2 Part Vikash Sharma.docx

INTRODUCTION TO THE INDUSTRY Indian leather industry is the core strength of the Indian footwear industry. It is the engine of growth for the entire Indian leather industry and India is the second largest global producer of footwear after China. Reputed global brands like Florsheim, Nunn Bush, Stacy Adams, Gabor, Clarks, Nike, Reebok, Ecco, Deichmann, Elefanten, St Michaels, Hasley, Salamander and Colehaan are manufactured under license in India. Besides, many global retail chains seeking quality products at competitive prices are actively sourcing footwear from India. While leather shoes and uppers are produced in medium to large-scale units, the sandals and chappals are produced in the household and cottage sector. The industry is poised for adopting the modern and state-of-the-art technology to suit the exacting international requirements and standards. India produces more of gent’s footwear while the world’s major production is in ladies footwear. In the case of chapels and sandals, use of non-leather material is prevalent in the domestic market. Leather footwear exported from India are dress shoes, casuals, moccasins, sport shoes, horrachies, sandals, ballerinas, boots. Non-leather footwear exported from India are Shoes, Sandals and Chappals made of rubber, plastic, P.V.C. and other materials. With changing lifestyles and increasing affluence, domestic demand for footwear is projected to grow at a faster rate than has been seen. There are already many new domestic brands of footwear and many foreign brands such as Nike, Adidas, Puma, Reebok, Florsheim, Rockport, etc. have also been able to enter the market. The footwear sector has matured from the level of manual footwear manufacturing methods to automated footwear manufacturing systems. Many units are equipped with In-house Design Studios incorporating state-of-the-art CAD systems having 3D Shoe Design packages that are intuitive and easy to use. Many Indian footwear factories have also acquired the ISO 9000, ISO 14000 as well as the SA 8000 certifications. Excellent facilities for Physical and Chemical testing exist with the laboratories having tie-ups with leading international agencies like SATRA, UK and PFI, Germany.

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One of the major factors for success in niche international fashion markets is the ability to cater them with the latest designs, and in accordance with the latest trends. India, has gained international prominence in the area of Colours & Leather Texture forecasting through its outstanding success in MODEUROP. Design and Retail information is regularly made available to footwear manufacturers to help them suitably address the season's requirement. Strength of India in the footwear sector originates from its command on reliable supply of resources in the form of raw hides and skins, quality finished leather, large installed capacities for production of finished leather & footwear, large human capital with expertise and technology base, skilled manpower and relatively low cost labor, proven strength to produce footwear for global brand leaders and acquired technology competence, particularly for mid and high priced footwear segments. Resource strength of India in the form of materials and skilled manpower is a comparative advantage for the country. The export targets from 2007-08 to 2010-11 as tabulated below reflects the fact that footwear sector is the most significant segment of the Leather Industry in India. The export targets from 2007-08 to 2010-11 (In Million US$) Product

2006-07

2007-08

2008-09

2009-10

2010-11

Leather

688.05

726.85

785.00

847.80

915.63

Footwear

1212.25

1967.88

2597.60

3428.83

4526.05

Garments

308.98

358.53

372.87

387.78

403.30

Leather Goods

690.66

733.34

798.69

870.06

948.04

Saddlery &

81.85

105.66

127.85

154.70

187.19

2981.79

3892.26

4682.01

5689.17

6980.21

Harness Total

India has emerged in recent years as a relatively sophisticated low to medium cost supplier to world markets –The leather industry in India has been targeted by the Central Government as an engine for economic growth. Progressively, the Government has prodded and legislated a reluctant industry to modernise. India was noted as a supplier of rawhides and skins semi processed leather and some shoes. 2

In the 1970’s, the Government initially banned the export of raw hides and skins, followed this by limiting, then stopping the export of semi processed leather and encouraging

local

tanneries

to

manufacture

finished

leather

themselves.

Despite

protestations from the industrialists, this has resulted in a marked improvement in the shoe manufacturing industry. India is now a major supplier of leather footwear to world markets and has the potential to rival China in the future (60% of Chinese exports are synthetic shoes). India is often referred to as the sleeping giant in footwear terms. It has an installed capacity of 1,800 million pairs, second only to China. The bulk of production is in men’s leather shoes and leather uppers for both men and ladies. It has over 100 fully mechanised, modern shoe making plants, as good as anywhere in the world (including Europe). It makes for some upmarket brands including Florsheim (US), Lloyd (Germany), Clarks (UK), Marks and Spencer (UK). India has had mixed fortunes in its recent export performance. In 2000, exports of shoes were US$ 651 million, in 2001 these increased to 663 million but declined in 2002 to 623 million dollars (See Statistics). The main markets for Indian leather shoes are UK and USA, which between them take about 55% of total exports. India has not yet reached its full potential in terms of a world supplier. This is due mainly to local cow leather that although plentiful, has a maximum thickness of 1.4 – 1.6mm, and the socio / political / infrastructure of the country. However, India is an excellent supplier of leather uppers. Importation of uppers from India does not infringe FTA with Europe or the USA. The potential is set to change albeit slowly, but with a population rivalling China for size, there is no doubt the tussle for world domination in footwear supply is between these two countries.

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Few Interesting Facts: 

The Indian footwear retail market is expected to grow at a CAGR of over 20% for the period spanning from 2011 to 2011.



Footwear is expected to comprise about 60% of the total leather exports by 2011 from over 38% in 2006-07.



Presently, the Indian footwear market is dominated by Men's footwear market that accounts for nearly 58% of the total Indian footwear retail market.



By products, the Indian footwear market is dominated by casual footwear market that makes up for nearly two-third of the total footwear retail market.



As footwear retailing in India remain focused on men's shoes, there exists a plethora of opportunities in the exclusive ladies' and kids' footwear segment with no organized retailing chain having a national presence in either of these categories.



The Indian footwear market scores over other footwear markets as it gives benefits like low cost of production, abundant raw material, and has huge consumption market.



The footwear component industry also has enormous opportunity for growth to cater to increasing production of footwear of various types, both for export and domestic market.

In a Nutshell: There are nearly 4000 units engaged in manufacturing footwear in India. The industry is dominated by small scale units with the total production of 55%. The total turnover of the footwear industry including leather and non-leather footwear is estimated at Rs.8500-9500 crore (Euro 551.3-1723.1 Million) including Rs.1200-1400 crore (Euro 217.6-253.9 Million) in the household segment. India's share in global leather footwear imports is around 1.4% Major Competitors in the export market for leather footwear are China (14%), Spain (6%) and Italy (21%). The footwear industry exist both in the traditional and modern sector. While the traditional sector is spread throughout the country with pockets of concentration catering largely to the domestic market, the modern sector is largely confined to select centres like Chennai, Ambur, Ranipet, Agra, Kanpur and Delhi with most of their production for export.

