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ANANTHA PVC PIPES PRIVATE LIMITED RATIO ANALYSIS

INTRODUCTION

INTRODUCTION TO FINANCE

Finance is one of the basic foundations of all kinds of economic activities. It is the master key, which provides access to all the sources for being employed in manufacturing. Hence it is rightly said that finance is lifeblood of any enterprise, besides being the scarcest elements, it is also the most indispensable requirement. Without finance neither any business can be started nor successfully run. Provision of sufficient funds the required time is the key to success of concern. As matter of fact finance may be said to be the circulatory system of economic body, making possible the needed co-operation among many units of the activity.

FINANCIAL MANAGEMENT:

Financial management emerged as a distinct field of study at the turn of this Century. Many eminent persons defined it in the following ways.

DEFINITIONS:

According to GUTHMANN AND DOUGHAL Business Finance can broadly be defined as the activity concerned with planning, rising, controlling and administering of funds used in the business.

According to BONNEVILE AND DEWEY: Financing consists in the rising, providing and managing of all the money, capital or funds of any kind to be used in connection with the business.

According to Prof.EZRA SOLOMAN: Financial Management is concerned with the efficient use of any important economic resource, namely capital funds.

FINANCIAL FUNCTIONS:

The finance functions of raising funds, investing them in assets and distributing returns earned from assets to shareholders are respectively known as financing, investment and divided decisions. While performing these functions, a firm attempts to balance cash inflows and outflows. This is called as liquidity decision.

The finance functions can be divided into three broad categories.

Investment or long-term asset mix decision.

Financing or capital mix decision.

Dividend or profit allocation decision.

Liquidity or short term asset mix decision.

INVESTMENT DECISION:

Investment or capital budgeting involves the decisions of allocation of cash or commitment of funds to long-term assets, which would yield benefits in future. It involves measurement of future profitability, which involves risk, because of uncertain future. Investment proposal should therefore be evaluated in terms of both expected return and risk. Other major aspect of investment decision is the measurement of standard or hurdle rate against which the expected return of new investment can be compared.

FINANCING DECISIONS:

Financing decision is the second important function to be performed by the firm. Broadly, he must decide when, where, and how to acquire funds to meet the firms investment needs. He has to determine the proportion of debt and equity. This mix of debt and equity is known as the firms Capital Structure. The financial manager must strive to obtain the least financing mix or the Optimum Capital Structure where the market value of share is maximized.

DIVIDEND DECISIONS:

It is the third major financial decision. T he financial manager decides whether the firm should distribute all profits, or return them, or distribute a portion and return the balance. The optimum dividend policy should be determined where is maximizes the markets value of the share.

LIQUIDITY DECISIONS:

Current assets management, which affects firms liquidity, is yet another finance function in addition to the management of long term assets. Current asset should be managed effectively safeguarding the firm against the dangers of liquidity and insolvency.

Investment in current assets, profitability, liquidity, and risk. A conflict exists between profitability and liquidity while managing current assets. If the firm doesnt invest sufficient funds in current assets it may. Become illiquid. But it could lose profitability and liquidity. In order to ensure that neither insufficient nor unnecessary funds are invested in current assets.

GOALS OF FINANCIAL MANAGEMENT:

Maximize the value of the firm to its equity shareholders. This means that the Goals of the firm should be to maximize the market value of its equity shares (Which represent the value of the firm to its equity shareholders).

Maximization of profit.

Maximization of earnings per share.

Maximization of return on equity (Defined as equity earnings / net worth).

Maintenance of liquid assets in the firm.

Ensuring maximum operational efficiency through planning, directing and Controlling of the utilization of the funds i.e., through the effective employment of funds.

Enforcing financial discipline in the use of financial resources through the coordination of the operation of the various divisions in the organization.

Building up of adequate reserves for financing growth and expansion.

Ensuring a fair return to the share holders on their investment.

The key challenges for the Finance Manager in India appear to be in the following areas:

Investment Planning

Financial Structure

Treasure Operations

Foreign Exchange

Investor Communication

Management Control

TECHNIQUES OF ANALYSIS AND INTERPRETATION:

The following techniques can be used in connection with analysis and interpretation of Financial Statements:Comparative Financial Statements (or Analysis)

Common Measurement Statements (or Analysis)

Trends Percentages Analysis

Funds Flow Statements ( or Analysis)

Net Working Capital Analysis

Cash Flow Statements (or Analysis)

Ratio Analysis

INDUSTRY PROFILE

INDUSTRY PROFILE

Introduction:

Plastic have become synonymous with modern living. It is undoubtedly a product, which has penetrated extensively into the common mans life. No wonder the industry has achieved in terms of supply of raw material expansion and diversification of processing capabilities and manufacturing of processing machinery and equipment.

This versatile material with its superior qualities such as light weight, easy process ability corrosion resistance, energy conservation, no toxicity etc. many substitute to a large extent many conventional and costly industrial materials like wood, metal, glass, jute, lather etc., in the future. The manifold applications of plastics in the field of automobiles, electronics, electrical, packaging and agriculture give enough evidence of the immense utility of plastics.

At 80 percent of total requirement for raw material and almost all types of plastic machines required for the industry are indigenously available. The present investment in all the three segments of the industry namely production of raw materials, expansion and diversification of processing capacities, manufacturing of processing machinery and ancillary equipment is Rs.1250 cores and it provides employment to more than eight lakh people.

On account of their inherent advantage in properties and versatility in adoption and use, plastics have come to play a vital role in a variety of applications, the world over. In our country, plastics are used in making essential consumer goods of daily use for common man such as baskets, shopping bags, water bags, water bottles, school bags, stiffen boxes, hair combs, tooth brushes, spectacle frames and fountain pens, they also find applications in field like packaging, automobiles, and transportation, engineering, electronics, telecommunications, defense, medicine, and building and construction. Plastics are growing in importance in agriculture and water management.

The Govt. of India recognizing the importance of plastics in agriculture appointed on march 7th, 1981 a National Committee on the use of plastics in agriculture under the chairmanship of Dr.G.V.K.Rao. This committee has forecast a tremendous growth of drip irrigation through a net work of plastic pipes and tubes. In its opinion large scale adoption of irrigation would lead to sports in demand for PVC pipes, L.D.P.E tubes and polypropylene emitters. The committee made a number of recommendations for promoting the use of plastics. The implementation of recommendations would go along away in increasing the consumption of plastics, which at present is very low. The rigid pipes, flexible pipes and sheeting, which are being used for agricultural operations to carry out water place to place and also lining of ponds and reservoirs to reduce seepage and most important in drip irrigation system.

Export of plastics goods:

Plastics have excellent potentialities. Our country is equipped with all kind of processing machinery and skilled labor and undoable, and extra to boost export, finished plastics products will yield rich divided.

Today India exports plastic products to as many as 80 countries all over the world. The exports, which were stagnant at around rest 60-70 cores per annum double to 129 craters. The Plastic industry has taken up the challenge of achieving an export target of Rs.17 cores.

Major export markets for plastic products and linoleum are Australia, Bangladesh, Canada, Egypt, Hong Kong, Italy, Kuwait, Federal Republic of Germany, Sri Lanka, Sweden, Taiwan, U.K., U.S.A., and Russia.

With view to boosting the export, the plastics and linoleums export promotion council has urged the government to reduce import duty of plastic raw material, supply indigenous raw materials at international prices, fix duty, draw backs on weighted average basis and charge freight rate on plastic products on weights basis instead of volume basis.Prospects:

The Production of various plastics a raw materials in the country is expected to double by the end of seventh plan, the consumption of commodity plastics including LDPE, HDPE, PP, PS AND PVC is immense scope for the use of plastics in agriculture, electronics, automobile, telecommunications and irrigation and thus, the plastic industry is on the threshold of an explosive growth.

Role of plastics in the national economy:

Plastics are got perceived as just simple colorful household products in the mind so common person. A dominant part of the plastics of the percent and future find their utilization in the areas.

Agriculture, forestry and water-management.

Automobile and transportation

Electronics and telecommunications, buildings, construction and.

Food processing and packaging

Power and gas distributor.

Importance of Pipes Industry:

We shall look at the basic data about plastics and particularly those properties, which are so, fuse in practical working with plastics. Plastics are man-made materials. The oldest raw material for producing plastics is carbonaceous material obtained from coal tar (benzene, phenol).

Today the majority of raw materials are obtained from petrol chemical source and they can be economically produced in large quantities.

