2009 10as 0.69 and 0.77. It shows that the current assets are increased than fixed

assets.

9. The net profit ratio is in fluctuation manner. It decreased in the current yearcompared with the previous year form 9.30 to 5.88.

10.The net profit is decreased greaterly in the current year. So the return on totalassets ratio is decreased from 5.95 to 4.81.


51/60

KMT

51

11.The Reserves and Surplus to Capital ratio is increased to 0.70 from 1.12. Thecapital is constant, but the reserves and surplus is increased in the current

year.

12.The earnings per share was very high in the year 2009 i.e., 0.34. That isdecreased in the following years because number of equity shares are

increased and the net profit is decreased.

13.The operating profit ratio is in fluctuating manner as 0.13, 0.11,and 0.085,from 2008 10 respectively.

14.Price Earnings ratio is increased when compared with the last year. It isincreased from 4.12 to 6.75.

15.The return on investment is decreased from 5.95 to 4.81 compared with the previous year. Both the profit and shareholders funds decrease cause an

decrease in the ratio.


52/60

KMT

52

4.2SUGGETIONS

1. The company should productively utilize the funds.2. Debt equity ratio has not satisfactory for the past two years. So the

company has enough scope for the more long-term borrowings from

the outsiders as its current ratio is also good and has a sufficient

amount of current assets.

3. Company having a significant portion of slow paying debtors, company

should take necessary actions so that to improve the debtors position.

4. Issue the fresh equity shares to reduces the debt burden.

5. The low fixed assets turnover ratio indicates declining trend in capacity

utilization, company should take it seriously.

6. Net profit margin of company is deteriorating in the year 2009-10, The

company activities to turn around its operations.

7. Adoption of profit planning and control techniques such as marginal

costing, cost volume- profit analysis, activity based system.

8. Steps to expand the existing market.


53/60

KMT

53

Chapter 5

5.1SUMMARY

1) After the analysis of Financial Statements, the company status is better, because the Net working capital of the company is increased from the last

years position.

2) The company profits are huge in the current year; it is better to declare thedividend to shareholders.

3) The company is utilising the fixed assets, which majorly help to the growthof the organisation. The company should maintain that perfectly.

4) The company fixed deposits are raised from the inception, it gives the otherincome i.e., Interest on fixed deposits.

5.2CONCLUSION

Financial ratio analysis is the calculation and comparison of ratios, which are

derived from the information in a companys financial statements. The level and

historical trends of these ratios can be used to make inferences about a companys

financial condition, its operations and attractiveness as an investment. So after

studying the companys overall position it come to conclusion as at a particularly the

current years company is in decreasing trend. So it is advised to the company

reduce expenses. It is better for the organization to diversify the funds to different

sectors in the present market scenario. It was observed that ratio analysis is one of

the best tools for analyzing financial statements.


54/60

KMT

54

ANNEXURE

Kiran Machine Tools LTD.

1-1 MIDC JalgonBALANCE SHEET AS ON 31st March 2008

Sr

. Particulars

Sch

No.

As on

31.03.2008

As on

31.03.2007

I Sources of Funds

1 Shareholders Funds

A) Share Capital I 7500000 7500000

B) Reserve & Surplus II 5267683 3986819

2 Loan Funds

Secured Loans III 22310203 25814158

3 Deferred Tax Liability 1444466 1552039

36522352 38853016

II Application Funds

1 Fixed Assets

A) Gross Block IV 24747316 19705318

B) Less: Depreciation V 5046739 4141641C) Net Block 19700577 15563704

2 Investments VI 8819710 15688403

3 Current Asset, Loans &

Advances

A) Inventories VI 5218888 3974064

B) Sundry Debtors VII 4712329 6720518

C) Cash & Bank Balance VIII 1436023 503045

D) Loans & Advances IX 1372186 40101412739426 11598641

Less: Current Liabilities &

Provisions X 4741936 4006887

Net Current Assets 7997490 7591754

4 A) Miscellaneous Expenses XI 4576 9156

36522353 38853017


55/60

KMT

55

Profit & Loss AccountSr

. Particulars

Sch

No.