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Assembly line production is organized, and about 90% of the workforces in the mechanized sector in South India consist of women. In fact, this sector has opened up plenty of employment opportunities for women who have no previous experience. They are trained to perform a particular function in the factory itself.

India's Leather & Leather Products Export Basket

Sales 45 40 35 30 25 20 15 10 5 0

Sales

Leather Goods

Leather Garments

Footwear

Finished Leather

Saddlery & harness

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STATISTICAL INFORMATION

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Introduction to the Organization 2.1 Company Profile: Founded by Mr. Trilok Chand Dewan “Venus” is a well known ISO certified footwear Brand. In 1982 established as a partnership firm named Relax Rubber Products, was Later reincorporated as a Public Limited Company (Closely Held ) named Venus Footarts Ltd. in 2006. Venus has been serving society with its quality footwear for more than two decades. Today, Venus employs over 1253 People with state of Art Infrastructure in Rajasthan. We have a well distributed network of marketing/representative offices all over India. Venus manufactures footwear for the entire family-ranging from casuals to formals from daily wear to sports wear and from an elegant collection for ladies to a fun range for kids.

With in house designing and manufacturing facilities, we are one of the largest producers of footwear in India. High-tech modern equipments and machines especially procured from specialized venders across the world, are used to manufacture footwear at par with international standards and quality.

Ultimate in design, comfort, and fit-each Venus product is the manifestation of our high standards of workmanship and latest technology. Our products are sold widely not only in the domestic market but also in the fashion conscious international markets across the globe.

We have always sought to be a value driven organization and have emerged as the most preferred provider of value. As a brand, we are constantly evolving to keep pace with the changing trends, styles, beliefs, and aspirations of people while maintaining the sanctity of our customers money.

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2.2 Vision Headquartered in Rajasthan, Venus has a wide network of dealers has been created to extend our reach not only inside India, but also across the borders with the sole purpose of nurturing relationships with our valued customers and channel partners.

Our Success has its roots in our commitment to quality and excellence in all spheres of our activities

Our vision is:



To cross every barrier and bring cutting-edge technologies to our country.



To produce something unique and different not only to satisfy our devotional consumers, but also the successive generations.



To constantly upgrade the quality standards and increase productivity to fit to every income bracket and age segment.



To continually strive to offer best value to our customers, employees and vendors.



To continue the untiring quest for discovering new business avenues and converting them into successful enterprises.



Our strategy relies on growing, transforming, and building the business to ensure its future success.

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2.3 Cost Efficiency We firmly believe that no business venture is successful unless its clientele is satisfied. To achieve this end, we supply high quality products, while ensuring cost efficiency and timely deliveries, culminating in long terms associations

We wish to: 

Evolve with our customers’ needs.



Function in a transparent manner.



Respect our customer’s individuality.



Maintain confidentiality.



Encourage the spirit of entrepreneurship.

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2.4 Growth: Growth has always been a way of life for Venus. Competent management with over 25 years of experience in the same line of business, teamed with a well-defined organizational structure and experienced and qualified staff. Bring in a high degree of operational expertise and efficiency. Diverse product range comprising EVA footwear, canvas shoes, rubber slippers, and PVC moulded footwear for men.

Substantial Growth The company’s revenues have been increasing at a compound annual growth rate (CAGR) of about 5200 percent over the past three years (2007-05 to 2006-07).

Wide Geographical Reach The company’s products are sold in about 17 states, including, Rajasthan, Madhya Pradesh, and Maharashtra through 150 distributors.

High near term business certainty as reflected in 

Sales registered from April 1, 2010 January 31, 2011 amounting to Rs.42.69 crore.



Regular repeat orders due to long- standing relationships with distributors.

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2.5 Management Profile:

Name : Mr. Trilok Chand Dewan Designation : Managing Director Current Responsibilities : Production, financial, and human resource management Age : 48 Years Qualification : M.Com; CA (Inetermediate) Experience : Over 25 Years in the same line of business

Name : Mr. Raj Kumar Agarwal (Friend of Mr. Trilok Chand Dewan) Designation : Director Current Responsibilities : Marketing management Age : 49 years Qualification : B.Com; CA (Intermediate) Experience : Over 25 years in the same line of business

Name : Mr. Subhash Chand Banka (Friend of Mr. Trilok Chand Dewan) Designation : Director Current Responsibilities : Procurement management Age : 48 years Qualification : M.Com Experience : Over 25 years in the same line of business

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2.6 Products:For men:

Fortune1

Cooler

Windsor

Force10

Gliders000

Gliders11

For women:

Force 10

Gliders1000

Senorita

Tiptop

Tiptopp

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For kids:

Footfun

Force102

Gliders

Perfect33

Safety shoes:

Pro_fd1

proo_fd3

warrior

warrior.33

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2.7 Entry in export arena: Venus Footarts entered the export arena in the year 1997 and began exporting to the U.K. and other European countries. The product consisted mainly of canvas shoes and textile slippers.

Their capacity to produce canvas shoes for export is around 100,000 pairs a month. Our customers are extremely happy with our quality and timely delivery.

2.8 Research and Development: Venus Footarts has an extremely modern research and development section with a qualified head and is constantly in the process of upgrading its products.

We trying to develop new items as well as accessories as may be required for the betterment of the products from time to time and also satisfy customer demands – domestic and international.

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2.8.1 Quality and Growth: The organization believes in certain quality objectives which are as under:



To adopt and maintain the standard of the international quality management system ISO 9001-2000.



To provide satisfactory customer service through continual improvement of product quality.



100% on-time delivery.



10-15% increase in the present turnover.



To start a new plant of sheets and sports shoes, eva injection footwear.

2.9 Quality: Quality is at the heart of Venus brand promise. We view Quality holistically and as an integral part of our business management.

At Venus, quality isn’t merely a set of predetermined standards to be adhered to. It has many more dimensions: Quality of thought, Quality of action, Quality of people, and above all, Quality of processes. 15

Our key quality targets are: 

To be number one in Quality.



To be number one in product leadership through upgradation of existing products enabling global acceptance.



To be number one in customer satisfaction and hence consumer loyalty.



To be number one in operational excellence.

Continuous innovation, application of latest technologies and regular feed-back from our consumers has led to Quality-Improvement at all levels.

2.9.1 QUALITY POLICY:  We will satisfy our customers by supplying products as per requirements with timely delivery.  We will maintain continual improvement in all spheres of our activities. We will achieve this by implementing effective methods to improve quality and by inculcating quality culture in our company.