Plastics have changed our world and day-by-day they are becoming important. They own their success to whole series of advantage, which they have over conventional materials such as:

Lightweight

Excellent mould ability

Attractive colors

Low energy requirements for convention

Low labor and cost of manufacture

Low maintenance & High strength weight ratio

Economic role:

Agriculture is the chief occupation in India. For the developing countries like India modernization of the agriculture practices assumes pivotal places in improving the economic status and the process of modernization. Includes usage of higher productive plastics supplement to greater extent manufacturing of tools required for new agricultural practices.

The usage of poly vinyl chloride pipes in agricultural fields, lesser water seepage, which was predominant in earlier practices, with services of P.V.C pipes, water can be transported efficiently with lesser from the place of higher potential to the place of lower water potential.

Presently the revolutionary tried in water management speaks much about drip irrigation, which is developed in Israel and is practiced by all agricultural based nations in the world. Drip irrigation greatly P.V.C pipes as core tools of implementation with the services of this sort, P.V.C pipes one way or the other strengthening the hands of countrys economy.

A part with the referred P.V.C pipes supplemented with fitting is used in houses for electrical connection and other domestic purposes. Apart from these two applications it has got wide applications even in industrial sectors. P.V.C pipes with much unique heart, chemical and physical characteristics serve many industrial purposes.

Even characteristics of weight and low price attract many more applications. Rigid PVC pipes have been manufactured in India from the 60s on imported extrusion lines and there after indigenous plan were few pipes manufactures upto 1979-83. When many extrusion lines were imported from batten field, Cincinnati, kraaus-maffi etc. the Govt. allowed the imports of sophisticated and high output plants, which were not available indigenously.

Pvc pipes in India :

Pipes products have found wide acceptance in India and abroad. PVC is one of the more versatile plastics. It can be extruded, molded, calendared and thermoformed into a multitude of furnished products. The PVC resin can be formulated to give a wide range of properties ranging from hand, tough materials for load bearing application lime pipes, windows and doors to flexible materials for products a due as wire and cable insulation and shooting and flooring.

PVC products cater to both interiors and exteriors. In interiors it can be used for flooring, profile and cable tray, wall covering modular office systems, houses and furniture. For exteriors it is used for doors and windows, fencing partitions and paneling, roofing and rain systems.

The other external applications are in the field of irrigation, portable water supplies. In the field of irrigation there are several methods to irrigate the fields. There are minor irrigation projects and major irrigation projects apart from individual sources like wells, tube wells, bore wells. Major irrigation sector small projects will have canals and lift irrigation schemes etc., will have canals and lift irrigation schemes etc., will have pipelines. Cement and GI pipes were the pipes used in conventional methods of irrigation. Now-a-days PVC pipes replaced the conventional pipes and they constituted almost 90% in this respect.

Drip irrigation popular in the agricultural sector especially in the field of horticulture commercial cropping and green ply houses. The drip irrigation concept is becoming more popular with its advantages like highly yield, water conversion, less labor cost, less fertilizer, less past management costs, less power costs and many more advantages. The demand for this concept is increasing at a place of 30%-40% per annum.

Agriculture a sunrise industry in the Indian economy is mainly dependent on the PVC pipes for the seawater sector and pumping to their aqua ponds. They are using pipelines of four to five kilometers of 10-16 diameters pipes.

The state Govt. of A.P is using rigid PVC pipes for the irrigation water supplies for the past few years. The state Govt. is producing PVC pipes through APSIDC (Andhra Pradesh State Irrigation Development Corporation) for its lift irrigation schemes. The panchayatraj department is producing pipes for public water supply schemes. These pipes can be used for the main distributors, sub-distributors and individual connections.

COMPANY PROFILE

Introduction:

A dynamic entrepreneur Sri S.P.Y.Reddy was established a black pipes manufacturing company in 1977 and the name of the company is Nandi Pipes Pvt Ltd at Nandyal, Kurnool district. Anantha PVC Pipes Pvt Ltd was incorporated in the year 2002. The factory is situated at NH-07, Hampapuram village, Raptadu mandal, and Anantapur district and it was taken over by Nandi Group Company. The company is managed by team of professionals under the guidance of young, experienced, and well qualified dynamic managing director Mr.S.Sreedhar Reddy.

Origin:

Rayalaseema is economically backward area in Andhra Pradesh, was rare field region for industries. A dynamic entrepreneur sir S.P.Y.Reddy who is basically mechanical engineer started a unit at Nandyal, which manufactures black pipes in 1977. The determination and hard work of Sri S.P.Y.Reddy helped him to overcome the problems faced by the company in the initial years, and with financial assistance from local commercial banks. The company could overcome the problems of the merger and now it is running smoothly.

Later the company started manufacturing of PVC pipes which terminated the manufacturing of black pipes. This resulted in the formation of a Pvt. Ltd. company called SUJALA PIPES PVT.LTD. with Sri S.P.Y.Reddy as the Managing Director.

The only major competitors to the company are Sudhakar pipes, Maharaja Pipes. The only backdrop to it is the competition from local brands. As the majority of the customers belong to farmers, they consider the quality. The company has to make aware of the companys quality standards to them.

Board of Directors S.P.Y REDDY

Sri S.P.Y REDDY locally well known industrialist with the base at Nandal Kurnool district who has been successfully entrepreneur and management. Is technically qualified person with B.E, MECHANICAL From R.E.C (Warangal) and with work experience at BAARC (Bombay). He has daringly ventured and established industries

Nandi Milk

Mahanandi Minerals water

Nandi Infosys

Nandionline services

Monarch Pipes LTD

Integrated thermos plastics LTD

NandiP.V.C Products

PROMOTERSri Sridhar Reddy, A computer engineer and a student of IIM, Ahmadabad as was entrusted the management of Monarch pipes LTD, Hampapuam and great assistance and a young upcoming engineer and industrialist.

BRANCHES

PONDICHERY

SALEAM

BELLARY

MADURAI

SANGHI

Nandi has it's origins in the year 1979 when Mr. S.P.Y Reddy,a technocrat left his job at Babe Atomic Research Centre, Mumbai to start a plastic containers unit in Anantapur. The company has grown at a fast pace and Mr. Reddy who sensed an opportunity in making pipes for irrigation started manufacture of PVC pipes in yr 1984 and has fast become leading manufacturer in Andhra Pradesh and later in India. With annual consumption of 50,000 tones of resin, Nandi group is one of the biggest plastic processors in Asia. The group has either setup or acquired plants in different geographical locations of south India to improve operational efficiency and to enhance customer satisfaction. Nandi group sells PVC pipes under 4 brands of which Nandi brand is the most prominent.

Mr. S.P.Y Reddy who hails from an agricultural family with his ever present enthusiasm for improving rural life standard has ventured into many things like corporate farming, dairy development activities to make his ideas come true. The Group has consistent stated policy of venturing only into branded products to ensure the stability and steady growth.

The Group has plans to venture into north and western regions of India to further increase its footprint. The Group is privately held and its mission is to provide quality products within reach of majority of consumers and work for common good to all the parties involved in the process, namely, customers, employees and suppliers with positive overall impact on immediate societal surroundings.Anantha PVC Pipes Ltd., Anantapur a premier enterprise of Nandi Group is the well known manufacturer of the largest and most comprehensive range of UPVC Pipes in India. Nandi Gold Pipes, with a diameter up to 400mm are suitable for water transportation, irrigation, plumbing, drainage, cable ducting, bore wells, transfer of industrial effluents and electrical conduits. The gamut of products cover all applications in which PVC pipes can be used. Nandi UPVC systems are more cost effective than conventional Gl, Cl or AC systems besides being light in weight, durable and no corrosive. They are also easy to handle, offer excellent flow characteristics and can be transported and installed anywhere. With world class quality and customized product development support, they enjoy the satisfaction of millions of customers.

The unit also has world class quality assurance systems ensuring products of uncompromising excellence, meeting all relevant ISI, BS, DIN, and ASTM standards. In addition to these features, extensive R& D facilities provide reliable and committed support for new product development, implying that even if a Nandi customer is unable to acquire his precise requirement from our elaborate ranges, Nandi also could supply customized products as per his own exclusive specifications. Such relentless pursuit of qualify and readiness to adopt and innovate, the propelled the Nandi to the forefront of this product category in India.ORIGIN

Rayalaseema is economically backward area in Andhrapradesh was rarefied region for industries. A dynamic entrepreneur Sri S.P.Y REDDY who is basically a Mechanical engineer started unit at Nandyal, which manufactures black pipes in 1977. The determination and hard work of Sri S.P.Y REDDY helped him to over come the problems faced by the company in the initial years. Financial assistance from local commercial banks. The company could over come the problems of the merger and is running smoothly.

Later the company started manufacturing PVC pipes, which terminated the manufacturing of black pipes. This resulted in the formation of a PVT. Ltd .company called SUJALA PIPES PVT LTD. With Sri S.P.Y REDDY as the managing director.

