Versa Lites

8/19/2019 Versa Lites

1/70

1. a. GENERAL INTRODUCTION

The Summer Project study “A STUDY ON RATIO ANALYSIS AT VERSA LITES

AND LUMINARIES PVT. LTD. BANGLORE” is done in partial fulfillment of the

requirement of the degree of Master of Business Administration course.

The Summer Project started on 24t for a span of

!ee"s# under the guidance of Mr. B.D.Roy the $ice president of %ersa &ites and

&uminaries and Ms. A. SAHANA, M.Sc., MBA, M.Ph!, faculty guide for Summer

Project.

A project is scientific and systematic study of real issue or a pro'lem intended and

s"ills. The study can deal !ith a small or a 'ig issue in an organi(ation. The pro'lem can

'e from any discipline of Management. )t can e$en 'e a case study !here a pro'lem has

'een dealt !ith through the process of management. The essential requirement of a

project is that it should a$ail scientific collection analysis and interpretation of data

leading to $alid conclusion.

*or"ing on a particulars project is the 'est !ay to practice !hat !e ha$e learnt

theoretically. Project !or" pro$ides us an opportunity to in$estigate a pro'lem and apply

our "no!ledge in practical situation.

The chief o'jecti$e of the summer project is to familiari(e myself !ith functions of

firm + their performance# there'y e,posed practically to understand the functions of the

organi(ation.

%ersa lites !as started in the year 1-/0 !ith eight persons. )t is 'asically a

"no!ledge'ased company in lighting# !hich is a com'ination of# "no! ho!# "no! !hy#

THE O"#ORD COLLEGE O# ENGINEERING $


2/70

and "no! !hat em'edded into one entity. %ersa lites is focused on designing and

manufacturing en$ironmental friendly and energy conser$ing lighting products at the

economical prices. The hierarchy that present in the organi(ation is hori(ontal. %ersa litesand luminaries offers !ide range of products to its industrial customers# they are !ide

range of 'allasts# transformers for fluorescent lamps. ompany products are a'out 2/ in

num'er !ith some products done only to order. )n spite of all the odds company face#

they 'elie$e in 3right ser$ice and $alue for money to their customers. ompany

sincerely replaced all the cho"es !hich ha$e run 'ad !ithin the !arranty period.

ompany5s major products are Patti5s and ho"es# Miniature fluorescent lamps#

ircular fluorescent lamps# 2 6 7 lamps# parallel fluorescent lamps# 8igh pressure

mercury $apour lamps# 8igh pressure sodium $apour lamps. %ersa lites manufacture0

fa'ricate original equipment products for 9:# P8)&)PS and *)P;


3/70

$. &. E"ECUTIVE SUMMARY

“A STUDY ON RATIO ANALYSIS AT VERSA LITES AND LUMINARIES

PVT. LTD. BANGLORE”

;atio Analysis is an important technique of analy(ing the financial statement and

it helps the analyst to ma"e quantitati$e judgment !ith regard to concerns financial

position and performance.

An efficient financial management is 'ecoming ine$ita'le for e$ery manager in

today5s corporate !orld. *hen initially the stress !as on the internal analysis of the firm#

procurement of funds# management of assets and allocation of capital# the present

importance has shifted to decision ma"ing !ithin the firm. *ith the modern aspect of

finance function the responsi'ilities of the finance manager has also increased. )n the

process of ma"ing optional decision# he ma"es use of certain analytical tools in the

analysis# planning and control acti$ities of the firm. =inancial analysis is an essential

prerequisite for ma"ing sound financial decisions.

This report helps to understanding the $olume of the profit and its reasona'leness

and it also helps to understand the mo$ement of profit o$er a period of time. )t re$eals the

reason for the $ariation in the profit and present position of the company.

Any one !ould li"e to "no! its position against its competitors. The ultimate

performance indicator of any company is the financial parameters# 'ecause in$aria'ly all

costs efficiencies> acti$ities and sol$ency position of the company !ill 'e reflected in the

financial mirror.

THE O"#ORD COLLEGE O# ENGINEERING '


4/70

These ratios help to identifying the financial strength and !ea"ness of the firm 'y

properly esta'lishing relationship 'et!een the items of the 'alance sheet and the profit

and loss account and also "no!ing the profita'ility# efficiency and gro!th of thecompany.

The sources of data is V(rsa L)(s pre$ious years 'alance sheet. The firm has

utili(ed its asset in the formal manner to yield ma,imum profit. The net income position

is fairly good. The earning po!er of the firm impro$ed in the last 4 years. The cash

'alance in the firm is $ery poor. The !or"ing capital le$el in the firm is $ery high. There

is a mismatch 'et!een de'ts to asset position. The interest co$erage proportion is in

match !ith industry standard.

THE O"#ORD COLLEGE O# ENGINEERING *


5/70

%. DESIGN O# THE STUDY

%.$ RESEARCH DESIGN

T)!( o+ S)-y? “A STUDY ON RATIO ANALYSIS AT VERSA LITES

AND LUMINARIES PVT. LTD. BANGLORE”

The type of research used for the collection + analysis of the data is 37escripti$e

;esearch Method.

The main source of data for this study is the past records of the company that is its

'alance sheet# profit + loss a0c# 'roachers. The focus of the study is to determine the

performance of the company# its allocation of assets + lia'ilities# and analysis of

company5s profita'ility 'y finding $arious ratios of the company.

The data regarding company history + profile are collected through 37escripti$e

;esearch 7esign particularly through the study of secondary sources and discussions!ith indi$iduals.

%.% S)a)((/) o+ Pro&!(0

The statement of the pro'lem under study is 3A study on ;atio Analysis !ith special

reference to V(rsa!)(s a/- L/ar(s P1). L)-. Ba/2!or(.”

This study is made in the light of different tools of financial management such as

comparati$e statements# common si(e statements# trend analysis and ratio analysis. The

study 'roadly ma"es an attempt to determine the o$erall financial performance of a firm

THE O"#ORD COLLEGE O# ENGINEERING 3


6/70

from last four years. Since finance is an important parameter of e$ery 'usiness concern to

determine the gro!th and profita'ility the study of the topics sounds momentous.

Pr4os( o+ )h( S)-y

The study !as conducted in %ersalites and &uminaries for the purpose of

fulfillment of curriculum.

The main purpose is to ma"e the thorough study on the gro!th and !or"ing of

the company from its inception till date.

The purpose is to assess the company5s trend specifically for last four years

!ith regard to operational performance.

To e,amine the factors affecting the financial and operational performance of

a company.

The main focus is to identify the loopholes of the company and gi$e suita'le

solution to the pro'lem 'ased on analysis.

%.' O&5(c)1(s +or )h( s)-y0

• To e$aluate the financial position through ;atio Analysis.

• To e$aluate the performance of financial aspects of %ersalites

@=inancial Analysis 6 !ith 7upont Analysis.

• To analy(e and interpret the financial statements of %ersalites and

&uminaries.

• To "no! a'out the soundness of the financial performance of the firm.

• To "no! the capital structure of the firm.