2.9.2 QUALITY OBJECTIVES:  To update the technologies and operating methods to maintain leadership in National / International market.  To maintain leadership in market by manufacturing new hi-tech product.  To motivate the employees and improve there skills by regular training programmes.  To implement appropriate environment and safety measures.

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2.10 VENUS’S VARIOUS DEPARTMENTS AND ITS FUNCTIONS:

C.E.O

C.G.M Departments H.R

Finance

Production

Purchase

Domestic

Marketing

Export

R&D

IT

Excise

Institutional Sales

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2.10.1 PURCHASE DEPARTMENT: Purchase department deals with production planning and raw material required for production. Purchase department also works according to the forecasting done by marketing department. Main functions of purchase department: 

Working according to production planning.



Fulfilling the requirement.



Providing guidance for purchase of material requirement.



Concerning with payments for purchase.

Purchase categories: 

Raw material.



Capital goods.



Laboratory equipments.



Mechanical instrumentation and Electric items.



Miscellaneous material.

The sources of purchase are, chemical weekly, existing customers, Internet searching new supplier, existing supplier etc.

2.10.2 MARKETING DEPARTMENT: Marketing department is responsible for establishing and maintaining the procedure for contract review and co-ordinates the activities. 

To understand the needs of the customers and communicate it to the concerned department.



To carry out the contract reviews and get it approved the commercial director.



To receive and record the customer‟s complaints and communicate them to all concerned department.



To organise the dispatch activities ass per dispatch schedule.



Department is concerned or responsible for the overall communication with customers.

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SERVICES: 

Credit pay facility depends upon customers requirements may be for the 90 days, 60 days, 30 days etc.



Transportation expenses added in the bills to the same extend.



365 days continuous service.



Exhibition for marketing.



Benefits-sales tax due to industry situated in D+ area.

2.10.3 PRODUCTION DEPARTMENT: Production department is a responsible for handling the production activity, function of production department are explain as below, To executive planned range of production. To implement and follow the rules essential for a purpose of safety. 

To control the production activity.



To implement safety equipollents as per need.



To control the performance of department.



To take correct actions on customers complaint, if any

2.10.4 QUALITY ASSURANCE DEPARTMENT: 

To perform inspection and testing of raw material intermediates in process materials and finished products in accordance with the quality plans and documented procedures.



To maintain inspection and test records up to date.



To ensure that calibration of inspection, measuring and testing equipments in Q.A.D. (Quality Assurance Department) is done as per the plan.



To process the customer complaint to take necessary corrective actions.



To report production department on the non-conformity in intermediate, in process and finished product.

2.10.5 STORES AND MATERIAL HANDLING 

To receive, store and issue spare parts and other material to the respective department.

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

To maintain all purchase and store related records.



Take care/full precautions for leak safety and spillage for raw material, finished products and storage tanks.



Manages the loading and unloading operation of raw material and finished products.



Carried out he calibration of weighing machine.

2.10.6 HUMAN RESOURCE DEPARTMENT 

To conduct and arrange training for employees as per training needs.



To evaluate training programmes.



To appraise the performance of employees.



To provide safety requirement as per need.



It responsible for all welfare activities.

2.10.7 MAINTAINANCE AND INSTRUMENT DEPARTMENT: 

To carry out breakdown maintenance and to put the equipment back in operation without affecting the product.



To prepare preventive maintenance plan and to make appropriate changes whenever necessary.



To co-ordinate with purchase department for the material required for the same. Calibration and control of inspection, measuring and test equipments.



Electric department activities are covered under instrument department.

2.10.8 EXPORT DEPARTMENT: 

Find out the potential customers through various sources.



Contact and negotiate with selected customers.



Preparation of various documents which are necessary for the export of product.



Find out the various govt. schemes for getting the incentives.

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2.10.9 FINANCE DEPARTMENT: This department keeps the record of the following things, 

Sales volume of production.



Raw material cost.



Combination after raw material.



Total cost of production.



Gross profit.



Interest

Function: 

To makes payments of vendors.



To verify the outstanding due of customers and to send outstanding reminders through marketing department.



To manage finance for the company as for the guidelines from the commercial director / executive director.



To make monthly reports.



To update of accounts.



To make cost analysis.

2.11 IMPLEMENTATION OF ERP: ERP—Enterprise Resource Planning: All the functions carried out at BAL are integrated by the implementation of the ERP system. The implementation of the ERP system is been started from the financial year 2009. Enterprise resource planning is a software technology that helps to integrate all the functions of the organization. ERP system helps in avoiding the duplication of work.For example, if the customer places an order with the marketing department and as the marketing manager accepts the order, the information of the same is been passed on to the production dept.( at the factory). And the production dept. will accordingly prepare the production schedule. The information of the production schedule will be passed on to the purchase dept. and accordingly the latter will plan for the purchase of raw material. Any purchase of raw material made is 21

noted by the finance dept. and accordingly the payments are released.The staff at BAL is undergoing training for the operation of the ERP system.

Introduction to the Study Financial Ratio Analysis The Tool Kit:3.1 Ration Analysis: Ration Analysis is the process of determining and interpreting numerical relationship based on financial statement. It is defined as the systematic use of ratio to interpret the financial statement so that the strength and weakness of a firm as well as its historical performance and current financial conditions can be determined.

A ratio is a statically yard stick that provides a measure of the relationship between variables and figures. The relationship between variables or figures can be expressed in fractions. For Ex. Quotient of current assets by current Liabilities.

3.2 Objectives of Ratio Analysis: The main objective of Ration Analysis technique is to reveal the relationship in more meaningful way so as to enable us to draw conclusion from them. The ration analysis thus as a quantitative tool helps the Analyst to draw answers to questions such as Are the Net Profits Adequate Are the assets being use efficiently is the firm solvent Can the firm meet its current obligation and so on. Thus the Ratio Analysis help the Owner or Investors: For estimating earning capacity. Creditors: Concerned primarily with liquidity and ability to pay interest and redeem loan within specified period. Financial Executive: Interested in evaluating analytical tool that will measure costs efficiency ,liquidity and profitability, with a view to making intelligent decisions.

Basis of comparison ;Ratio are relative figures reflecting the relationship between variables. This enables the analysis to draw conclusion regarding financial operations

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The use of ratio as a tool of financial analysis involves their comparison, for a single ratio, like absolute figures, fails to reveal the true position. For ex, P /E ratio (price /earning ratio for a particular scrip) should be compared over a period of time to get a true picture of company performance.

Thus comparisons with related facts is the basis of ratio analysis s In ratio analysis, four types of comparisons are involved. 

1 Trend Ratio



Inter firm comparisons



Comparisons of items within a single years financial statement of a firm.