The only major competitors to the company are sudhakar pipes. Maharaja pipes. The only backdrop to it is the competition from local brands. As the majority of customers belong to farmers, they consider than quality. The company has to make aware of the companys quality standards to them.

SIZES:

Various sizes ranging from to 10 inches pipes are offered to the customers.

Even pipes with different gauges and sizes are manufactured to suit specific conditions.

Details of Anantha PVC Pipes

Pipe DiameterClassFlow Range

mmInchesclasspressureliter/sec

200.55100.07-0.13

250.755100.13-0.25

3215100.25-0.50

401.25360.50-1.00

501.5341.00-1.80

632241.80-3.00

752.5243.00-5.00

903245.00-15.00

1104248.00-15.00

14052415.00-20.00

16062420.00-30.00

18072430.00-40.00

20082440.00-50.00

22592450.00-60.00

250102460.00-70.00

PACKING:

Packing plays less important role in to the products like PVC pipes because the hallow space inside can be utilized. For the purpose of cubic space utilization in trucks, while transport. Organization is adopting the technique like pipes in pipes.

PAYMENT PERIOD:

For monarch brand the company adopts zero credit policy and goods are not delivered unless cash remittances are made. For monarch and sager brands credit is entitled up to a week. The difference between these brands is due to brand image.

COVERAGE

At present Andhrapradesh, parts of southern states of Karnataka, Tamilnadu

And Kerala are ambit of Sujala pipes Pvt LTD. The extended the sales in the below regions as shown below.

1979 Nandyal region (poly phone pipes)

1984-1985 Rayalseema regions (PVC pipes)

1985-1986 Telangana regions

1986-1987 Karnataka and Andhra Pradesh

1988-91 Tamilnadu and Karnataka

1991-94 Kerala

TRANSPORTATION:

The transportation department of Sujala pipes Pvt Ltd. Is very admirable. This unique strength of the organization enables the dealers to reduce inventory levels to the minimum. Thus dealers are also supplemented with dealers to reduce inventory levels to the minimum. Thus dealers are also supplemented with the benefit of the lower tied up capital in the form of inventory.

GENERAL INFORMATION ABOUT THE COMPANY:The company is equipped with sophisticated laboratory to carry all tests to ascertain out going quality level of pipes. A Nandi pipe has got I.S.I Trade mark; this speaks for itself for the quality of the pipes. Numbers of statistical quality Control techniques are applied to sustain the quality level of the product. Managers at the company are dynamic and are well educated supervisory staff or intermediate managerial staff are able in talking their area are not highly educated. Most of the employees are skilled is uniqueness of workers in sujala Pipes Pvt. Ltd. There is non-indulgence in trade union activities.

As the company is located in industrial estate of Nandyal .It is facilitated with good communication networks. Which includes telecom; fax machine and Internet Company has also got the support of electronic data processing.

The companys major strength is considered to be transportation vehicles .a unique cash out flow justifies it self by providing good reputation of the company through improved customer service.

FINANCIAL DEPARTMENT

Through initially the company approached the external sources for financial status of the company is the very sound and is being run only with self-financial excepting For loans taken for hypothecation of machinery and stock from SBI Nandyal.

The company follows cash and carry policy for Nandi brand. The product is not delivered until the cash is paid and financial department with the help of marketing department look after this transaction.

MARKETING DEPARTMENT

Marketing manager who reports to executive director an assistant marketing Manager who reports and 20 salesmen headed by 30 sales representatives who are headed by assistant marketing ,heads the marketing department. Marketing mix and advertising particulars of sujala pipes Pvt.Ltd. shows the departments effective management of the marketing department in the organization.

PERSONAL DEPARTMENTThe personal department consists the details of the executives and workers of the organization. The organization is formed with Sri S.P.Y REDDY as the Managing Director and executive director who reports managing director .Two marketing managers, financial manager , public relations officer and quality control officer who all reports to executive director .other than executives there are thousand works in the organization Panel consisting of managing director, executive director and managers of concerned departments makes the recruitment and selection of persons Apart from the attractive salaries company provides health card facilities.

PURCHASING DEPARTMENT:

The perplexing situation i.e. conformed by manufactures of the PVC pipes is scarcity of resin. Though the Government of India has taken various steps to improve Supply conditions of PVC resin .The Indian manufacturers could meet only 50 Percent of demand of demand and remaining 50 percent is met from imports.

The major petrochemical companies are:

Sri ram vinyl Ltd.

Chem.-Past Ltd

Reliance petrochemical Ltd.

National organic chemical industries Ltd.

Indian petrochemical industries Ltd.

PROCESSThe main raw materials are HDPE granules .PP granules. The manufacturing for Pipes consists of mixing various resins along with coloring material in a mixture and the prepared material is fed to the extruder. In the extruder, the material is heated to the required politicizing temperature (1900 centigrade to 2300 centigrade) the extruded through the die hard to from the pipe. The hot pipe coming out of the extruder is cooled in a water bath to retain the final shape. The pipe coming out of the extruder is guided through the water bath suitable Traction system. The temperature of the water is maintained by circulating through the cooling toward and with the help of a chilling plant. The required length of the pipe is cut with a planetary saw the cut lengths are titled by titling Units and get corrected in the pipe rack attached to the tilting frames. Later they are stocked separately. The company has entered in to a technical has its own processing technology.

MONARCH PIPES:

Monarch pipes Ltd. Was incorporated in the year 1986. The factory is situated at Nh-7, hampapuram village, rapthadu mandalam, Anantapur district. It was taken over by Nandi pipes.

In annual production capacity is 16000 Mts. And it is one of the leading manufactures of PVC pipes in south India. The company is equipped with technical collaboration from Batten field of West Germany. It has made possible few other small ventures. Pipes are sold under brand names of MONARCH, KOHINOOR and KRISHNA.

Monarch pipes with their good quality trouble free services durability and economical use or a better choice than mild steel, galvanized steel, cast iron and plastic pipes.

The company is managed by a term of professionals under the guidance of a young, experienced and well qualified dynamic managing director MR S.SREEDHAR REDDY.

APPLICATIONS OF UPVC PIPES:

Agriculture and irrigation schemes.

Rural & urban water supplies schemes.

Tube well casing.

Gas and oil supply lines.

Industrial effluent disposal.

Sewerage and drainage scheme.

Air condition ducting.

Building installations.

Industrial ducting.

ORGANIZATION STRUCTURE OFNANDI BRAND PIPES PVT. LTD. Managing Director

Executive Director

Financial Purchase Production Marketing Public Manager Manager Manager Manager Relation

Officer

Production Machine Quality

Supervisor Technician Control Officer

Foreman Machine Operator Lab Technician

REVIEW OFLITERATUREREVIEW OF LITERATURE:

RATIO ANALYSIS

Ratio Analysis is the process of determining and interpreting numerical relationships based on financial statement. This relationship can be expressed as percent or as a quotient.

Ratio Analysis is the most widely used tool of financial analysis. A ratio is a quotient of two numbers and is an expression of relationship between the figures or two amounts. It indicates a quantitative relationship which is used for a qualified judgment and decision-making.

MEANING:

Ratio Analysis is one of the important financial tools which come to be used very frequently for analyzing the financial strength, the weakness of the enterprise Ratios are among the best known and mostly widely used tools of financial analysis. It is defined as the indicated quotient of two mathematical expressions. An operational definition of financial ratio is the result of the comparing mathematical two values. A company total a sets turnover is calculated by deciding the companys total value into its sales figure. This ratio is the qualified relationship between the sales and total assets.

The resulting figure is also an index because it tells us how many times the value of the total assets was incorporate into the firms products. It is worthwhile to mention that the must express a relationship that as signification thus, there is a clear-cut direct and understandable relationship between the sales price of an item on hand and its cost of goods.

IMPORTANCE:

The relationship between accounting figures, expressed mathematically, is known as financial ratio or simply as a ratio. A ratio helps to analyst to make qualitative judgment about the firms financial position and performance. For example, current ratio is calculated by dividing current assets by current liabilities, the ratio indicates a relationship a quantified relationship between current assets and current liabilities. This relationship is an index or yardstick which permits a qualitative judgment to be formed about the firms ability to meet its current obligations. It measures the firms liquidity. The greater the ratio, the greater the firms liquidity and vice versa.

Such is the nature of all financial ratios. As ratio simple to calculate and easy to understand, there is tendency to employ them profusely. While such statistical calculations stimulations thinking and develop understanding, there is a danger of accumulation of a mass of data that obscures rather than clarifies relationship. The individual ratio, by itself, may have little significance of its own. Ratios may be interpreted by expanding the analysis and considering a group of several related ratios. The same ratios or a group of ratios is studied over a period of years, with the result that significant trends indicating rise, stability, or decline are highlighted.