• To study $alidity of tools of financial statements in real life situation.



7/70

%.* METHODOLOGY

This is a 7escripti$e ;esearch Method that aims at studying the ;atio Analysis

follo!ed at the 3%ersalites and &uminaries P$t. &td.

The quality of the project !or" depends on the methodology adopted for the

study. Methodology# in turn# depends on the nature of the project !or". The use of proper

methodology is an essential part of any research. )n order to conduct the study

scientifically# suita'le methods + measures are to 'e follo!ed.

)n order to determine the essential features> the study has 'een designed to collect

the $ie!s and information a'out the ;atio techniques follo!ed 'y the managers !ho are

party to the same and the $arious employees of the organi(ation. The data has 'een

collected through the information pro$ided 'y the managers and employees of the

organi(ation.

Da)a Co!!(c)o/

The data collection is one of the important aspect in the research design purely

'ecause# it is the !ay that ho! !e can get ans!er to the research question.

Da)a D()a!s0 7 7ata relating to firm is required for the study i.e.# a'out the profit and

loss Account# and Balance sheet for calculating $arious ratios.

The data is collected in t!o !ays?

• Primary 7ata

• Secondary 7ata



8/70

Prary Da)a07

The primary data collection is one of the "ey tools used 'y the researcher for data

collection. )t is the first hand information collected 'y the researcher from the

respondents directly. Primary data is collected through o'ser$ation and communication.

S(co/-ary Da)a07

The secondary data is another form of data collection# !here the data is collected

from the e,isting records# company manual and form pre$iously carried out research

!or".

All the details are collected from secondary sources only. Secondary data includes

the annual reports# financial reports of the company etc.# discussion !ith the concerned

officials has also helped to $erify and e$aluate the $ariations and results either to confirm

it.

%.3 Sco4( o+ )h( S)-y0

A study has 'een conducted for $ersalites and luminaries located at Bengaluru#

!hich mainly caters to the needs of the corporate sector. The focus of the study co$ers

fe!er aspects of the ;atio Analysis of the firm.



9/70

%.6 L)a)o/s o+ )h( S)-y

The study has follo!ing &imitations.

1. The nona$aila'ility of a num'er of managers due to their 'usy schedule

also pro$ed to 'e a constraint.

2. onfidential matters !ould not 'e easily re$ealed.

. 7ue to time constraints the study !as limited only to si, !ee"s.

4. The study is fully e$ident and 'ased on the monetary information pro$ided

'y the organi(ation.

/. The data mainly has 'een collected from secondary sources and less

chances to gather primary information due to time constraints.

. Again# due to lac" of time# all the ratios are not calculated for the analysis

purpose.

THE O"#ORD COLLEGE O# ENGINEERING :


10/70

'. THEORETICAL OVERVIE;

INTRODUCTION TO #INANCE

=inance is life'lood of the economy. )t is one of the major components# !hich

acti$ities and stimulates the o$erall gro!th of the economy. =inance is a 'ody of

principles and theories# !hich deals !ith rising# and acquiring of funds on reasona'le

terms# and use of money 'y the acquirer.

)n the modern money oriented economy# finance is one of the 'asic foundations of

all "inds of economic acti$ities. )t is a master "ey# !hich pro$ides access to all the

sources for 'eing employed in manufacturing and merchandising acti$ities. )t is rightly

said that# 3Business needs money to ma"e more money. :fficient management of e$ery

'usiness enterprise is closely lin"ed !ith efficient management of finance. 8ence# a !ell

"nit financial system directly contri'utes to the gro!th of the economy.

I/)ro-c)o/ )o Bs/(ss +/a/c(0

According to 9uthmann and 7ougall# 3Business finance can 'e 'roadly defined

as the acti$ity concerned !ith the planning# raising# controlling and administering the

funds used in the 'usiness.

Business finance is that 'usiness acti$ity !hich is concerned !ith acquisition and

conser$ation of capital funds in meeting financial needs and o$erall o'jecti$es of a

'usiness enterprise.

THE O"#ORD COLLEGE O# ENGINEERING $


11/70

=inance is regarded as the life 'lood of a 'usiness enterprise. This is 'ecause of

modern money oriented economics> finance is one of the 'asic foundations of all "inds of

economic acti$ity. )t is the master "ey !hich pro$ides access to all the sources for 'eingemployed in the manufacturing and merchandising acti$ities. )t has 'een rightly said that

'usiness needs money to ma"e more money# ho!e$er it is also true that money !e got

more money is only !hen it is properly managed.

)n general 'usiness finance may 'e defined 3as the pro$ision of money at the time it is

needed. )t is also defined as 3procurement of funds and their effecti$e utili(ation.

)t is clear that the terms 'usiness finance in$ol$es rising of funds and their effecti$e

utili(ation# "eeping in $ie! that o$erall o'jecti$e of the firm. This requires great caution

and !isdom on the part of management. The management ma"es use of $arious financial

techniques and de$ices for administering the financial affairs of the firm in the most

effecti$e and efficient !ay.

#/c)o/s o+ &s/(ss +/a/c(0

The functions of a financial manager are to plan cautiously# control and e,ecute the

financial o'jecti$es !ith great care. 8e should re$ie! and control the financial decision

to commit or recommit the funds to ne! or outgoing uses. Thus# in addition to raising

funds# financial management is directly concerned !ith production# mar"eting and other functions of an enterprise.

The main functions of 'usiness finance are?

1. =unds requirement decision.

2. =inancing or capitalmi, decision.

THE O"#ORD COLLEGE O# ENGINEERING $$


12/70

. )n$estment or longterm assetmi, decision.

4. &iquidity or short term assetmi, decision.

/. 7i$idend or profit allocation decision.

#/a/ca! a/a2((/)0

Sound financial management is necessary in e$ery organi(ation. ollins Broo"s has

remar"ed that# 3Bad production management and sales management ha$e stain hundreds#

'ut# a faulty financial management ha$e stain in thousands.

=inancial management is managerial acti$ity# !hich is concerned !ith the

anticipation of financial needs# acquiring financial resources# allocating funds in 'usiness#

administrating the allocating of funds and accounting and reporting to the management

o$er the financial matters.

O&5(c)1(s o+ +/a/ca! a/a2((/)0

The firm5s in$estment and financing decision are una$oida'le and continuous. )n

order to ma"e them rational# the firm must ha$e certain goals.

The main o'jecti$es of financial management are?

1. Profit ma,imi(ation as a social o'ligation.

2. To ensure !ealth ma,imi(ation.. To ha$e a 'alanced asset structure# that is# proper 'alance 'et!een fi,ed

assets and current assets.

4. To maintain liquidity to meet the upcoming o'ligations.

/. To ensure fair returns to share holders.

. To ha$e an efficient and disciplined financial structure.

THE O"#ORD COLLEGE O# ENGINEERING $%


13/70

C. To a$ail the creation of resources needed 'y the firm.

#/a/c( a/- 1aros -(4ar)(/)s0

THE O"#ORD COLLEGE O# ENGINEERING $'

;esearch

department

)nformation

department

8uman

resource

department

Purchase

department


14/70

#/a/c( a/- acco/)s -(4ar)(/)0

The finance department is the controlling point of the organi(ation. The finance

and accounts are interconnected to each other. The main o'jecti$es of these departments

are cost control# funds management# decision ma"ing.