Comparisons with standard or plans

Trend ratios :Comparison of firm over time i.e. present ratios are compared with past ratios. Trend ratios indicate the direction of change in performance improvement deterioration or consistency over the years.

Inter firm comparisons :Comparisons of the ratios of a firm with those of other in the same line of business or with the industry reflects its performances in relations to its competitor. The other type of comparisons may relate to comparisons of items with in a single year financial statement of a firm and comparisons with standard or plans.

Meaning of Ratio:Ratios are relationships expressed in mathematical terms between figures which areconnected with each other in some manner. Obviously, no purpose will be served by comparing two sets of figures which are not at all connected with each other. Moreover, absolute figures are also unfit for comparison.

Ratio can be expressed in two ways: (1). Times: - When one value is divided by another, the unit used to express the quotient is termed as “Times”. For example, if out of 100 students in a class, 80 are present, the attendance ratio can be expressed as follows:

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= 80 / 100 = .8 Times (2). Percentage: - If the quotient obtained is multiplied by 100, the unit of expression is termed as “Percentage”. For instance, in the above example, the attendance ratio as a percentage of the total number of students is as follows: = .8 X 100 = 80% Accounting ratio are, therefore mathematical relationships expressed between inter-connected accounting figures.

Following are the objectives of ratio analysis technique: 

A financial ratio is a relationship between two financial variables. It helps to ascertain the financial condition of a firm.



In ratio analysis, the liquidity ratio measures the firm’s ability to meet

current

obligations and is calculated by establishing relationships between current assets and current liabilities. 

The profitability ratio measure the overall performance of the firm by determining the effectiveness of the firm in generating profit and are calculated by establishing relationship between profit figures on the one hand and sales and assets on the other.



The main objective of using this technique to judge the performance of the business. Ratio throws light on

the profitability of the business, solvency position of the

business, liquidity of the business etc. 

Comparisons of ratios of a business enterprise either with ratios of the same concern For past periods or with ratio of the concern for same period or both, reveals the weakness of the business and

point of its strengths. Points of weakness are further

investigated and corrective action is taken. Thus, ratios are useful and perhaps the indispensable part of financial analysis. They provide the analyst of underlying conditions.

Ratio analysis is relevant in assessing the performance of a firm in respect of the following aspects: 

Liquidity position



Long term solvency



Operating efficiency



Overall profitability 24



Inter firm comparison

We can use ratio analysis to try to tell us whether the business 

is profitable



has enough money to pay its bills



could be paying its employees higher wages



is paying its share of tax



is using its assets efficiently



has a gearing problem



is a candidate for being bought by another company or investor

3.3 Importance of Ratio Analysis:As a tool of financial management, ratios are of crucial significance. The importance of ratio analysis lies in the fact that it presents facts on a comparative basis and enables the drawing of inferences regarding the performance of a firm. Ratio analysis is relevant in assessing the performance of a firm in respect of the following aspects:

Liquidity Position:With the help of ratio analysis conclusions can be drawn regarding the liquidity position of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligations when they become due. A firm can be said to have the ability to meet its short-term liabilities if it has sufficient liquid funds to pay the interest on its short-maturing debt usually within a year as well as to repay the principal. This ability is reflected in the liquidity ratios of a firm. The liquidity ratios are particularly useful in credit analysis by banks and other suppliers of short-term loans.

Long-term Solvency:Ratio analysis is equally useful for assessing the long-term financial viability of a firm. This aspect of the financial position of a borrower is of concern to the long-term creditors, security analyst and the present and potential owners of a business. The long-term solvency is measured by the leverage or capital structure and profitability ratios which focus on earning power and operating efficiency. Ratio analysis reveals the strengths and weaknesses of a firm in this respect. The leverage ratios for instance will indicate whether a firm has a reasonable proportion of various sources of finance or if it is heavily loaded with debt in which case its

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solvency is exposed to serious strain. Similarly, the various profitability ratios would reveal whether or not the firm is able to offer adequate return to its owners consistent with the risk involved.

Operating Efficiency:Yet another dimension of the usefulness of the ratio analysis, relevant from the viewpoint of management, is that it throws light on the degree of efficiency in the management and utilization of its assets. The various activity ratios measure this kind of operational efficiency. In fact, the solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by the use of its assets-total as well as its components. Overall Profitability:Unlike the outside parties which are interested in one aspect of the financial position of a firm, the management is constantly concerned about the overall profitability of the enterprise. That is, they are concerned about the ability of the firm to meet its short-term as well as long-term obligations to its creditors, to ensure a reasonable return to its owners and secure optimum utilization of the assets of the firm. This is possible if an integrated view is taken and all the ratios are considered together.

Inter-firm Comparison:Ratio analysis not only throws light on the financial position of a firm but also serves as a stepping stone to remedial measures. This is made possible due to inter-firm comparison and comparison with industry averages. A single figure of a particular ratio is meaningless unless it is related to some standard or norm. One of the popular techniques is to compare the ratios of a firm with the industry average. It should be reasonably expected that the performance of a firm should be in broad conformity with that of the industry to which it belongs. An inter-firm comparison would demonstrate the firm’s position vis-a-vis its competitors. If the results are at variance either with the industry average or with those of the competitors, the firm can seek to identify the probable reasons and in that light, take remedial measures. Ratio analysis provides data for inter-firm comparison. Ratios highlight the factors associated with successful and unsuccessful firms. They also reveal strong firms and weak firms, over-valued and undervalued firms.

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Make Intra-firm Comparison Possible:Ratio analysis also makes possible comparison of the performance of the different division of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future.

Trend Analysis:Finally, ratio analysis enables a firm to take the time dimension into account. In otherwords, whether the financial position of affirm is improving or deteriorating over the years. This is made possible by the use of trend analysis. The significance of trend analysis of ratio lies in the fact that the analysts can know the direction of movement, that is, whether the movement is favourable or unfavourable. For example, the ratio may be low as compared to the norm but the trend may be upward. On the other hand, though the present level may be satisfactory but the trend may be a declining one.

Simplifies Financial Statements:Ratio analysis simplifies the comprehension of financial statements. Ratios tell the whole story of change in the financial condition of the business.

Help in Planning:Ratio analysis helps in planning and forecasting. Over a period of time a firm or industry develops certain norms that may indicate future success or failure. If relationship changes in firm’s data over different time periods, the ratios may provide clues on trends and future problems. Thus, “ratios can assist management it its basic function of forecasting, planning, coordination, control and communication”.