STANDARDS OF COMPARISION:

The ratio analysis involves comparison for a useful interpretation of the financial statements. A single ratio is itself does not indicates a favorable or unfavorable condition. It should be compared with some standard. Standards of comparison may consist of:

1. Ratio calculated from the past financial statements of the firm.

2. Ratios are developed using the projected or preformed financial statements of the same firm.

3. Ratios of the some selected firms, especially the most progressive and successful, at the same point of time.

4. Ratios of the industry to which the firm belongs.

Sometimes future ratios are used as the standard of comparison. Future ratios can be developed from the projected or preformed financial statements. The comparison of the past ratios which the future ratios show the firms relative strengths and weaknesses in the past and future. If the future ratios indicate weak financial position, corrective actions should be initiated.

AIMS AND ADVANTAGES OF RATIO ANALYSIS:

The analysis of financial statements spotlights the significant facts and relationships concerning managerial performance, corporate efficiency, financial strengths and weakness and credit worthiness that would have otherwise been buried in a merge of detail. To the management, the ratio analysis serves as a means of self evaluation. It is like a report on its managerial skills and competence. The knowledge derived through such analysis can be used by the management in planning business operations. The management can study relative efficiency of the departments, conserve assets, maintain sound divided policies and establish sound credit ratings.

The principle advantages of Ratio analysis are:

1. It is possible to assets the liquidity, profitability, solvency, and the efficiency of the enterprise through the technique of ratio analysis.

2. The help the management in planning and forecasting.

3. They act as in index of the efficiency of the enterprise. As such they serve as an instrument of management control.

4. They help the management in decision making.

5. They summaries briefly the result of detailed and complicated computations.

LIMITATIONS OF RATIO ANALYSIS:

The ratio analysis is a widely used technique to evaluate the financial position and performance of a business. But there are certain problems in using ratios. The principle limitations of Ratio analysis are:

1. Ratios are calculated from the data drawn from the accounting records. Hence, it suffers from the inherent weakness of the accounting system itself, which is the source of data.

2. Ratios are meaningless if detached from the details from which they were derived. It is therefore, imperative that they should be published with related state they are derived from.

3. Ratios based on single set of figures will not have much significance. They become more useful when they compared with ratios based on past years figures or standard ratios.

4. If too many ratios are calculated they are likely to confuse instead revealing meaningful conditions.

5. Presence particular type of ratio is not a sure indicator of bad or good management. It merely conveys certain observations pointing to the probability of matters needing investigations.

6. It is difficult to decide on the proper basis for comparison.

7. The price level changes make the interpretation of ratios invalid.

8. The difference in the definitions of items in the balance sheet and the income statements make the interpretation of ratios difficult.

9. The ratios calculated at a point of time are less informative and effective as they suffer from short term changes.

10. The ratios are generally calculated from past financial statements and thus, are no indicators of future.

TYPES OF RATIOS:

Several Ratios can be calculated from the accounting data contained in the financial statements. These ratios can be grouped into various classes according to the financial activity or function to be evaluated. In view of requirements of the various users of ratios, they may classify the following four categories.

RATIO ANALYSIS:Ratio analysis of financial statements stands for the process of determining and presenting relationship of items and group of items in the statements.

There are different ratios which an analyst can employ depending on the purpose for which the analysis is made. A creditor, who likes to know the ability to meet its current obligations, may think of current and liquid ratios. Similarly, Managers and Investors who want to know operationally efficiency may think of return on investments, turnover and fixed assets, earnings per share, book value per share and dividend per share.

Ratio analysis is a powerful tool of financial analysis. It is a process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of Balance sheet and Profit and Loss a more meaningful understanding of the financial position and performance of a firm.

A Ratio is a mathematical relationship between the two related items expressed in quantitative form. A ratio is used as an index yard stick for evaluating the financial position and performance of a firm.

Requisite for Ratio analysis

The requisition of Ratio Analysis to come in to being caused by the following facts.

Business facts displayed in Balance sheet and Profit and Loss account do not convey any pompous individually. Their significance lies in the fact that they are inter-related. From this time on word, there is need for fixing relationship between various but related items.

Ratio Analysis as a tool for the interpretation of financial statements is also important because ratios help the analyst to have a profound cautiously in to the data given statements figure in their peremptory forms shown in financial statements are neither significant nor to enable to the compared.

Uses of ratio Analysis

The nature of ratio Analysis will differ depending on the purpose of the analyst. Ratio Analysis the starting point for making plans before using any sophisticated fore casting and budgeting procedures . The Ratio analysis is useful for the following reasons.

SHARE HOLDERS / INVESTORS:

Investors or Shareholders, who have invested their money in the firms shares, are most concerned about the firms earnings. They restore more confidence in those firms that show steady growth in earnings .As such, they concentrate on the analysis of the firms present and future profitability. They are also interested in the firms financial position to the extent it influences the firms earnings ability. Owners or Investors desire primarily a basis for estimating capacity.

Creditors:

Creditors are concerned primarily with liquidity and ability and to pay interest on redeems loan with a specified period.

Long-Term Creditors:

The Long term creditors are interested in the long term solvency and survival. They analyses about firms solvency and profitability overtime, its ability to generate cash, to be able to pay interest and repay principal and relationship between various sources of funds.

Employees:

The employees are also interested in the financial position of the concern especially profitability. Their wages increase, the amount of fringe benefits are related to the volume of profits earned by the concern. The employees make use of information available in financial statements.

Government:

Government is also interested to know the strength and weakness of the firm. Government makes the future policies, plans on the basis of financial information available from various units of the company.

Management:

Finally management of the firm or Executives would be interested in every aspect of the financial analysis. It is their overall responsibilities to see at the resources of the firm are used most effectively, and the firms financial condition is sound. Through financial analysis they try to seek answers to the following questions:

Is the firm in a position to meets it current obligations.

What sources of Long-term finance are employed by the firm and what is the relationship between them? Is there any danger to the solvency of the firm due to the employment of excessive debt how efficiently does the firm uses its assets are the earnings of the adequate?

Financial analysis may not provide exact answers to these questions, but it does indicate what can be expected in the future.

Standards of comparison

A single ratio in itself does not indicate favorable or unfavorable condition. It should be compared with some standards of comparison may consist of ratios calculated from the past financial statements of the same firm.

Ratios developed using the projected or Performa financial statements of the same firm.

Ratios of some selected firms, especially the most progressive and successful at the same point of time.

Ratios of the industry to which the firm belongs.The easiest way to evaluate the performance of a firm is to compare its present ratios with the past ratios. When financial ratios over a period of time are compared, it gives an indication of the direction of change and reflects whether the firms financial position and performance has improved, deteriorated constant over time. This kind of comparison is valid only when the firms accounting policies and procedures have not changed over time.

Sometimes, Future ratios are used as the standard comparison. Future ratios can be developed projected or Performa financial statements. The comparison of the past ratios with future ratios shows the firms relative strengths and weakness in the past and the future. The future ratios indicate weak financial position, corrective actions.

Another way of comparison is to compare the ratios of one firm with some related firms in the same industry at the same point of time. In most of the cases, it is more useful to compare firms ratios with the ratio of a few carefully selected competitors who have similar operations. This kind of comparison indicates the relative financial position and performance of the firm. A firm can easily resort to such a comparison, as it is not difficult to get the published financial statements of the similar firms.

To determine the financial condition and performance of a firm, its ratios may be compared with average ratios of the industry of which the firm is a member. Industry ratios are important standards in view of the fact that each industry as its characteristics which influence the financial operating relationships.

But there are certain practical difficulties in using industrial ratios.

It is difficult to get average ratios in the industry.

Even if industry ratios are available, they are averages averages of the ratios of strong and weak firms. Sometimes the spread may be so wide that the average may not be little utility.

The averages will be meaningless and the comparison futile, if the firm with in the same industry widely differ in their accounting policies and parties.

If it is possible to standardize the accounting data for the companies in the industry and eliminate extremely strong and extremely weak firms, the industry ratios will prove to useful in evaluating the financial condition and performance of a firm.

Types of Ratios

Several ratios can be calculated from the accounting data contained in the financial statements. These ratios can be grouped in to various classes according to the financial activity or function to be evaluated. As stated earlier, the parties that generally undertake financial analysis are short-term creditors, Long-term creditors, owners and Management. Short-term creditors main interest is in the liquidity position of the short -term solvency of the firm. Long-term creditors on the other hand, are more interested in the long term solvency and profitability of the firm. Similarly, owners concentrate on the firms profitability analysis and analysis of the firms financial conditions. Management is interested in evaluating every activity of the firm. They have to protect the interest of all parties and see that the firm grows profitability.