As on

31.03.2008

As on

31.03.2007

1 IncomeSales & Exceis XII 24213468 23645854

Other Income XIII 540237 2259150

Increase / Decrease in Stock XIV 1244824 (1,023,591)

25998529 24881413

2 Expenditure

Raw Material Purchases XV 9045337 7657199

Manufacturing & Other Expenses XVI 5051347 4865426

Payments & Previsions for

Employees XVII 788833 839994Administration & Selling

Expenses XVIII 6355070 4777409

Financial Charges 812561 669125

22053148 18809153

Profit(Before Depreciation) 3945381 6072260

Less: Depreciation 905126 723216

Profit(After Depreciation) 3040255 5349044

Less: Tax Provisions 892427 2300772

Current Tax 970000 825000

Deferred Tax -107573 1433072

FBT 30000 42700

Less: Appropriation of Profits 877463 855188

Proposed Dividend 750000 750000

Tax on Dividend 127463 105188

Net transferred to B/S 1270365 2193084


56/60

KMT

56


1-1 MIDC Jalgaon

BALANCE SHEET AS ON 31st March 2009

Sr

. Particulars

Sch

No.

As on

31.03.2009

As on

31.03.2008

I Sources of Funds




2 Loan Funds



42779327 36522352


1 Fixed Assets

A) Gross Block IV 25452609 24747316

B) Less: Depreciation V 6201530 5046739C) Net Block 19251079 19700577

2 Investments VI 10164584 8819710

3 Current Asset, Loans &

Advances



C) Cash & Bank Balance VIII 1079066 1436023

D) Loans & Advances IX 2483807 137218618898733 12739426


Provisions X 5535069 4741936



42779327 36522353


57/60

KMT

57

Profit & Loss AccountSr

. Particulars

Sch

No.

As on

31.03.2009

As on

31.03.2008

1 Income

Sales & Exceis XII 27398567 24213468


Increase / Decrease in Stock XIV 196,775 1244824

29216970 25998529

2 Expenditure



Payments & Previsions for

Employees XVII 2429058 788833

Administration & Selling Expenses XVIII 3587266 6355070


24540783 22053148






Deferred Tax 6347179 -107573

FBT 40000 30000

Profit After Tax 2547217 2147828






58/60

KMT

58


1-1 MIDC Jalgon

BALANCE SHEET AS ON 31st March 2010

Sr. Particulars Sch No.As on31.03.2010

As on31.03.2009

I Sources of Funds




2 Loan Funds



43188593 42779327


1 Fixed Assets

A) Gross Block IV 27432500 25452609

B) Less: Depreciation V 7431092 6201530

C) Net Block 20001408 19251079

2 Investments VI 7677587 10164584

3 Current Asset, Loans & Advances



C) Cash & Bank B balance VIII 1596026 1079066

D) Loans & Advances IX 2467299 2483807

21265913 18898733


Provisions X 5756315 5535069



43188593 42779327


59/60

KMT

59

Profit & Loss Account

Sr. Particulars

Sch

No.

As on

31.03.2010

As on

31.03.2009

1 Income

Sales & Exceis XII 35344784 27398567


Increase / Decrease in Stock XIV 368226 196,775

36485845 29216970

2 Expenditure



Payments & Previsions for Employees XVII 2987472 2429058

Administration & Selling Expenses XVIII 7916927 3587266


32897348 24540783






Deferred Tax 281002 6347179

FBT 0 40000

Profit After Tax 2077933 2547217






60/60

KMT

Bibliography

Annual Reports of Kiran Machine Tools Ltd. IM .Pandey, Financial Management 8th Edition, Vikas Publishing

house Pvt Ltd, 6th

Reprint -2006- New Delhi.

Ravi M. Kishore, Financial Management, 6 Edition Reprint 2007,TAXMANNS Allied Services (P) Ltd. New Delhi.

WEB SITES

y www.kmtsprings.comy www.wikipedia.com

Date post:	07-Apr-2018
Category:	Documents
Upload:	nitswazzup
View:	216 times
Download:	0 times

Project Chapters

Documents