3.4 Limitation of the Ratio Analysis:Ratio analysis is a widely used tool of financial analysis. Yet, it suffers from various limitations. The operational implication of this is that while using ratios, the conclusions should not be taken on their face value. Some of the limitations which characterise ratio analysis are as follows:

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Difficulty in Comparison:One serious limitation of ratio analysis arises out of the difficulty associated with their comparability. One technique that is employed is inter-firm comparison. But such omparisons are vitiated by different procedures adopted by various firms. The differences may relate to: 

Differences in the basis of inventory valuation



Different depreciation methods



Estimated working life of assets, particularly of plant and equipments



Amortization of intangible assets like goodwill, patents and so on



Amortization of deferred revenue expenditure such as preliminary expenditure and discount on issue of shares



Capitalization of lease



Treatment of extraordinary items of income and expenditure and so on.

Secondly, apart from different accounting procedures, companies may have different accounting periods, implying differences in the composition of the assets particularly current assets. For these reasons, the ratios of two firms may not be strictly comparable. Another basis of comparison is the industry average. This presupposes the availability, on a comprehensive scale, of various ratios for each industry group over a period of time. If, however, as is likely, such information is not compiled and available, the utility of ratio analysis would be limited.

Impact of Inflation:The second major limitation of the ratio analysis as a tool of financial analysis is associated with price level changes. This, in fact, is a weakness of the traditional financial statements which are based on historical costs. And implication of the is feature of the financial statements as regards ratio analysis is that assets acquired at different periods are, in effect, shown at different prices in the balance sheet, as they are not adjusted for changes in the price level. As a result, ratio analysis will not yield strictly comparable and therefore dependable results. To illustrate, there are two firms which have identical rates of returns on investments, say 15 per cent. But one of these had acquired its fixed assets when prices were relatively low, while the other one had purchased them when prices were high. As a result the book value of the fixed assets of the former type of firm would be lower, while that of the latter higher. From the

28

point of view of profitability, the return on the investment of the firm with a lower book value would be over-stated. Obviously, identical rates of returns on investment are not indicative of equal profitability of the two firms. This is a limitation of ratios. Conceptual Diversity:Yet another factor which influences the usefulness of ratios is that there is difference of opinion regarding the various concepts used to compute the ratios. There is always room for diversity of opinion as to what constitutes shareholders’ equity, debt, assets, and profit and so on. Different firms may use these terms in different senses or the same firm may use them to mean different things at different times. Reliance on a single ratio for a particular purpose may not be a conclusive indicator. For instance, the current ratio alone is not an adequate measure of short-term financial strength; it should be supplemented by the acid-test ratio, debtor turnover ratio and inventory turnover ratio to have a real insight into the liquidity aspect.

3.5 Limitation of Financial Statements:Ratios are based only on the information which has been recorded in the financial statements. Financial statements suffer from a number of limitations, the ratios derived there from, therefore, are also subject to those limitations.

For example, nonfinancial changes through important for the business are not revealed by the financial statements. If the management of the company changes, it may have ultimately adverse effects on the future profitability of the company but this cannot be judged by having a glance at the financial statements of the company. Similarly, the management has a choice about the accounting policies. Different accounting policies may be adopted by management of different

companies

regarding

valuation

of

inventories,

depreciation,

research

and

development expenditure and treatment of deferred revenue expenditure, etc.

The comparison of one firm with another on the basis of ratio analysis without taking into account the fact of ompanies having different accounting policies, will be misleading and meaningless. Moreover, the management of the firm itself may change its accounting policies form one period to another.

It is, therefore, absolutely necessary that financial statements are they subjected to close scrutiny before an analysis attempted on the basis of accounting ratio. The financial analyst

29

must carefully examine the financial statements and make necessary adjustments in the financial statements on the basis of disclosure made regarding the accounting policies before undertaking financial analysis.

The growing realization among accountants all over the world, that the accounting policies should be standardized, has resulted in the establishment of International Accounting Standards Committee which has issued a number of International Accounting Standards.

In our country, the Institute of Chartered Accountants of India has established Accounting Standards Board for formulation of requisite accounting standards. The accounting Standards Board had already issued nineteen standards including AS-1: Disclosure of accounting Policies. The standard AS-1 has been made mandatory in respect of accounting periods beginning on or after 1.4.1991. It is hoped that in the years to come, with the progressive standardization of accounting policies, this problem will be solved to a great extent.

Ratio alone are not adequate:Ratios are only indicators; they cannot be taken as final regarding good or bad financial position of the business. Other things have also to be seen. For example, a high current ratio does not necessarily mean that the concern has a good liquid position in case current assets mostly comprise outdated stocks. It has been correctly observed, “Ratio must be used for what they are – financial fools. Too often they are looked upon as ends in themselves rather than as a means to an end. The value of a ratio should not be regarded as good or bad inter se. It may be an indication that a firm is weak or strong in a particular area, but it must never be taken as proof”. Ratios may be linked to railroads. They tell the analyst, “Stop, look, and listen”.

Window Dressing:The term window dressing means manipulation of accounts in a way so as to conceal vital facts and present the financial statement in a way to show a better position that what is actually is. On account of such a situation, presence of a particular ratio may not be a definite indicator of good or bad management. For example, a high stock turnover ratio is generally 30

considered to be an indication of operational efficiency of the business. But this might have been achieved by unwarranted price reductions or failure to maintain proper stock of goods.

Similarly, the current ratio may be improved just before the Balance Sheet date by postponing replenishment of inventory. For example, if a company has got current assets of Rs. 4000 and current liabilities of Rs. 2000, the current ratio is 2, which is quite satisfactory. In case the company purchases goods of Rs. 2000 on credit, the current assets would go up to Rs. 6000 and current liabilities to Rs. 4000.

Thus, reducing the current ratio to 1.5. The company may, therefore, postpone the purchases for the early next year so that its current ratio continues to remain at 2 on the Balance Sheet date. Similarly, in order to improve the current ratio, the company may pay off certain pressing current liabilities before the Balance Sheet date. For example, if in the above case the company pays current liabilities of Rs. 1000, the current liabilities would stand reduced to Rs. 1000, current assets would stand reduced to Rs. 3000 but the current ratio would go up to 3.

No Fixed Standards:No fixed standards can be laid down for ideal ratios. For example, current ratio is generally considered to be ideal if current assets are twice the current liabilities. However, in case of those concerns which have adequate arrangements with their bankers for providing funds when they require, it may be perfectly ideal if current assets are equal to slightly more than current liabilities. It is, therefore, necessary to avoid many rules of thumb. Financial analysis is an individual matter and value for a ratio which is perfectly acceptable for one company or one industry may not be at all acceptable in case of another.