#/a/c( a/- 4rchas(0

The purchase department is connected to finance department 'y for!arding deli$ery

challan and purchase order copy to it. =inance personnel !ill $erify the 7 and purchase

order and if it is satisfactory# then payment is made and recorded in the 'oo"s of

accounts.

#/a/c( a/- Ha/ r(sorc(s0

The human resources department !ill send the attendance recorded 'y the punch card

machines of the employees and according to the salary statement sent 'y the human

resource department# the salaries to the employees are made e$ery month and recorded in

the account.

#/a/c( a/- ar=()/20

Mar"eting 'udget of the 'usiness !ill 'e issued 'y the mar"eting department at the

'eginning of the year as per the 'udget> finance department !ill issue money and records

the transactions in the 'oo".

#/a/c( a/- o4(ra)o/s0

THE O"#ORD COLLEGE O# ENGINEERING $*


15/70

The funds required during the operations are planned and pro$ided 'y the finance

department. All the e,penses meet during the time of operations are recorded in the 'oo".

Ra)o a/a!yss0

;atio analysis is the most !idely used method for the analysis of financial

statements. The item of figures found in the financial statements !ill 'e $ery useful only

!hen one item is compared !ith another item. ;atio is a term that esta'lishes relationship

'et!een t!o mathematical figures. )n other !ords 3;AT)


16/70

and a financial position of a firm. An accounting figure con$eys meaning !hen it is

related to some other rele$ant information.

#or (>a4!(0 ;s./ crores net profits may loo" impressi$e# 'ut the firm5s performance

can 'e said to 'e good or 'ad only !hen the net profit figure is related the firm5s

in$estment. The relationship 'et!een t!o accounting figures# e,pressed mathematically#

is "no!n as financial ratio @or simply as ratio. ;atio helps to summaries large quantities

of financial data and to ma"e qualitati$e judgment a'out the firm5s financial

performance.

I4or)a/c( o+ )h( ra)o a/a!yss0

The importance of ratio analysis lies in the fact it preser$es facts on a

comparati$e 'asis and ena'les the dra!ing of the inferences regarding the performance of

a firm. ;atio analysis is rele$ant in assessing the performance of a firm in respect of the

follo!ing aspect.

L?-)y 4os)o/0

*ith the help of ratio analysis conclusions can 'e dra!n regarding the liquidity

position of a firm the liquidity position of a firm !ould 'e satisfactory if it is a'le to meet

its current o'ligation !hen they 'ecome due. A firm can 'e said to ha$e the a'ility to

meet its short term lia'ilities if it has sufficient liquid funds to pay the interest and its

short maturing de't usually !ith a year as !ell the principle.

Lo/2 )(r so!1(/cy0

THE O"#ORD COLLEGE O# ENGINEERING $6


17/70

;atio analysis is equally useful for accessing the long term financial $ia'ility of a

firm this aspect of the financial position of a 'orro!er us of concern to the long term

creditor security analysis and the present and potential o!ners of a 'usiness the long termsol$ency is measured 'y le$erage0capital structure and profita'ility ratios !hich focus on

earning po!er of a firm in the respect.

O4(ra)/2 (++c(/cy0

Det another dimension of the usefulness of the ratio analysis rele$ant from the $ie!

point of management is it thro!s light on the degree of efficiency in the management and

utili(ation of its asset# it !ould 'e recalled that the $arious acti$ity ratios measure this

"ind of operation efficiency in the fact the sol$ency of the firm is in the ultimate analysis

dependence upon the sales re$enues generated 'y the use of its assets total as !ell as its

components.

O1(r 4ro+)a&!)y0

Enli"e the outside parties are interested in the financial position of a firm the

management is concerned a'out the o$erall profita'ility of the enterprises that is they are

concerned a'out the a'ility of the firm to meet its short term as !ell as long term

o'ligation to its o!ners and secure# optimum utili(ation of asset of a firm. This is

possi'le if integrated $ie! is ta"en and all ratios considered together.

I/)(r7+r co4arso/0



18/70

;atio analysis not only thro!s light on the financial position of a firm 'ut also

ser$es as a stepping stone to remedial measures this is made possi'le due to interfirm

comparison !ith industry a$erages and single figures of particular ratio is meaninglessunless it related to some standard or norm one# the popular techniques is to compare the

ratios of a firm !ith the industry a$erages it should 'e reasona'le e,pected that the

performance of a firm should 'e 'road conformity !ith the industry to !hich it 'elongs.

As interfirm comparison !ould demonstrate the relati$e position $isF$is competitors.

H(!4s / -(cso/7a=/20

=inancial statements are prepared primarily for decisionma"ing. But the information

pro$ided in financial statement is not an end in itself and no meaningful conclusion can

'e dra!n from these statements alone. ;atio analysis helps in decisions from the

information pro$ided in these financial statements.

H(!4s / +/a/c/2 +or(cas)/2 a/- 4!a///20

;atio analysis is of much help in financing forecasting and planning. Planning is

loo"ing ahead and the ratios calculated for a num'er of years !or" as a guide for the

future. Meaningful conclusion can 'e dra!n for future from these ratios. Thus# ratio

analysis helps in forecasting and planning.

U)!)y )o /1(s)ors0

An in$estor !ill li"e to assess the financial position of the concern !here he is going

to in$est. 8is first interest !ill 'e the security of his in$estment and then return in the

form of di$idend or interest. ;atio analysis !ill 'e useful to the in$estors in ma"ing up

his mind !hether present financial position of the concern !arrants future in$estment or

not.



19/70

U)!)y )o cr(-)ors0

The creditors or suppliers e,tend shortterm credit to the concern. urrent and acid

test ratios !ill gi$e an idea a'out the current financial position of the concern.

B(/(+)s )o (4!oy((s0

The employees are also interested in the financial position of the concern especially

profita'ility. %arious profita'ility ratios li"e gross profit# operating profit# net profit etc.#

ena'le employees to put for!ard their $ie!points for the increase of !age and other

'enefits.

A-1a/)a2(s o+ ra)o a/a!yss0

1. ;atio analysis simplifies the understanding of the financial statement.

2. A financial analysis can diagnose the financial condition of an enterprise

and interpretation of accounting ratio tells the !hole story of the changes

in the financial condition or position of the 'usiness# they e$aluate the

important aspect of the conducts of the 'usiness li"e liquidity# sol$ency#

capital gearing profita'ility etc.

. ;atio analysis is an in$alua'le aid to the management in the efficient

discharge of its 'asic functions of forecasting# planning# communication#

control# etc 'y and analytical study of the past performances of the

'usiness trends in cost# sales# profit and other related facts can 'e

understood and on the 'asis of such trends that is the past ratios future

e$ents can 'e forecasted.