In view of the requirements of the user of ratios we may classify them as follows:

Traditional classification

Balance sheet Ratios:

Balance sheet Ratios deal with the relation between two balance sheet items . Both the items must however pertain to same Balance sheet. Ex. Current Ratio

Profit and Loss Account

These ratios deal with the relationship between two profit and loss account items, both the items must belong to the same Profit and Loss Account. Ex. Gross Profit RatioComposite or Mixed Ratios:

These ratios exhibit statement item and a Balance sheet item.

Example: Stock Turnover RatioCLASSIFICATION OF RATIOS:

RATIOS may be classified in a number of was keeping in view of the particular purpose. Rations indicating profitability are calculated on the basis of the profit and loss account, those indicating financial position are computed on the basis of the balance sheet and those which show operating efficiency or productivity or effective use or resources are calculated on the basis of figures in the profit and loss account and the balance sheet. This classification is rather crude and unsuitable to determine the profitability and financial position of the business. To achieve this effectively, ratios may be classified as:

LIQUIDITY RATIOS

LEVERAGE RATIOSACTIVITY RATIO

PROFITABILITY RATIOS

Liquidity Ratios: It is extremely essential for a firm to be able to meet its obligations as they become due. Liquidity Ratios measure the ability of the firm to meets its current obligations. In fact, analysis of liquidity needs the preparation of Cash Budgets and Cash flow statements .But liquidity ratios, by establishing in a relationship between Cash and other Current obligations provide a quick measure of liquidity.

Also that it is not too much meets its obligations, due to lack of sufficient liquidity, will result in bad credit rating, loss of creditors confidence, or even in lawsuits resulting in the closure of the Company. A very high degree of liquidity is also bad. Therefore, it is necessary to strike a proper balance between Liquidity.

The ratios, which measured and indicate the extent of firms liquidity, are known was liquidity ratios or short-term solvency ratios commonly used liquidity ratios included.

1. Current Ratio (OR) Working Capital Ratio2. Quick Ratio (OR) Acid Test Ratio3. Cash Position Ratio (OR) Super Quick Ratio

Leverage Ratios: The long term creditors like Debentures holders, financial Institutions, etc. , are more concerned with the firms long -term financial strength. To judge the long-term financial position of the firm, Leverage or capital structure ratios are calculated. These ratios indicate the funds provided by the owners and creditors. As a general, there should be an appropriate mix of the debt and owners equity in financing the firms assets.

Firm with low leverage have less risk of loss, but they also have lower expected returns. Conversely firms high leverage ratios have risk of large losses.

But also have a chance of earning huge profits. Therefore, before deciding whether a firm should have debt, must balance with higher expected returns against increased risks. The most commonly examined leverage ratios are:

1. Debt Equity Ratio2. Fixed Assets Ratio3. Current Assets To Fixed Assets RatioActivity Ratios : The funds of creditors and owners are interested in various kinds of Assets to generate sales and profit. The better the management of Assets, the larger will be the amount of sales. Activity ratios are employed to evaluate the efficiency with which the firm manages and utilizes its assets. These ratios are also called Turn over ratios because they indicate the speed with which assets are being converted or turn over in to sales. Activity ratios thus involve a relationship between sales and the various assets .A proper balance between Sales and Assets generally reflects that assets are managed well.

Following are some of the important activity ratios.1. Total assets turnover ratio2. Fixed assets turnover ratio3. Current assets turnover ratio4. Stock turnover ratio5. Debtors turnover ratio6. Creditors turnover ratioProfitability Ratios: A company should earn profits to survive and grow over a long period of time. Profits are essential, but it would be wrong to assume that every action initiated by management of the company should be aimed at maximizing profits, irrespective of social consequences.

Profit is the difference between total Revenues and total Expenses over a period of time. Profits are the ultimate output of a company and it will have no future if it fails to make sufficient profits. There fore, the Financial Manager should continuously evaluate the efficiency of the company. Besides management of the company, creditors and owners are also interested in the profitability of the firm.

Generally, two major types of profitability ratios are calculated.

1.Profitability in relation to sales.

2.Profitability in relation to Investment

A company should be able to produce adequate profit on each rupee of sales .If sales do not generate sufficient profits, it would be very difficult for the firm to cover the operating expenses and interest charges and as a result will fall to earn any profits for owners. Some of the profitability ratios are:

1. Gross profit ratio2. Operating ratio3. Operating profit ratio4. Net profit ratioSignificance of Ratio Analysis The ratio Analysis is the most powerful tool of the financial analysis. The many diverse groups of people are interested in analyzing the financial information to indicate the operating efficiency and the various aspects of the firms financial position. These people use ratios to determine a particular financial characteristic of the firm in which they are interested. With the help of ratios one can determine.

1.The ability of the firm to meet its current obligations.

2.The extent to which the firm is utilizing its long-term solvency by borrowing funds.

3.The efficiency with which the firm is utilizing its various assets in generating sales Revenue.

4.The overall operating efficiency and performance of the firm.

A short-term creditor will be interested in current financial position of the firm, while a long-term creditor will pay more attention to the solvency of the firm and also be interested in profitability of the firm.

The equity share holders are generally concerned with their return and many bother about the firms financial condition only when their earnings are depressed. In fact, it has to be realized that the short-term and the long-term financial position and the profitability of the firm are based on every kind of financial analysis, the emphasis would differ.

In credit Analysis, the analyst will usually select a few important ratios. He may use the Current Ratio or Quick- Asset Ratio to judge the firms liquidity or Debt-paying ability.

The ratio Analysis is also useful in security analysis. The major focus on security analysis is on the long-term profitability. From time to time, Management uses ratio Analysis to determine the firms financial strength and weakness and accordingly takes action to improve the firms position.

The ratio of a firm in itself does not reveal anything. For meaningful interpretation, the ratios of the firm should be compared with the ratios of similar firms and industry. This comparison will reveal whether the firm is significantly out have like. The firm should undertake a detailed analysis to spot out the trouble areas.

The Ratio Analysis will reveal the financial condition of the firm more reliably when trends in ratios over time are analyzed. The significance of trend analysis of ratios lies in the fact the analyst can know the direction of movement, i.e., whether the movement is favorable or unfavorable.

Limitations of Ratio Analysis: The Ratio Analysis is a widely used technique to evaluate the financial position and performance of a business. But there are certain problems in using ratios. The following are the limitations of the Ratio Analysis.

It is difficult to decide on proper basis for comparison:

The comparison is rendered difficult because of differences in situations of two companies or one company over years.

The price level changes make the interpretations of ratios invalid.

The differences in definitions of items of Balance sheet and income statements make the interpretation of ratios difficult.

The ratios calculated at a point of time are less informative and defective as they suffer from short-term changes.

The ratios are generally calculated from past financial statements and thus are no indications of the future.

A single ratio usually does not convey much sense. To make a better interpretation a number of ratios have to be calculated which are likely to confuse the analyst than helping him in making any meaningful conclusion.

Like financial statements, ratios also suffer from the inherent weakness of accounting records such as their historical nature. Ratios of the past are not necessarily true indicators of the future.

Ratio Analysis is merely a tool of financial statements. Hence, ratios become useless if separated from the statements from which they are computed.

RESEARCH METHODOLOGY RESEARCH METHODOLOGY Data Collection Methods :Primary data:

In formation collected form company guide and finance manager of the company.

Secondary data:

Company balance sheet and profit loss account of the company. The data of the companys profits and loss accounts, balance sheets is collected for 4 years.

Data is collected completely from the financial annual reports of the company and to some extent from the accounting information given by the management.

Research: July 2nd 2012 to August 16th 2012.

Research Tool: Ratio Analysis

Data Analysis: Data is analyzed with the help of ratios and percentages.

Data Presentation: The data collected for the study is presented in the form of tables and simple bar diagrams.

Tools and Techniques of analysis:The following tools and techniques analysis are used as measures of judging the degree of efficiency of financial analysis. The figures of annual reports have been rounded off to two decimal places in crores of rupees. The analysis of data is carried out through financial rati SCOPE OF THE STUDY The present study is concerned with the analysis of financial statements with the help of a powerful tool like ratio analysis. It covers various ratios like liquidity ratios, leverage ratios, activity ratios and profitability ratios.

OBJECTIVES OF THE STUDYPrimary objective:- To analyze the financial performance of Anantha pvc pvt.Ltd at Anantapur.Secondary objective: To measure the firms ability to meet its current obligations. To analyze the proportions of debt and equity in financing the firms assets. To analyze the firms efficiency in utilizing its assets. To measure the overall performance and effectiveness of the firm.