3.6 Ratios are a Composite of Many Figures:Ratios are a composite of many different figures. Some cover a time period, others are at an instant of time while still others are only averages. It has been said that, a man who has his head in the oven and his feet in the ice-box is on the average, comfortable”! Many of the figures used in the ratio analysis are no more meaningful than the average temperature of the room in which this man sits. A balance sheet figure shows the balance of the account at one moment of one day. It certainly may not be representative of typical balance during the year.

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It may, therefore, be concluded that ratio analysis, if done mechanically, is not only misleading but also dangerous.

It is indeed a double edged sword which requires a great deal of understanding and sensitivity of the management process rather than mechanical financial skill. It has rightly been observed: “The ratio analysis is an aid to management in taking correct decisions, but as a mechanical substitute for thinking and judgment, it is worse than useless. The ratio if discriminately calculated and wisely interpreted can be a useful tool of financial analysis”. Finally, ratios are only a post-mortem analysis of what has happened between two balance sheet dates.

For one thing, the position in the interim period is not revealed by ratio analysis. Moreover, they give no clue about the future. In brief, ratio analysis suffers from some serious limitations. The analyst should not be carried away by its oversimplified nature, easy computation with a high degree of precision. The reliability and significance attached to ratios will largely depend upon the quality of data on which they are based. They are as good as the data itself. Nevertheless, they are an important tool of financial analysis.

3.7 Financial Ratio Analysis Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements. The level and historical trends of these ratios can be used to make inferences about a company's financial condition, its operations and attractiveness as an investment.

Financial ratios are calculated from one or more pieces of information from a company's financial statements. For example, the "gross margin" is the gross profit from operations divided by the total sales or revenues of a company, expressed in percentage terms. In isolation, a financial ratio is a useless piece of information. In context, however, a financial ratio can give a financial analyst an excellent picture of a company's situation and the trends that are developing.

A ratio gains utility by comparison to other data and standards. Taking our example, a gross profit margin for a company of 25% is meaningless by itself. If we know that this company's

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competitors have profit margins of 10%, we know that it is more profitable than its industry peers which are quite favourable.

If we also know that the historical trend is upwards, for example has been increasing steadily for the last few years, this would also be a favourable sign that management is implementing effective business policies and strategies.

Financial ratio analysis groups the ratios into categories which tell us about different facets of a company's finances and operations. An overview of some of the categories of ratios is given below. 

Leverage Ratios which show the extent that debt is used in a company's capital structure.



Liquidity Ratios which give a picture of a company's short term financial situation or solvency.



Operational Ratios which use turnover measures to show how efficient a company is in its operations and use of assets.



Profitability Ratios which use margin analysis and show the return on sales and capital employed.



Solvency Ratios which give a picture of a company's ability to generate cash flow and pay it financial obligations.

3.8 Types of Ratios:3.8.1 Liquidity Ratios 

Liquidity refers to the ability of a firm to meet its short-term financial obligations when and as they fall due.



The main concern of liquidity ratio is to measure the ability of the firms to meet their short-term maturing obligations. Failure to do this will result in the total failure of the business, as it would be forced into liquidation.

Current Ratio The Current Ratio expresses the relationship between the firm’s current assets and its current liabilities. Current assets normally include cash, marketable securities, accounts receivable and inventories. Current liabilities consist of accounts payable, short term notes payable, short-

33

term loans, current maturities of long term debt, accrued income taxes and other accrued expenses (wages).

Current Ratio = Current Assets / Current Liabilities

The rule of thumb says that the current ratio should be at least 2 that are the current assets should meet current liabilities at least twice.

Quick Ratio Measures assets that are quickly converted into cash and they are compared with current liabilities. This ratio realizes that some of current assets are not easily convertible to cash e.g. inventories. The quick ratio, also referred to as acid test ratio, examines the ability of the business to cover its short-term obligations from its “quick” assets only (i.e. it ignores stock). The quick ratio is calculated as follows

Quick Ratio / Acid-test Ratio = Quick Assets / Current Liabilities

Clearly this ratio will be lower than the current ratio, but the difference between the two (the gap) will indicate the extent to which current assets consist of stock.

3.8.2 Turnover Ratio The liquidity ratios discussed so far relate to the liquidity of a firm as a whole. Another way of examining the liquidity is to determine how quickly certain current assets are converted into cash. The ratios to measure these are referred to as turnover ratios. In fact, liquidity ratios are not independent of activity ratios. Poor debtor or inventory turnover ratios limit the usefulness of the current and acid-test ratios. Both obsolete / unsalable inventory and uncollectible debtors are unlikely to be sources of cash. Therefore, the liquidity ratios should be examined in conjunction with relevant turnover ratios affecting liquidity.

Inventory Turnover Ratio It is computed by dividing the cost of goods sold by the average inventory. Thus, Inventory Turnover Ratio = Cost of Goods sold / Average Inventory This ratio measures the stock in

34

relation to turnover in order to determine how often the stock turns over in the business. It indicates the efficiency of the firm in selling its product. It is calculated by dividing the cost of goods sold by the average inventory. The ratio shows a relatively high stock turnover which would seem to suggest that the business deals in fast moving consumer goods. 

The trend shows a marginal increase in days which indicates a slowdown of stock turnover.



The high stock turnover ratio would also tend to indicate that there was little chance of the firm holding damaged or obsolete stock.

Debtors Turnover Ratio It is determined by dividing the net credit sales by average debtors outstanding during the year. Thus,

Debtors turnover ratio = Net credit sales / Average debtors

Net credit sales consist of gross credit sales minus returns, if any, from customers. Average debtors are the simple average of debtors including bills receivable at the beginning and at the end of the year. The analysis of the debtors’ turnover ratio supplements the information regarding the liquidity of one item of current assets of the firm. The ratio measures how rapidly receivables are collected. A high ratio is indicative of shorter time-lag between credit sales and cash collection.

Creditors Turnover Ratio It is a ratio between net credit purchases and the average amount of creditors outstanding during the year. It is calculated as follows: Creditors Turnover Ratio = Net credit purchases / Average Creditors A low turnover ratio reflects liberal credit terms granted by suppliers, while a high ratio shows that accounts are to be settled rapidly. The creditor’s turnover ratio is an important tool of analysis as a firm can reduce its requirement of current assets by relying on supplier’s credit. The extent to which trade creditors are willing to wait for payment can be approximated by the creditors’ turnover ratio.

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3.8.3 Financial Leverage Ratios 

The ratios indicate the degree to which the activities of a firm are supported by creditors’ funds as opposed to owners.



The relationship of owner’s equity to borrowed funds is an important indicator of financial strength.



The debt requires fixed interest payments and repayment of the loan and legal action can be taken if any amounts due are not paid at the appointed time. A relatively high proportion of funds contributed by the owners indicate a cushion (surplus) which shields creditors against possible losses from default in payment.