THE O"#ORD COLLEGE O# ENGINEERING $:


20/70

4. ;atio facilitates sinter firm comparison that is it pro$ides the necessary

data for inter firm comparison# that is it pro$ides the rele$ant data for the

comparison of the performance of the different departments or di$ision of the same firm.

/. ;atios are $ery useful not only to the insider i.e. management 'ut also to

outsiders li"e creditors# in$estors etcG

. ;atios are $ery useful in esta'lishing standard costing system and

'udgetary control.

C. ;atio analysis can also help us to chec" !hether a 'usiness doing 'etter

this year than it !as last year? and it can tell us if our 'usiness is doing

'etter or !orse than other 'usinesses doing and selling the same things.

. )t measures profita'ility and sol$ency of a concern.

Dsa-1a/)a2(s or !)a)o/s o+ ra)o a/a!yss0

$. L)(- s( o+ s/2!( ra)os0

A single ratio usually does not con$ey much of the sense to ma"e 'etter

interpretation a num'er of ratios ha$e to 'e calculated !hich is li"ely to 'e calculated

!hich is li"ely to confirm the analyst then help in ma"ing any meaningful conclusion.

%. I/h(r(/) !)a)o/s o+ acco/)/20

&i"e financial statement ratios also suffer from the inherent !ea"ness of

accounting records such as their historical nature ratios of the past are not necessary to

indicators of the future.

'. Cha/2( o+ acco/)/2 4roc(-r(0

THE O"#ORD COLLEGE O# ENGINEERING %


21/70

hange of accounting procedures 'y a firm often ma"es ratio analysis misleading.

*. P(rso/a! &as0

;atios are only means of financial analysis and not an end itself. ;atios ha$e to 'e

interpreted and different people interpret the same ratio in different !ay.

3. I/co4ara&!(0

Hot only industries differ in their nature 'ut also t!o firm of the similar 'usiness

!idely differ in their si(e and accounting procedure# it ma"es compression of ratios

difficult and misleading due to $arious financial terms used in the ratio analysis.

6. A&so!)( +2r(s -(s)rc)1(0

;atios de$oid of a'solute figures may pro$e distracti$e as ratio analysis is

primarily a quantitati$e analysis and not a qualitati$e analysis.

8. Prc( !(1(! cha/2(s0

*hile ma"ing ratio analysis no consideration is made to the changes in price

le$els and this ma"es the interpretation ratios in$alid.

9. Ra)os ar( /o) s&s)))(s0

;atio analysis is merely a tool of financial statement> hence ratios 'ecome useless

if separated from# the statement from !hich they are computed.

THE O"#ORD COLLEGE O# ENGINEERING %$


22/70

1. )t lac"s standard $alues for the ratio. Therefore scientific analysis

is not possi'le.

2. There are no standards !ith to compare it fair to through light on

the acti$ity of the 'usiness.

. To indicate immediately !here the mista"e or error lies# it does not

ta"e into the consideration of mar"et and other changes.

*. ANALYSIS AND INTERPRETATION O# DATA

=inancial analysis depends primarily on the financial analysis to diagnose financial

performance. )t is 'ecause of main reasons. As long as accounting 'iases remain more

or less the same time# e,amining trends in the ra! data and in financial ratio can dra!

meaningful inferences. Since similar 'iases characteri(e $arious firms in the same

industry# inter 6 firm comparisons are useful. :,perience seems to suggest that financial

analysis pro$es if and only is the person handling it is a!are of the accounting 'iases.

Proper analysis can 'e made on the ratios. The ratio so computed is compared to

the )ndustry standards. The comparison can also 'e done !ith the competing other SS)s

in the same industry or !ith the industry past performance itself. Both of them seem to 'e

incorrect. This is 'ecause> in Small Scale )ndustry each company formulates its o!n ore

'usiness.

:, The Strategies adopted 'y %ersalites and &uminaries !ill differ from that of other

Small Scale )ndustries. The reason may 'e attri'uted to $arious factors such as suppliers#

cost 'ased profits# $ariations !ith fi,ed priced systems. :ach of them @SS) follo!s

different strategies !ith consent of e,ternal factors.

THE O"#ORD COLLEGE O# ENGINEERING %%


23/70

So the )ndustry standards are considered to 'e the 'est in financial performance

e$aluation of $ersalites and &uminaries.

The main purpose of financial analysis and interpretation is to render ser$ice to those

concerned !ith the firm. As stated# o!ners# creditors# 7e'enture 8olders# )n$estors#

9o$ernment# :mployees# Management# ha$e their o!n purpose to 'e met !ith. The

o'jecti$e of "no!ing the earning capacity of the firm# financial position of the firm#

sol$ency and term liquidity of the firm# 'orro!ing capacity and future prospects of the

firm.

Study is detailed in the follo!ing manner. There is an e,tensi$e use of the financial

ratios. The omparison is made easier and on comparison !ith the standard# the cause

and its effect is e$aluated. The Solution to the a'o$e is also deri$ed on consultation !ith

the Manager.

The Study is initiali(ed 'y studying the follo!ing ratio analysis. The e,tensi$e use of

&iquidity ratios# &e$erage ratio# Profita'ility ratios and $aluation ratios in analy(ing the

financial position. The ne,t step is to e$aluate the company from the point of the return

gained. The effecti$e tool used is 7u 6 Pont analysis.

THE O"#ORD COLLEGE O# ENGINEERING %'


24/70

LI@UIDITY RATIOS

These ratios are also called as !or"ing capital ratios or short term sol$ency ratio.

&iquidity means the firm5s a'ility to meet the short term o'ligations of the firm.

Therefore the relationships are dra!n 'et!een the current assets @sources for meeting

short term o'ligations and current lia'ilities. The firm should ensure that it does not

suffer from lac" of liquidity# and also that it does not ha$e e,cess liquidity. The failure of

a company to meet its o'ligations due to lac" of sufficient liquidity# !ill result in a poor

credit !orthiness# loss of creditors confidence and a $ery high degree of liquidity is also

'ad 'ecause it results in 'loc"ing of funds or idle assets earn nothing. Therefore# it is

necessary to stri"e a proper 'alance 'et!een high liquidity and lac" of liquidity.

Crr(/) ra)o

The current ratio measures its shortterm liquidity or sol$ency of a company that is

a'ility to meet shortterm o'ligation. The higher the current ratio larger the amount of

rupees a$aila'le per rupee of current lia'ility# the more the firm5s a$aila'ility to meet the

current o'ligations and the greater safety of funds of short term creditors.

THE O"#ORD COLLEGE O# ENGINEERING %*


25/70

urrent assets refer to all assets !hich change there form and su'stance and !hich

are ultimately con$erted into cash during normal operating cycle of 'usiness !hich is

normally 12 months. urrent assets include cash in hand# cash at 'an"# sundry de'tors# 'ills recei$a'les# short term in$estments# prepaid e,penses# accrued incomes# in$entory#

loans and ad$ances.

urrent lia'ilities refer to short term o'ligations or lia'ilities !hich are required to 'e

repaid !ithin a period of one year they include sundry creditors# 'ills paya'le# pro$isions

for income ta, proposed di$idend# outstanding e,penses.