NEED FOR THE STUDY

Financial forecasting is an integral part of financial planning. Forecasting uses past data to estimate the future financial requirements. Ratio analysis is a powerful tool of financial analysis. A ratio is uses as a benchmark for evaluating the financial position and performance of the firm. Ratio helps to summarizes large quantities of financial data and to make qualitative judgment about the firms financial performance. With the help of ratios, one can determine. The ability of the firm to meet its current obligations. The extent to which the firms has used its long-term solvency by borrowing funds. The efficiency with the firm is utilizing its assets in generating sales revenue. The overall operating efficiency and performance of the form.

Analysis and interpretation of various accounting ratio gives a skilled and Experience analyst, a better understanding of the financial condition and performance of the firm. Thus ratio analysis can assist management in its basic function of forecasting, planning, coordination, control and communication.

LIMITATIONS OF THE STUDY The study will be only a provisional one based on the data collected from the reports and the accounts during the period and its subject to refinement. The stuffy is based on only the balance sheets and profit and accounts of the company and to has its own limitations.

The economic and government policies etc., may affect the industry after the study, which are not taken into consideration. The ratios of the company are not compared with some benchmark ratios due to the lack of information regarding it. Ration analysis suffers from the serious limitations of the statistical concepts such as determinations of standard for comparison.

Ratio analysis helps in providing only a part of the information needed in the process of decision-making. DATA ANALYSIS AND INTERPRETATION

RATIO ANALYSIS IN ANANTHA PVC PIPES INDUSTRIES

1. LIQUIDITY RATIOS:

Current Ratio: This is the most widely used ratio. It is the ratio of current assets and current liabilities.

It shows a firms ability to cover its current liabilities with its current assets. Generally 2: 1 is considered ideal for a concern Le. Current assets should be twice of the current liabilities. If the current assets are two times of the current liabilities, there will be no adverse effect on business operations when the payment of current liabilities is made.

If the ratio is less than 2, difficulty may be experienced in the payment of current liabilities and day to day operation of the business may suffer if the ratio higher then to it is very comfortable for the creditor but, for the business concern, it is indicator of the idle funds a lack of enthusiasm for work. It is calculated as follows:

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITIESCurrent Assets:Inventories

Sundry Debtors

Cash & Bank Balances

Loans & Advances

Current liabilities:Creditors

Bank Overdraft

Other Current Liabilities and Provisions

YEARSCURRENT ASSETS

(Rs.)CURRENT LIABILITIES

(Rs.)CURRENT RATIOS

2008-0957359601306756801.59: 1

2009-1055425619366022731.51: 1

2010-1162039947357665351.73: 1

2011-1259855287270114702.21: 1

INTERPRETATION

The above table shows the Current ratio during the study period. The ratio was 1.59: 1 in 2008, which increased to 2.21: 1 in 2012 and which is too above from the standard ratio that is 2: 1.

ii) Quick ratio (or) Acid test ratio:

This is the ratio of liquid assets to liquid liabilities. It shows a firms ability to meet current liabilities with its most liquid or quick assets.

The standard ratio 1: 1 is considered ideal ratio for a concern. Liquid assets are those, which can be easily converted into cash within a short period of time without loss of value. This ratio can be calculated by using the formula.

LIQUIDITY RATIO =LIQUID ASSETS

LIQUID LIABILITIES

Liquid asset/Quick assets I:Sundry Debtors,

Cash & Bank Balance

Loans & Advances

YEARSLIQUID ASSETS

(Rs.)LIQUID LIABILITIES

(Rs.)LIQUID RATIOS

2008-0945274667360756801.25: 1

2009-1027637499366022730.76: 1

2010-1152791174357665351.48:1

2011-1237904668270114701.40:1

INTERPRETATION:

From the above table, we see that the quick ratio was standard during the study period. The ratio was 1.25: 1 in 2008, which increased to 1.40: 1 in 2011. The highest liquid ratio was recorded as 1.48: 1 during the year 2010-11, which is also higher than the standard ratio that is 1: 1.

2) LEVERAGE RATIOS:

i) DEBIT RATIO:

Several debit ratios may be used to analyses the long term solvency of a firm. The firm may be interested in knowing the proportion of the interest-Dearing debit (also called funded debit) in the capital structure. It may, therefore, compute debit ratio by dividing total debit (TD) by capital employed (CE) or net assets (NA). Total debit will include short and long-term borrowings from financial institutions, debentures/bonds, deferred payment arrangement for buying capital equipments, bank borrowings, public deposits and any other interest-bearing loan.

DEBIT RATIO = TOTAL DEBIT

NET ASSETS

YEARSSHAREHOLDERS FUNDS

(Rs.)TOTAL ASSETS

(Rs.)PROPRIETARY RATIOS

2008-0939120062419936670.93

2009-1053471728566592320.94

2010-1155065294593008710.92

2011-1248208099532546930.90

INTERPRETATION:

The above table shows the Debit Ratio. The Ratio is 0.93: 1 means that lenders have financed 93.0%2006-07 and 0.90 recorded in 2009-10 that is lowest value and the highest value recorded as 0.94 in 2007-08.

ii) FIXED ASSETS RATIO

This ratio shows the relationship between Fixed Assets and Capital employed.

Fixed Assets Ratio explains whether the firm has raised adequate long-term funds to meet its Fixed Assets requirements and it gives an idea as to what part of the capital employed has been used in purchasing the Fixed Assets for the concern. If the ratio is less than one it is good for the concern. The ideal ratio is 0.67 and is calculated as under.

FIXED ASSETS RATIO = FIXED ASSETS

CAPITAL EMPLOYED

YEARSFIXED ASSETS

(Rs.)CAPITAL EMPLOYED

(Rs.)FIXED ASSETS RATIOS

2008-0920709746780093470.27: 1

2009-1037835887932615060.41: 1

2010-1133027458950674060.35: 1

2011-1240410876802661640.50: 1

INTERPRETATION

The above table shows the Fixed Asset Ratio during the study period. The Lowest Ratio was recorded as 0.27:1 in 2008-09 and the Highest ratio was recorded as 0.50:1 in 2011-12 which is also too below from the standard ratio that is 0.67:1. It means the firm does not raised adequate long-term funds to meet its Fixed Asset requirements.

iii) CURRENT ASSETS TO FIXED ASSETS RATIO:

The ratio will differ from industry to industry and, therefore no standard can be laid down. A decrease in the ratio may mean that trading is slack or more mechanization has been put through. An increase in the Ratio may reveal that inventories and debtors have unduly increased or fixed assets have been intensively used.

This Ratio is worked out as

CURRENT ASSETS TO FIXED ASSETS = CURRENT ASSETS

FIXED ASSETS

YEARSCURRENT ASSETS

Rs.FIXED ASSETS

Rs.CURRENT ASSETS/FIXED ASSETS

2008-0957359601207097462.76:1

2009-1055425619378358871.46:1

2010-1162039947330274591.87:1

2011-1259855287204108772.93:1

INTERPRETATION

The above table shows the Ratio of Current Assets to Fixed Assets, which differ from industry to industry, therefore, no standard, can be laid down. The highest Ratio was recorded as 2.93:1 in 2011-2012and the lowest ratio was recorded as 1.46:1 in 2008-09, which also very large. So investing is more in fixed assets.

3. TURNOVER RATIOS

(Or)

ACTIVITY RATIOS

I) INVENTORY TURNOVER RATIO:

This ratio, also known as Stock Turnover Ratio, establishes relationship between cost of goods sold during a given period and the average amount of inventory held during that period. This Ratio reveals the number of times finished stock is turned over during a given accounting period. Higher the ratio, the better it is because it shows that finished stock rapidly turnover. On the other hand, a low stock turnover ratio is not desirable because it reveals the accumulation of obsolete stock, or the carrying of too much stock. The ratio is calculated as follows;

STOCK TURNOVER RATIO = COST OF GOOD SOLD

AVERAGE STOCK

COST OF GOODS SOLD = OPENING STOCK + PURCHASES + MANUFACTURING EXPENSES CLOSING STOCK

AVERAGE STOCK = OPENING STOCK + CLOSING STOCK/2

YEARSCOST OF GOODS SOLD

Rs.AVERAGE STOCK

Rs.STOCK TURNOVER RATIOS

2008-0932546716534080169.55TIMES

2009-1032037108165390244.89 TIMES

2010-1123281232185441032.72 TIMES

2011-1230934143192387413.34 TIMES

INTERPRETATION

The above table shows the inventory Turnover Ratio. The highest ratio was recorded as 9.55times during the year 2008-09, and the lowest ratio was recorded as 2.72times during the year 2010-11. By seeing this ratio we can say that the Company is showing that finished stock is rapidly turned over into sales.