The greater the proportion of equity funds, the greater the degree of financial strength. Financial leverage will be to the advantage of the ordinary shareholders as long as the rate of earnings on capital employed is greater than the rate payable on borrowed funds.

Debt to Equity ratio This ratio indicates the extent to which debt is covered by shareholders’ funds. It reflects the relative position of the equity holders and the lenders and indicates the company’s policy on the mix of capital funds. The debt to equity ratio is calculated as follows: Debt–Equity Ratio = Long-term Debt / Shareholders’ Equity Debt to Total Capital Ratio The relationship between creditors’ funds and owner’s capital can also be expressed in terms of another leverage ratio. This is the debt to total capital ratio. Here, the outside liabilities are related to the total capitalization of the firm and not merely to the shareholder’s equity. Essentially, this type of capital structure ratio is a variant of the D/E, ratio described above. In can be calculated as follows:

Debt to Total Capital Ratio = Total Debt / Total Assets

3.8.4 Profitability Ratios Profitability is the ability of a business to earn profit over a period of time. Although the profit figure is the starting point for any calculation of cash flow, as already pointed out, profitable companies can still fail for a lack of cash.

36



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 a company should be aimed at maximising profits, irrespective of social consequences.

The ratios examined previously have tendered to measure management efficiency and risk. Profitability is a result of a larger number of policies and decisions. The profitability ratios show the combined effects of liquidity, asset management (activity) and debt management (gearing) on operating results. The overall measure of success of a business is theprofitability which results from the effective use of its resources.

Gross Profit Margin 

Normally the gross profit has to rise proportionately with sales.



It can also be useful to compare the gross profit margin across similar businesses although there will often be good reasons for any disparity.



This indicates that the rate in increase in cost of goods sold are less than rate of increase in sales, hence the increased efficiency.

Gross Profit Margin = Gross Profit / Sales X 100

Net Profit Margin This is a widely used measure of performance and is comparable across companies in similar industries. The fact that a business works on a very low margin need not cause alarm because there are some sectors in the industry that work on a basis of high turnover and low margins, for examples supermarkets and motorcar dealers. What is more important in any trend is the margin and whether it compares well with similar businesses. However, to know how well the firm is performing one has to compare this ratio with the industry average or a firm dealing in a similar business.

Net Profit Margin = Net Profit / Sales X 100

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Earnings per Share (EPS) Whatever income remains in the business after all prior claims, other than owners claims (i.e. ordinary dividends) have been paid, will belong to the ordinary shareholders who can then make a decision as to how much of this income they wish to remove from the business in the form of a dividend, and how much they wish to retain in the business. The shareholders are particularly interested in knowing how much has been earned during the financial year on each of the shares held by them. For this reason, earnings per share figure must be calculated. Clearly then, the earning per share calculation will be: EPS = Net Profit available to Equity – holders / Number of ordinary shares outstanding

Dividend Pay-out Ratio D/P ratio is also known as pay-out ratio. It measures the relationship between the earnings belonging to the ordinary shareholders and the dividend paid to them. In other words, the D/Pratio shows what percentage share of the net profits after taxes and preference dividend is paid out as dividend to the equity-holders. It can be calculated by dividing the total dividend paid to the owners by the total profits / earnings available to them. Alternatively, it can be found out by dividing the DPS by the EPS. Thus,

D/P Ratio = Dividend per ordinary Share (DPS) / Earnings per share (EPS) X 100

3.8.5 Activity Ratios If a business does not use its assets effectively, investors in the business would rather take their money and place it somewhere else. In order for the assets to be used effectively, the business needs a high turnover. Unless the business continues to generate high turnover, assets will be idle as it is impossible to buy and sell fixed assets continuously as turnover changes. Activity ratios are therefore used to assess how active various assets are in the business.

Total Assets Turnover Asset turnover is the relationship between sales and assets 

The firm should manage its assets efficiently to maximise sales.

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

The total asset turnover indicates the efficiency with which the firm uses all its assets to generate sales.



It is calculated by dividing the firm’s sales by its total assets.



Generally, the higher the firm’s total asset turnover, the more efficiently its assets have been utilized.

Total Assets Turnover Ratio = Cost of Goods Sold / Average Total Assets

Fixed Asset Turnover The fixed assets turnover ratio measures the efficiency with which the firm has been using its fixed assets to generate sales. 

Generally, high fixed assets turnovers are preferred since they indicate a better efficiency in fixed assets utilization.



It appears that the activity of the business is relatively constant, with a slight upward trend.



The ratio also confirms that the business places a much greater reliance on working capital than it does on the fixed assets as the fixed assets (2001 and 2002) turned over more quickly than stock turnover.

Fixed Assets Turnover = Cost of Goods Sold / Average Fixed Assets

3.9 Meaning of financial statement: A financial statement is a systematically and logically arranged financial data. In short, inancial statement i.e. 1. Balance sheet. 2. Profit and Loss Account. Balance sheet contains information about the resources and obligation of a business entity and its owners interest in business at a particular point of time. It reveals financial position of a firm on particular date. The Profit and Loss Account reflects earning capacity and potential of the firm. The income statement is scoreboard of firms performance during a particular period of time.

39

Definitions of Ratio Analysis: 1) A Ratio is defined as: “The indicated quotient of the mathematical expression and the relationship between two or more things.” In financial analysis, a ratio is used as an index of yardstick for evaluating position and performance of a firm.

2) A Ratio is defined, as: “Ratio analysis is a process of analysis of the ratios in such a manner, so that management can take actions on of Standard performances.”

Importance of Ratio Analysis: The importance of the ratio analysis lines in the fact that it presents facts on a comparative basis and enables the drawing of inferences regarding the performance of a firm. Ratio analysis is relevant in assessing the performance of a firm in respect of the following

1. Liquidity Position: With the help of the ratio analysis conclusions can be drawn regarding the liquidity position of affirm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligations when they become due. The liquidity ratios are particularly in credit analysis banks and other suppliers of short-loans. 2. Long- term solvency: Ratio analysis is equally useful for assessing the long-term solvency is measured by the leverage capital structure and profitability ratio, which focus on earning power and operating efficiency. Ratio analysis reveals the strength and weakness of a firm in this respect.

3. Operating Efficiency:Ratio analysis throws light on the degree of efficiency in the management and utilized of assets. Various activity ratios measure this kind of operational efficiency. The solvency of a firm depends upon the sales revenues generated by the use of its assets total as well as its components. 40

4. Over all Profitability: The management constantly concerned about the overall profitability of the enterprise that is they are concern about the ability of firm to meet its short term as well as longterm obligations to its creditors to ensure a reasonable return to its owner and secure optimum utilization of the asset of the firm.