Shortterm creditors prefer a high current ratio since it reduces their ris".

Shareholders may prefer a lo!er current ratio so that more of the firm5s assets are

!or"ing to gro! the 'usiness. Typical $alues for the current ratio $ary 'y firm and

industry. =or e,ample# firms in cyclical industries may maintain a higher current ratio in

order to remain sol$ent during do!nturns and the standard current ratio @)deal is 2?1 i.e.#

for e$ery one current lia'ility their should 'e t!o current assets to 'e maintained.

Crr(/) Ra)o Crr(/) Ass()s Crr(/) La&!)(s

Ta&!(7$

Ta&!( sho/2 a/a!yss o+ Crr(/) Ra)o

4ar)c!ars As o/ %


26/70

!a&!)(s

Crr(/)

Ra)o

$.$60$ $.*30$ $.6


27/70

Gra4h7$

Gra4h sho/2 a/a!yss o+ crr(/) ra)o

THE O"#ORD COLLEGE O# ENGINEERING %8

1.16

1.45

1.6

1.45

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2005 2006 2007 2008

current ratio


28/70

Ac- T(s) Ra)o

The quic" ratio is gi$en as @Juic" current assets 0 urrent &ia'ilities and it is

e,pressed as a pure ratio or percent ratio. Juic" assets are those assets !hich can 'e

con$erted to cash immediately or at a short notice !ithout diminution of $alue. )ncluded

in this category of current assets are? @other than in$entories + prepaid e,penses.

• ash and 'an" 'alances

• Shot term mar"eta'le securities and

• 7e'tors0recei$a'les.

The )n$entory is omitted to ascertain the intrinsic a'ility to reali(e the cash. )t is true

that the in$entories are the assets on !hich the largest losses occur in the e$ent of

liquidation. The acid test helps in identifying the a'ility to command cash !ithout

disposing in$entory# 'ecause it is assumed that in$entory !ill not supply cash as readily

as de'tors or cash. The acid test is therefore# supposed to 'e impro$ed# stringent# $ersion

of the current ratio in measuring the liquidity of an enterprise and the standard ratio is 1?1

is considered to 'e satisfactory and this differs from firm to firm.

@c= Ra)o @c= ass()s Crr(/) Ass()s F I/1(/)or(s Crr(/) La&!)(s

THE O"#ORD COLLEGE O# ENGINEERING %9


29/70

Ta&!(7%

Ta&!( sho/2 a/a!yss o+ Ac- T(s) Ra)o

Par)c!ars As o/ %


30/70

'e considered 'ecause# the )n$entory in the 'alance sheet forms the closing stoc" and any

further computation 'ased on the in$entory !ill not yield realistic figure.

Gra4h7%

Gra4h sho/2 a/a!yss o+ Ac- T(s) Ra)o

THE O"#ORD COLLEGE O# ENGINEERING '


31/70

Cash Ra)o

Since cash is the most liquid asset and it is to 'e analy(ed and it is equi$alent to

current lia'ilities. Trade in$estment or mar"eta'le securities are equi$alent of cash>

therefore# they may 'e included in the computation of cash ratioL

Cash Ra)o cash Ba/= &a!a/c(s Crr(/) La&!)(s

Ta&!(7'

Ta&!( sho/2 a/a!yss o+ Cash Ra)o

Par)c!ars As o/ %


32/70

The ash ratio is less than the standard ratio. The ash ratio is not at all near to the

standard cash ratio. The reason 'ehind this is that the ash and Ban" 'alances present inthe organi(ation are $ery lo! !hen compared to other component of the current assets.

The &iquid funds !ill ne$er yield 'enefit to the organi(ation. The reason is that the ash

in hand of the 'an" 'alances in the urrent account !ill yield nothing o$er the period.

The standard for the cash ratio is I./?1. )f ash accumulates or is deficit in the

'usiness# then the need !ill arise to analy(e and necessary arrangements to 'e made for

the purpose of maintaining adequate liquidity.

Gra4h7'

Gra4h sho/2 a/a!yss o+ Cash Ra)o

THE O"#ORD COLLEGE O# ENGINEERING '%

0.00058

0.00097

0.0034

0.00047

0

0.0005

0.001

0.0015

0.002

0.0025

0.003

0.0035

2005 2006 2007 2008

Cash ratio


33/70

N() ;or=/2 Ca4)a! Ra)o

The difference 'et!een current assets and current lia'ilities e,cluding shortterm

'an" 'orro!ings is called Het *or"ing capital. The Het *or"ing capital is often used as

the measure of firm5s liquidity. )t is considered that# 'et!een t!o firms# the one ha$ing

Het *or"ing apital has greater a'ility to meet its current o'ligations. This is not

necessarily so> the measure of liquidity is a relationship# rather than a difference 'et!een

current assets and current lia'ilities. Het *or"ing apital ho!e$er measures the firm5s

potential reser$oir of funds. )t can 'e related to net assets @or net current assets.

Het Assets includes total of current assets and H* is difference of current asset +

current lia'ilities.

N;C Ra)o N() ;or=/2 Ca4)a! N() Ass()s

Ta&!(7*

Ta&!( sho/2 a/a!yss o+ N() ;or=/2 Ca4)a! Ra)o

Par)c!ars As o/ %


34/70

I/)(r4r()a)o/

Het *or"ing apital ;atio is significantly increasing o$er the years. Het !or"ing

capital ratio is also high 'ecause of different attri'utes.

o Hormal increase in the *or"ing apital requirement !ill 'e present in each

financial year.

o As the amount of sundry de'tors is more# it !ill in turn $ary the *or"ing

apital Position.

Gra4h7*

Gra4h sho/2 a/a!yss o+ N() ;or=/2 Ca4)a! Ra)o

THE O"#ORD COLLEGE O# ENGINEERING '*


35/70

L(1(ra2( Ra)os

The shortterm creditors li"e 'an"ers and suppliers of ra! materials are more

concerned !ith the firm5s current de'tpaying a'ility.


36/70

these 'urdens. The important o$erage ratios are? )nterest co$erage ratio# =i,ed harges

ratios 7e't ser$ice o$erage ratio.

D(&) F Ass() Ra)o

7e't ratios may 'e used to analy(e the longterm sol$ency of a firm. )t may#

therefore# compute de't ratio 'y di$iding total de't 'y total assets. Total de't includes

short and longterm 'orro!ings from financial institutions# de'entures0'onds# 'an"

'orro!ings# deposits and any other interest'earing loan @secured + unsecured 7e'ts.

Total assets includes equals net assets !hich consists of net fi,ed assets and net

current assets

The 7e't asset ratio measure the e,tent to !hich 'orro!ed funds supports the

financial assets.

D(&) F Ass()s Ra)o D(&) Ass()s.

Ta&!(73

Ta&!( sho/2 a/a!yss o+ D(&) Ass() Ra)o

Par)c!ars As o/ %


37/70

I/)(r4r()a)o/

)n the year 2II/ the de't asset ratio !as high as I.1C and in the year 2IIC it has

decreased to I.2. The &e$erage ratios are computed 'ased on the fact that the short term

loans are also considered as the 7e'ts for the firm. )t is also ta"en into consideration that

the firms are lia'le to pay the interest to them.