ASSET TURNOVER RATIOS

ii) TOTAL ASSETS TURNOVER RATIO

Overall performance and efficiency of the firm are measured by this ratio. This ratio is calculated by dividing the annual Sales value by the value of total Assets. The norm that is usually adopted for this Ratio is 2 : 1. A high ratio is an indicator of over-trading of total assets while a low ratio reveals idle capacity. The formula of this ratio is:

TOTAL ASSETS TURNOVER RATIO =SALES

TOTAL ASSETS

Sales included all sales during the particular year

Total Assets included all Fixed Assets and Current Assets

YEARSSALES

Rs.TOTAL ASSETS

Rs.TOTAL ASSETS TURNOVER

2008-09356019032780693474.56TIMES

2009-10360160508932615063.86 TIMES

2010-11261410580950674062.74 TIMES

2011-1235657455080661644.44 TIMES

INTERPRETATION

The above table shows the Total Assets Turnover Ratio, The highest ratio was recorded as 4.56 times in 2008-09, and the lowest ratio was recorded as 2.74 times in 2010-11.

iii) FIXED ASSETS TURNOVER RATIO

This ratio can also be called as Sales to Fixed Assets Ratio. It shows the number of times Fixed Assets are being turnover in the stated period. This ratio shows how well the fixed assets are being used in the business. The ratio is important in case of manufacturing concerns because sales are produced not only by use of current assets but also by amount invested in the fixed assets. If we get higher ratio, it indicates that the firm efficiency utilizes Fixed Assets and if get Lower Ratio, it indicates that the firm does not properly utilize Fixed Assets.

FIXED ASSETS TURNOVER RATIO = SALES

NET FIXED ASSETS

Sales included all sales during the particular year.

Net Fixed Assets = Fixed Assets DepreciationYEARS

SALES

Rs.

FIXED ASSETS

Rs.FIXED ASSETS TURNOVER RATIOS

2008-093560190322070974617.19TIMES

2009-10360160508378358879.52 TIMES

2010-112614105680330274587.91 TIMES

2011-12356574550404108768.82 TIMES

INTERPRETATION

The above table shows the Fixed Assets Turnover Ratio during the Period 2008-09 to 2011-12. The Lower Ratio was recorded as 7.91 times in 2010-11, and the Highest Ratio was recorded as 17.19 times in 2008-09. It is decreasing by every compare to previous year. The company doesnt show the interest turning out the fixed asserts.

IV) CURRENT ASSETS TURNOVER RATIO

This Ratio measures the Contribution of Current Assets to Sales generation. If we get Higher Ratio, It indicates that there is more contribution of Current Assets in generating of Sales. On the other hand, if we get Lower Ratio, it indicates that there is not much contribution of Current Assets in generating of Sales. It is calculated by dividing the Net Sales value by the Current Assets Value.

CURRENT ASSETS TURNOVER RATIO = NET SALES

CURRENT ASSETS

Net sales included all sales during the particular year

Current Assets included inventories, Sundry Debtors, Cash & BankYEARSNET SALES

Rs.CURRENT ASSETS

Rs.CURRENT ASSETS TURNOVER RATIO

2008-09356019032573896016.20

2009-10360160508554256196.49

2010-11261410580620399474.21

2011-12356574550598552875.95

INTERPRETATION

The above table shows the Current Assets Turnover Ratio, which shows the contribution of Current Assets in generating of Sales. The Highest Ratio was recorded as 6.20 in 2009-10 and the Lower Ratio was recorded as 4.21 in 2010-11.

V) WORKING CAPITAL TURNOVER RATIO:

The term Net working capital refers to the difference between current assets and current liabilities. A positive net working capital will arise when current assets are more than current liabilities. A negative net working capital occurs when current liabilities are more than current asset. This ratio calculated as under.

WORKING CAPITAL TURNOVER RATIO = NET SALES

NETWORKING CAPITAL

YEARSNET SALES

Rs.WORKING

CAPITAL

Rs.

WORKING TURN-

OVER RATIO.

2008-093560190322128392116.72

2009-103601605081882334519.13

2010-11261410580262734129.94

2011-123565745503284381610.85

INTERPRETATION

When compared to 2008-09 the net working capital turnover ratio is decreased in 2010-11 and few percentages increased in 2009-10 year. The highest value recorded as 19.13 in the year 2009-10 and lowest value recorded as 9.94 percentages in 2010-11.

vi) DEBTORS TURNOVER RATIO

When a firm sells goods on credit, book debits are created. Debtors are expected to be converted into cash over a short period. To a great extent, the amount and quality of debtors determined the liquidity position of the firm Debtors Turnover or Receivables Turnover is calculated by dividing credit sales by average debtors. This ratio indicates the numbers of times on an average the debtors or receivables turnover each year. Generally, the higher the value of debtors turnover shows the more efficiency in the management of assets.

Sometimes, data relating to credit sales, opening balance and closing balance of debtors may not be available than debtors turnover can be calculated by dividing total sales by closing balance.

DEBTORS TURNOVER RATIO = CREDIT SALES

AVERAGE DEBTORS

ORDEBTORS TURNOVER RATIO = TOTAL SALES

CLOSING STOCK

YEARSTOTAL SALES

Rs.CLOSING DEBTORS

Rs.DEBTORS TURNOVER RATIO

2008-09356019032442658088.04TIMES

2009-103601605082102065117.13 TIMES

2010-11261410580326574258.00 TIMES

2011-123565745502838006212.56 TIMES

INTERPRETATION

Generally more the Ratio better is the Cash position of the company. In 2008-09, the companys Debtors Turnover Ratio was recorded as 8.00 times, which increased to 17.13 times in 2009-10. The debtors turnover ratio of the company increasing and decreasing year by year it reveals that the management is showing better performance to connect the debts in time.

4. PROFITABILITY RATIOS

I) GROSS PROFIT RATIO:

This ratio tells gross margin on trading. The gross profit should be adequate to cover fixed expenses, dividends and building of reserves. An important factor, which will affect the ratio of Gross Profit to Sales, is that of the practice of increasing or reducing the sale price of goods sale by making-ups and marks-downs. It is important that business keeps up its margin of gross profit; otherwise it may not cover its operating expenses and thus provide an adequate return to proprietors. Higher the ratio, the better it is. A low ratio indicates unfavorable trends in the form of reduction in selling prices not accompanied by proportionate decrease in cost of goods or increase in cost of production. This Ratio is calculated as under.

GROSS PROFIT RATIO = GROSS PROFIT X 100

NET SALES

WHERE GROSS PROFIT = SALES-COST OF GOODS SOLD

YEARSGROSS PROFITS

Rs.SALES

Rs.GROSS PROFIT RATIOS (%)

2008-09305518663560190328.58

2009-103978942736016050811.04

2010-112859825926141058010.94

2011-124723311835657455013.25

INTERPRETATIONS:

The above table shows the Gross Profit Ratios. The Highest Gross Profit Ratio was recorded as 13.25% in 2011-12 and the Lowest Gross Profit Ratio was recorded as 8.58% in 2008-09 by seeing this ratio, we can say that the Gross Profit of the Firm is bad because the cost of goods sold is increasing every year.

ii) NET PROFIT RATIO:

This Ratio is the ratio that establishes the relationship between net profits to net sales and is expressed as a percentage.

The higher the net profit ratio, higher the greater will be the profitability and higher return to the share holders as well as enable the firm to withstand adverse economic conditions. On the other hand a lower net profit ratio is an indication of poor profitability of an enterprise. This ratio is calculated as under.

NET PROFIT RATIO = NET PROFIT/LOSS X 100

----------------------------------------

NET SALES

WHERE

NET PROFIT =GROSS PROFIT-EXPENSES

NET SALES included all sales during the particular year.YEARSNET PROFIT/LOSS

Rs.SALES

Rs.NET PROFIT RATIOS (%)

2008-094195153560190320.11

2009-104426893601605080.12

2010-115648242614105800.21

2011-126489203565745500.18

INTERPRETATION:

The above table shows the net profit percentage 2008-09. The net profit every year increase few percentage and 2011-12 net profit decreased compare to previous year. The company maintaining the smooth growth percentage in net profit.