The de't ratio of I.1C in 2II/ means that lenders ha$e financed 1CK of net assets

and correspondingly in the year 2II it increases to /K# in 2IIC it is K# and in 2II

it is 2K.

)t o'$iously implies that o!ners ha$e pro$ided the remaining finances. They ha$e

financed? 1I./4I.# 1I./I./# 1I.I.2# 1I.2I.C2# respecti$ely in 2II/# I#

IC + I respecti$ely.

Gra4h73

Gra4h sho/2 a/a!yss o+ D(&) Ass() Ra)o

THE O"#ORD COLLEGE O# ENGINEERING '8


38/70

Tr/ o1(r Ra)os

Turno$er ratios are also referred to as Acti$ity ;atios or Asset Management

;atios# measure ho! effecti$ely the assets are employed 'y the firm. These ratios are

'ased on the relationship 'et!een the le$el of acti$ity# represented 'y the sales or cost of

goods sold# and le$els of $arious assets. =unds of creditors and o!ners are in$ested in

$arious assets to generate sales and profit. Better the management of assets# the larger the

THE O"#ORD COLLEGE O# ENGINEERING '9


39/70

amount of sales. Acti$ity ratios are employed to e$aluate the efficiency !ith !hich the

firm manages and utili(es its assets.

The important Turn o$er ratio is? )n$entory Turno$er ;atio# a$erage collection period#7e'tor Turno$er ;atio# =i,ed Asset Turno$er# and Total Asset Turno$er ;atio.

I/1(/)ory Tr/o1(r Ra)o

The in$entory turno$er ratio# or stoc" turno$er# measures ho! fast the )n$entory

is mo$ing through the firm and generating sales. The in$entory turno$er reflects the

efficiency of the management. The higher the ratio# more efficient the management is and

$ice $ersa. 8o!e$er this may al!ays not 'e true. A high in$entory may 'e caused 'y a

lo! le$el of )n$entory !hich may result in frequent stoc" outs and loss of sale and

customer good!ill.

I/1(/)ory Tr/o1(r Ra)o Cos) o+ 2oo-s so!- A1(ra2( I/1(/)ory

Cos) o+ Goo-s So!- N() sa!(s F Gross Pro+)

A1(ra2( I/1(/)ory O4(//2 S)oc= C!os/2 S)oc= %

Ta&!(76Ta&!( sho/2 a/a!yss o+ I/1(/)ory Tr/ O1(r Ra)o

Par)c!ars As o/ %


40/70

Gross Pro+) 24I1I/C.2 2/CC2-./2 -.I2 /-44I41.1

Cos) o+

Goo-s So!-

4/-C1I2./ /I221IC./ 424-14./1 CIII//.CI

A1(ra2(

S)oc=

2I-/.II /42414.II -/CI2./ -C-1./

I/1(/)ory

Tr/o1(r

Ra)o

$'.390$ :.%6 :.*% 8.$3

I/)(r4r()a)o/

)n$entory turno$er ratio so computed sho!s 'ad sign in the mo$ement of stoc"s in the

company. The )n$entory turno$er ratio has decreased o$er the past four years. The

)n$entory turno$er ratio has decreased 'ecause of many reasons such as non sequential

orders from the customers# and inadequate supply of ra! materials from the suppliers.

Gra4h76

Gra4h sho/2 a/a!yss o+ I/1(/)ory Tr/ o1(r Ra)o

THE O"#ORD COLLEGE O# ENGINEERING *


41/70

D(&)or Tr/o1(r Ra)o

7e'tor turno$er indicates the num'er of times de'tor5s turno$er each year.9enerally the higher the $alue of de'tor5s turno$er# the more efficient is the management

of credit. To an outsider analysis# information a'out credit sale and opening and closing

'alance of de'tors may not 'e a$aila'le. Therefore# de'tor5s turno$er can 'e calculated

'y di$iding total sales 'y the year end 'alance of de'tors. The liquidity position of the

firm depends on the quality of de'tors to a great e,tent. =inancial analysts apply three

ratios to judge the quality or liquidity of de'tors?

7e'tors turno$er

ollection period# and

Aging schedule of de'tors.

D(&)ors Tr/o1(r Ra)o N() cr(-) sa!(s A1(ra2( Acco/)s R(c(1a&!(s.

THE O"#ORD COLLEGE O# ENGINEERING *$


42/70

Ta&!(78

Ta&!( sho/2 a/a!yss o+ D(&)ors Tr/o1(r Ra)o

Par)c!ars As o/ %


43/70

A1(ra2( co!!(c)o/ P(ro-

The A$erage ollection period represents the num'er of days !orth of credit sales

that is loc"ed in 7e'tors @Account ;ecei$a'les. The credit limit sanctioned to the

de'tors to repay the de't amount. The A$erage ollection Period indicates the num'er of

days ta"en to collect the de't amount from the de'tors.

An e,cessi$ely long collection period implies a $ery li'eral and inefficient credit

and collection performance# on the other hand too lo! a collection period is not

necessarily fa$ora'le. ;ather# it may indicate a $ery restricti$e credit and collection

policy.

A1(ra2( Co!!(c)o/ P(ro- A1(ra2( D(&)ors A1(ra2( Da!y Cr(-) Sa!(s

Ta&!(79

Ta&!( sho/2 )h( A1(ra2( Co!!(c)o/ P(ro-

THE O"#ORD COLLEGE O# ENGINEERING *'


44/70

Par)c!ars As o/ %


45/70

#>(- Ass()s Tr/o1(r Ra)o

The relationship 'et!een sales and assets is called asset turno$er

This ratio measures sale per rupee of )n$estment in fi,ed )n$estment in fi,ed assets. The

ratio is supposed to measure the efficiency !ith !hich fi,ed assets are employed a high

ratio indicates a high degree of efficiency of asset utili(ation and a lo! ratio reflects

inefficient use of assets. 8o!e$er in interpreting this ratio# one caution should 'e ta"en

into consideration. *hen the fi,ed assets of the company are old and su'stantially

depreciated# the fi,ed assets turno$er ratio tends to 'e high 'ecause the denominator of

the ratio is $ery lo!.

#>(- Ass()s Tr/o1(r Ra)o N() Sa!(s A1(ra2( #>(- Ass()s

THE O"#ORD COLLEGE O# ENGINEERING *3


46/70

Ta&!(7:

Ta&!( sho/2 )h( a/a!yss o+ #>(- Ass()s Tr/ o1(r Ra)o

Par)c!ars As o/ %


47/70

To)a! Ass()s Tr/o1(r Ra)o

The Total Turno$er ratio indicates the Turno$er of assets !ith that of the sales.

The total assets turno$er ratio indicates the efficiency of the total assets utili(ed 'y the

THE O"#ORD COLLEGE O# ENGINEERING *8


48/70

company. The Total Assets indicate the =i,ed Assets as !ell as urrent Assets in the

organi(ation. This ratio sho!s the firm5s a'ility in generating sales from all financial

resources committed to total assets

To)a! Ass() Tr/o1(r Ra)o N() Sa!(s To)a! Ass()s

Ta&!(7$<

Ta&!( sho/2 )h( a/a!yss o+ To)a! Ass()s Tr/o1(r Ra)o

Par)c!ars As o/ %


49/70

the year 2II it has decreased to 2.C. )t indicates that the total assets turno$er of 2.4

times in 2II4 implies that firm generates a sale of ;s 2.4 for one rupee in$estment in

fi,ed and current assets together# li"e!ise sale of ;s 2.4C# .I and 2.C in 2II/# 2II#2IICand 2II respecti$ely for one rupee in$estment in assets.

Gra4h7$<

Gra4h sho/2 )h( a/a!yss o+ To)a! Ass()s Tr/o1(r

Pro+)a&!)y ra)os

THE O"#ORD COLLEGE O# ENGINEERING *:


50/70

The operating efficiency of a firm and its a'ility to ensure adequate returns to its

shareholders depends ultimately on the profits earned 'y it. The profita'ility of a firm can

'e measured 'y its profita'ility ratios.

Profita'ility reflects the final result of 'usiness operations. There are t!o types of

profita'ility ratios @1 Profit margin ratios. @2 ;ate of return ratios. Profit margin ratios

sho! relationship 'et!een profit and sales. The t!o popular profit margin ratios are?

9ross profit margin ratio and Het profit margin ratio. ;ate of return ratios reflect the

relation 'et!een profit and )n$estment. The most important rate of return measure is

:arning Po!er.

Gross Pro+) ar2/ Ra)o

This ratio sho!s the margin left after meeting manufacturing costs. )t measures

the efficiency of production as !ell as pricing. To analy(e the factors underlying the

$ariation in the gross profit margin the production of $arious elements of the cost @la'or#

material and manufacturing o$erheads to sales can also 'e considered. The 9.P margin

reflects the efficiency !ith !hich management produces each unit of product

Gross Pro+) ar2/ Ra)o Gross 4ro+) N() sa!(s

Ta&!(7$$

Ta&!( sho/2 )h( a/a!yss o+ Gross Pro+) Mar2/ Ra)o



51/70

Par)c!ars As o/ %


52/70

N() Pro+) Mar2/ Ra)o

This ratio sho!s the earning left for shareholders @'oth equity and preferences as

a percentage of net sales. )t measures the o$erall efficiency of production# administration#

selling# financing# pricing and ta, management. Nointly considered# the gross profit and

net profit margin ratios pro$ide a $alua'le understanding of the cost and profit structure

of the firm and ena'le the analyst to identify the sources of 'usiness efficiency or

inefficiency.

This ratio also indicates the firm5s capacity to !ithstand ad$erse economic

condition as !ell as a high net profit margin !ould ensure adequate return to the o!ners#

a lo! net profit margin has opposite reactions. 8o!e$er# a firm !ith a lo! profit margin#

can earn a high rate of return on in$estments if it has a higher in$entory turno$er.

THE O"#ORD COLLEGE O# ENGINEERING 3%


53/70

N() Pro+) ar2/ Ra)o N() 4ro+) N() sa!(s

Ta&!(7$%

Ta&!( sho/2 )h( a/a!yss o+ N() Pro+) Mar2/ Ra)o

Par)c!ars As o/ %


54/70

THE O"#ORD COLLEGE O# ENGINEERING 3*


55/70

Ear//2 Po(r

A measure of operating profita'ility# earning po!er is defined as?

:arning Po!er Profit 'efore )nterest + ta,es A$erage Total Assets

Ta&!(7$'

Ta&!( sho/2 )h( Ear//2 Po(r

Par)c!ars As o/ %


56/70

Gra4h7$'

Gra4h sho/2 )h( Ear//2 Po(r

DU7PONT ANALYSIS



57/70

The 7u 6 Pont ompany of Enited States pioneered a system of financial

analysis# !hich has recei$ed !idespread recognition and acceptance. A useful system of analysis# !hich considers important interrelationships 'ased on information found in

financial statements# many firms in some from or the other ha$e adopted it.

R()r/ o/ To)a! Ass()s N() Pro+) Mar2/ To)a! ass()s Tr/o1(r Ra)o

N() Pro+) To)a! Ass()s N() Pro+) N() sa!(s N() Sa!(s To)a! Ass()s

Ta&!(7$*

Ta&!( sho/2 )h( D7Po/) A/a!yss

Par)c!ars As o/ %


58/70

7uPont analysis also pro$ed that the company is ha$ing a good net profit margin

!hen compared to pre$ious years. The net profit is mo$ing constant !hen compared to

years this sho!s the consistency. ompany has maintained standard performance in theyear 2II/# 2IIC and in 2II that is I.I4# I.I/ and I.I4 respecti$ely. But it has

decreased in the financial year 2II. The increase in the sales position also contri'utes an

increase in the return on total asset.

Gra4h7$*

Gra4h sho/2 )h( D7Po/) A/a!yss



59/70

3 SUMMARY O# #INDINGS CONCLUSION.

1. The ash 'alance in %ersa &ites + &uminaries seems to 'e poor. )t is important from

the financing aspect that the company should maintain a minimum cash 'alance that

equates the current lia'ilities. At any point of time# the company should 'e a'le to

meet all its urrent &ia'ilities. The current cash le$el is poor compared to past 4

years. )t !ould 'e 'etter that the company should maintain high le$el of cash in its

asset category to meet the contingent lia'ilities.

2. The *or"ing apital le$el in the organi(ation is also poor compared to pre$ious years

that should increase as it affects the dayto day transaction. The company should

ma"e sure that proper urrent Assets needs to 'e maintained to meet the urrent

lia'ilities as already mentioned. )t is therefore $ery much important from all aspects

that company should either adopt the policy of !or"ing on maintaining urrent

lia'ilities. The strategy should 'e in tune !ith ma,imi(ing the profits for the

ompany. Any de$iation in its primary o'jecti$e !ill affect its producti$ity le$el as

!ell as hamper its performance in )ndustrial le$el.

. There is a mismatch in 7e't to asset position in %ersa &ites. )t is $ery much important

for SS) to maintain urrent assets> other!ise there !ill al!ays 'e a pro'lem of

liquidity for current assets to match the current lia'ilities. The urrent Assets le$el

should at least match /IK of urrent &ia'ilities in SS).

4. The )nterest co$erage ratio is in tune !ith the )ndustry standards. The a$erage CK

!ill yield in positi$e results as the company is running under profit. The co$erage of

THE O"#ORD COLLEGE O# ENGINEERING 3:


60/70

)nterest on the profit 'efore )nterest + Ta,es !ill 'e $ery nominal + !ill ha$e $ery

less influence on the company5s profita'ility.

/. The 7e'tors Turno$er ratio is an important one in analy(ing the company5s a$eragecollection period. The 7e'tors Turno$er has 'een good in the year 2II as compared

to those other 4years. This needs to 'e impro$ed in the future years also. ollection

agents need to 'e appointed so that the collection can 'e mo'ili(ed faster + the

impro$ement !ill 'e 'rought in the profita'ility position of the company. This is $ery

much important# as the collection from de'tors !ill impact the profita'ility position

of the company.