FINDINGS

FINDINGS

The Current Ratio of the company is well the standard 2:1 throughout the study period. It decreases from 2.21 times to 1.51 times which indicates the firm is in a very good position to meet its short term obligations. Generally the quick ratio standard is 1:1 throughout the study period it from 1.48 times to 0.76 times. It shows that the company is maintaining sufficient investments in quick assets. The Debit ratio of the company slightly increased from 0.90 to 0.94 times, but not up to the standard ratio 1:3. It is mainly caused by decrease in Total tangible assets. The stock turnover ratio of the company has been increased from 27.22 times to 95.50 times. It indicates the company sale has been increasing rapidly. The Fixed Assets Turnover Ratio is increasing from 7.91 times to 17. Times. Fixed Asset Turnover Ratio is increasing year by year and it reveals that the company is showing better performance in turning out its Fixed Assets.

SUGGESTIONS

SUGGESTIONS

The company shall maintain the stable financialposition. So that, the Company can earns better Profits. The Company may increase Investment in Current Assets to meet its short-term obligations. The Company needs to adopt Sales Forecasting and Budgetary Control Methods to check the rising expenses. The company may increase its Capital Employed Turnover Ratio by increasing sales every year.

CONCLUSION

CONCLUSION

I am very glad to get my project in the industry which is one of the leading companies in PVC pipes manufacturing industry. I have learnt a lot in this 45 days period about the companys strategies and its objectives, which are going to fulfill all its requirements of the company.

I have given my best in this 45 days span to improve the companies standards to my best and I really very happy to hear about their customer satisfactory that they were providing good service to the customers.

ANNEXURE

BALANCE SHEETS

M/S.ANANTHA PVC PIPES PRIVATE LIMITED

Sy.No.26, HAMPAPURAM VILLAGE, ANANTAPUR DT.,

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING ON 31.03.2009

PARTICULARSSCHEDULEAMOUNTAMOUNT

NOAS AT 31.03.2009AS AT 31.03.2008

INCOME:

Sales and other receipts 332,396,494.49 6,183,463.31

Other Income 82,227.60 --

Increase (decrease) in InventoryH (4,561,228.00)108,523.00

( I ) 327,917,494.09 6,291,986.31

EXPENDITURE:

Materials ConsumedF 271,784,332.77 5,076,913.00

Consumable StoresG 1,475,419.84 3,280.70

Employee Remuneration & BenefitsI 5,088,043.00 48,005.00

Manufacturing expensesJ 22,853,637.60 613,695.00

Administrative & Operative ExpensesK 23,762,437.28 405,161.00

DepreciationC 2,432,956.00 60,948.00

Preliminary expenses written off 37,389.00 37,389.00

( II ) 327,434,215.49 6,245,391.70

PROFIT/LOSS for the year ( I - II ) 483,278.60 46,594.61

Add : Balance brought forward from 46,594.61 --

previous year

Profit Carried to Balance Sheet 529,873.21 46,594.61

For and on behalf of BoardAs per my report of even date

ANANTHA PVC PIPES PRIVATE LIMITED

Sd/- xx xx xx xx

Sd/- xx xx xx xx xx Sd/- xx xx xx (N.SUBBAIAH)

MANAGING DIRECTOR DIRECTORCHARTERED ACCOUNTANT


Sy.No.26, HAMPAPURAM VILLAGE, ANANTHAPUR DT.,

BALANCE SHEET AS ON 31.03.2009


NOAS AT 31.03.2009AS AT 31.03.2008

SOURCES OF FUNDS:A

1.SHARE HOLDERS FUNDS:

a). Share Capital 20,000,000.00 5,000,000.00

b). Reserve and Surplus :

Profit & Loss a/c 529,872.75 46,594.15

2.LOAN FUNDS:B

a). Secured Loans 46,000,979.80 48,208,099.34

b). Un - Secured Loans 22,558,359.00 18,135,341.00

TOTAL 89,089,211.55 71,390,034.49

APPLICATION OF FUNDS:

1.FIXED ASSETS:C

a). Gross Block 20,471,824.95 20,471,824.95

b). Less: Depreciation 2,493,904.00 60,948.00

c). Net Block 17,977,920.95 20,410,876.95

2.INVESTMENTS: Nil Nil

3.CURRENT ASSETS, LOANS &D

ADVANCES 81,103,552.97 59,705,731.40

Less: Current Liabilities & ProvisionsE 10,104,429.37 8,876,129.86

Net Current Assests 70,999,123.60 50,829,601.54

4.MISCELLANEOUS EXPENDITURE

-PRELIMINERY EXPENSES

(to the extent not written off or adjusted) 112,167.00 149,556.00

TOTAL 89,089,211.55 71,390,034.49



Sd/- xx xx xx xx xx

Sd/- xx xx xx Sd/- xx xx xx xx

( N.SUBBAIAH )





NOAS AT 31.03.2010AS AT 31.03.2009

INCOME:


Other Income 82,227.60 82,227.60

Increase (decrease) in InventoryH 7,503,087.00 (4,561,228.00)

( I ) 366,862,456.43 327,917,494.09

EXPENDITURE:


Consumable StoresG 1,575,128.34 1,475,419.84

Employee Remuneration & BenefitsI 4,914,992.00 5,088,043.00

Manufacturing expensesJ 20,994,396.60 22,853,637.60

Administrative & Operative ExpensesK 21,989,210.11 23,762,437.28

DepreciationC 2,167,152.00 2,432,956.00


( II ) 362,927,557.87 327,434,215.49

PROFIT/LOSS for the year ( I - II ) 3,934,898.56 483,278.60

Add : Balance brought forward from 529,872.75 46,594.15

previous year

Profit Carried to Balance Sheet 4,464,771.31 529,872.75



Sd/- xx xx xx xx

Sd/- xx xx xx xx xx Sd/- xx xx xx (N.SUBBAIAH)






NOAS AT 31.03.2010AS AT 31.03.2009

SOURCES OF FUNDS:A


a). Share Capital 20,000,000.00 20,000,000.00


Profit & Loss a/c 4,464,771.31 529,872.75

2.LOAN FUNDS:B

a). Secured Loans 44,203,763.30 46,000,979.80


TOTAL 92,302,186.61 89,089,211.55


1.FIXED ASSETS:C

a). Gross Block 21,154,287.95 20,471,824.95

b). Less: Depreciation 4,661,056.00 2,493,904.00

c). Net Block 16,493,231.95 17,977,920.95



ADVANCES 84,755,133.29 81,103,552.97






TOTAL 92,302,186.61 89,089,211.55



Sd/- xx xx xx xx

Sd/- xx xx xx xx xx Sd/- xx xx xx ( N.SUBBAIAH )






NOAS AT 31.03.2011AS AT 31.03.2010

INCOME:


Other Income 759,934.60 82,227.60

Increase (decrease) in InventoryH (73,244.00) 7,503,087.00

( I ) 429,522,436.77 366,862,456.43

EXPENDITURE:






DepreciationC 2,437,146.00 2,167,152.00


( II ) 423,870,761.11 362,927,557.87

PROFIT/LOSS for the year ( I - II ) 5,651,675.66 3,934,898.56

Add : Balance brought forward from 4,464,771.31 529,872.75

previous year

Profit Carried to Balance Sheet 10,116,446.97 4,464,771.31



Sd/ xx xx xx

Sd/ xx xx xx Sd/ xx xx (N.SUBBAIAH)






NOAS AT 31.03.2011AS AT 31.03.2010

SOURCES OF FUNDS:A


a). Share Capital 40,000,000.00 20,000,000.00


Profit & Loss a/c 10,116,446.97 4,464,771.31

2.LOAN FUNDS:B

a). Secured Loans 61,520,588.92 44,203,763.30


TOTAL 138,538,395.89 92,302,186.61


1.FIXED ASSETS:C

a). Gross Block 25,267,467.95 21,154,287.95

b). Less: Depreciation 7,098,202.00 4,661,056.00

c). Net Block 18,169,265.95 16,493,231.95



ADVANCES 142,012,417.19 84,755,133.29






TOTAL 138,538,395.89 92,302,186.61



Sd/ xx xx xx

Sd/ xx xx xx Sd/ xx xx ( N.SUBBAIAH )






NOAS AT 31.03.2012AS AT 31.03.2011

INCOME:


Other Income 969,907.00 759,934.60

Increase (decrease) in InventoryH 18,970,342.00 (73,244.00)

( I ) 623,998,031.00 429,522,436.77

EXPENDITURE:






DepreciationC 3,102,096.00 2,437,146.00


( II ) 617,158,838.28 423,870,761.11

PROFIT/LOSS for the year ( I - II ) 6,839,192.72 5,651,675.66

Add : Balance brought forward from 10,116,446.97 4,464,771.31

previous year

Less: Income Tax & Advance Tax

transferred to Reserves & Surpluses 2,696,551.00

Profit Carried to Balance Sheet

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