. The a$erage collection period of the company is at its !orst compared to the last 4

years. )t needs to impro$e on the present position + ma"e sure that there is some

form of 'enchmar" needs to 'e fi,ed + the company tries to attain it in its each

financial year. This is $ery much important as the company !ill 'e ha$ing continuous

+ regular cash inflo!s regularly + !ill reduce the le$el of lia'ility on the company.

C. The =i,ed Assets turno$er depicts the utili(ation of fi,ed assets to the sales done 'y

the organi(ation. This depicts the producti$e performance of the fi,ed assets !hen

compared to the sales done 'y the organi(ation in the last 4/ years. This is $ery

much important in case of manufacturing or production 'ased companies.

. 8o!e$er# !hen !e analy(e the profita'ility position of the %ersa &ites# the companyis running under profit. The Profita'ility ratios are positi$e as the firm is running

under profit. The strategy should 'e 'ase lined to achie$e good results in different

phases outlined for smallscale industries.



61/70

-. The Het )ncome of the %ersa &ites is $ery large at nearly 1/K in the financial year

2II/. The Het )ncome needs to 'e sta'ili(ed to earn good profita'ility position for the

year. This is $ery important# as the good profita'ility !ill 'ring in 'etter prospects for the company. 8o!e$er the Total )ncome in comparison to the total assets has

performed 'etter in comparison to all the / years is a good sign for the company.

1I. The earning po!er of the company compared to the last fi$e year this year it has

decreased. The company should strategi(e on impro$ing its earning po!er to the core

ma,imum le$el.

11. As far as the Total Assets is concerned the importance of current assets is ta"en into

consideration !hen compared to the fi,ed assets for $aluating the Total Assets

turno$er ratio. The importance of current assets in the e$aluation of turno$er ratio is

considered for calculating the o$erall profita'ility position of the company !ith

respect to the total assets of the company. The significance of current assets in

e$aluating the Total Assets turno$er is more in %ersa &ites !hen compared to the

other ser$ice 'ased industry. This is 'ecause the production )ndustry !ill yield

significantly more in the current assets !hen compared to fi,ed assets. This is one of

the reasons for production companies to maintain the le$el of current assets at IK

compared to current lia'ilities. The increased sales + depreciated assets !ill yield

good ratio. %ersa &ites has utili(ed the assets in the formal manner to yield ma,imum

profits. )t is therefore in the year 2II> the company is earning good position in the

profita'ility compared to last 4 years.

THE O"#ORD COLLEGE O# ENGINEERING 6$


62/70

6 SUGGESTIONS.

%ersa &ites +&uminaries is a small scale industry engaged in manufacturing cho"es and

Patti fittings.

)t is important for the %ersa &ites to maintain sta'ility + %ia'ility in its

operations. )t is therefore $ery much important for %ersa &ites to 'ring in producti$ity in

all its class of operations. The reation of 'enchmar" is $ery much important for setting

up a standard + ensuring the attainment of its o'jecti$es. The ratio analysis 'rings out

many aspects !here the $aluation ratios + profita'ility ratios are $ery much fa$or in the

case of %ersa &ites. 8o!e$er# %ersa &ites has made profits during last four financial

years.

They need focus on all the factors in order to reduce direct as !ell as in direct cost

in order to increase the Het profits of the company e$en though there is a normal gro!th

in the firm.

There is a still need for %ersa &ites to analy(e on "ey factors# !hich are

influencing the producti$ity le$els for %ersa &ites. 7eep indepth analysis on the Sundry

de'tors# pro'lems in$ol$ed in financing the current lia'ilities steps to 'e ta"en to see to

that the sundry de'tors are maintained to a standard le$el. %ersa &ites should set up the

o'jecti$es# analy(e the factors of production# and there'y ma,imi(e the profits for the

organi(ation.

THE O"#ORD COLLEGE O# ENGINEERING 6%


63/70

MS VERSA LITES, BANGALORE

No. % ', HMS Layo), Ar(ha!!, Ba/2a!or( F 36:


64/70

E"PENDITURE0

Profit + loss A0c@B0= 1/41CI.-

CURRENT LIABILITIES

Sundry reditors@Trade

Ad$ances from customers

Ta,es + duties paya'le


65/70

N() Pro+) +or )h( y(ar 6%8:88.


66/70

MS VERSA LITES, BANGALORE

No. % ', HMS Layo), Ar(ha!!, Ba/2a!or( F 36:


67/70

&ess? 7ra!ings

B0= &osses !ritten off.

Balance 0=

2//4.I4

4II.1

1/41CI.-

2I2244.1-

LOANS ADVANCES0

ash redit from SB)

Term &oan from SB)

7emand &oan from SB)

ar &oan from ))) Ban"

8ousing &oan from SB)

Ensecured &oans

/424I1.2

14C.II

1-12.1

I-.C

-2I/.4

14/42/.II

CURRENT ASSETS0

7eposits

&oans + Ad$ances

losing Stoc"

Sundry 7e'tors

ash on hand

442C.II

I-C2.II

C-.II

11IC/1.I

-II./

CURRENT LIABILITIES

Sundry reditors@Trade

7uties + Ta,es @B0= from 2II4

I/

7uties + Ta,es @current

114.22

2I4.I

2C4/4.II

TOTAL %%


68/70

Purchases

*ages

Manufacturing e,penses

GP c-.

/11C1-.4C

42I/.I

/-4--.-

''6':96.


69/70

&ess? 7ra!ings

Bal 0=L

2/44IIC.

4-2.14

TOTAL

&ess? 7eprecation

*7% 0=.

1II.C

2/2CI.C

2/4I.II

LOANS ADVANCES0

SECURED LOANS

Term &oan from SB)

7emand &oan from SB)

ash redit from SB)

UNSECURED LOANS

Mr. 8.;. Sreenatha ;ao

Mrs. %ijaya handrase"har

Mr. %ish!as Namadagni

1--.II

11-.II

C4C/4.-I

C/42/.II

4IIIII.II

IIIII.II

CURRENT ASSETS0

7eposits

&oans + Ad$ances

Ad$ances )ncome Ta,

losing Stoc"

Sundry 7e'tors

ash on hand

4I4I.II

/III.4I

1IIII.II

12CC4.II

14/4-CI/.C2

-I4.1/

CURRENT LIABILITIES

Sundry reditors @Trade

Ta,es + duties paya'le

1-2C4I/.-C

11142.2

MISCELLANEOUS

E"PENDITURE0

TOTAL '%


70/70

Administration e,penses +

other indirect cost

)nterest on Ban" &oans

)nterest on Pri$ate &oans

7onations

Miscellaneous :,penses

7epreciation

N() Pro+) +or )h( y(ar

C/--1.1/

I22-./

1IIIII.II

11/2.II

44.C1

2/2CI.C

$$

Versa Lites

Documents

Transcript of Versa Lites