5. Inter firm Comparison: Ratio analysis is one of the popular technique uses to compare ratio of firm with the industrial average. A single figure related to some standards an inter firm comparison. Would demonstrate the relative position vis-à-vis competitors. If any variance is found the firm can identify the probable results and in that light, it takes remedial measures.

6. Trend Analysis:Ratio analysis enables a firm to take the time dimension in to account that is it reveals whether the financial position of affirm is made possible by the use of trend analysis. The firm‟s movement may be favorable.

3.10 Importance 3.10.1 Importance of financial statement analysis in an organization. In our money-oriented economy, Finance may be defined as provision of money at the time it is needed. To every one responsible for provision of funds, it is problem of securing importance to so adjust his resources as to provide for a regular outflow of expenditure in face of an irregular inflow of income. 

The profit and loss account (Income Statement).



The balance sheet

In companies, these are the two statements that have been prescribed and there contents have been also been laid down by law in most countries including India. There has been increasing emphasis on:

Giving information to the shareholder in such a manner as to enable them to grasp it easily.

41



(b) Giving much more information e.g. funds flow statement, again with a view to facilitating easy understanding and to place a year results in perspective through comparison with post year results.



(c) The directors report being quite comprehensive to cover the factors that have been operating and are likely to operate in the near future as regards to the various functions of production, marketing, finance, labour, government policies, environment in general.

Financial statements are being made use of increasingly by parties like Bank, Governments, Institutions, and Financial Analysis etc. The statement should be sufficiently informative so as to serve as wide a curia as possible.

The financial statement is prepared by accounts based on the activities that take place in production and non-production wings in a factory. The accounts convert activities in monetary terms to the help know the position.

3.10.2 Uses of Financial Statement Analysis. The main uses of accounting statements for: Users

Use

Executives : -

To formulate policies.

Bankers : -

To establish basis for Granting Loans.

Institutions \ Auditors : -

To extend Credit facility to business.

Investors : -

To assess the prospects of the business and to know

whether they can get a good return on their investment. Accountants : -

To study the statement for comparative purposes.

Government Agencies: -

To study from an angle of tax collection duty levee etc.

3.10.3 Principles of Accounting. Accounting is the language of business. A business communicates with the outside world. Interested in its affairs through the medium of financial statements. The accounts all over the world have developed certain rules, principals. Procedures, conventions that are generally referred to as generally referred to as Generally. 42

Accepted Accounting Principles A: - accounting concepts. B: - accounting conventions.

3.10.4 Accounting concepts Accounting concepts may be considered as basic assumptions or conditions on which the science of accounting is based. The following concepts have received general support.

Business Entity Concept; For accounting purpose the business firm is regarded as a separate entity. Accounts are maintained for the entity as distinct from the person who is connected with it. The accounting records transactions as they effect this entity and regards owners creditors, suppliers, employees, customers and government as parties transacting with this entity.

Money Measurement Concept; Accounting is concerned only with those facts, which are expressible in monetary terms. The use of monetary yardstick provides a means by which heterogeneous elements such as land. Plant & equipment, Inventories. Securities and goodwill may be expressed in numbers, which can be meaningful compared.

Going concern concept: Accounting is generally based on a premise that the business entity will remain a going concern for an indefinitely long period and not a concern, which is going to be wound up in near future. This has an important implication for future evaluation of assets and liabilities. Assets are normally carried in the books at their cast, less depreciation reflects better value of an assets to a business which will remain a going concern. Liabilities are carried at value the reflect what business owes and not at values which the creditor would settle for in case of liquidation.

Cost Concept: This principle mis related to stable monetary value principle and suffers from its weaknesses Assets acquired by a business are generally recorded at there cost, the price paid up for

43

acquisition. This cost is used for all subsequent accounting purpose for e.g. depreciation is charged on original cost.

Dual Aspect Concept: This may be regarded as the most distinctive and fundamental concept of accounting. It provides the conceptual basis for accounting mechanics and there is a universal agreement among accounts over this concept.

Accounting Period Concept: In order to know the results of business operations and financial positions of the firm periodically, time is divided into segments referred to as accounting periods. income is measured for these periods and the financial position is assessed at the end of an accounting.

Realization Concept: According to the realization concept, revenue is deemed to be earned only when it is realized and we normally consider revenue as relished when goods are shipped or delivered to the costomer5 and not when a sales order is received or a contract is signed or goods manufactured.

3.10.5 Accounting Conventions Important conventions in accounting practice are :

Consistency



Full Disclosure & Relevance.



Objectivity.



Reliability

The Balance sheet The Balance sheet shows the financial status of a business. The registered companies are to follow part 1 of schedule VI of companies \ act 1956 for recording Assets and Liabilities in the Balance Sheet.

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Format of Balance Sheet as prescribed by companies Act :-

Liabilities

Assets

Share Capital

Fixed Assets

Reserve &Surplus

Investments

Secured loans

Current Assets, Loan

Unsecured

Loans Advances

Current Liabilities & provision

Misc. Expenditures & Losses

Liabilities: Liabilities defined very broadly represent what the business entity owes to other. Share capital: There are two type of share capital: 

Equity Capital



Preference Capital

Equity Capital represents the contribution of the owners of the firm. Preference capital represents the contribution of preference shareholders and the dividend rate payable on it is fixed.

Reserve & Surplus: Reserve & Surplus are profits, which have been retained by the firm reserves, are two types, revenue Reserve and Capital Reserve. Revenue Reserve represents accumulated retained earnings from the profits of normal business operations. Capital reserve arises out of gains, which are not related to normal business operations.

Surplus is the balance in the profit and loss account, which has not been appropriated to any particular reserve account. Reserve and surplus along with equity capital represent owner s equity.

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Secured Loans: These denote borrowings of the firm against which specific securities have been provided. The important components of secured loans are debentures, loans from financial institutions, and loans from commercial banks.

Unsecured Loans: These are borrowing of the firm against which no specific security has been provided. The major components of unsecured loans are fixed deposits, loans and advances from promoters, Inter-Corporate borrowings and unsecured loans from Banks.

Current Liabilities and Provision: Current Liabilities and Provision as per the classification under the companies Act, Consists of the Following amounts due to the suppliers of goods and services brought on credit, Advance payments received, accrued expenses. Unclaimed dividends, Provisions for taxed, Dividends, Gratuity, Pension etc.

Assets: Assets have been acquired at a specific monetary cost by the firm for the conduct of its operation.

Fixed Assets: These assets have two characteristics. They are acquired for use over relatively long period for carrying on the operations of the firm and they are ordinarily not meant for resale. Examples for fixed assets are land, building, plant, Machinery, patent & Copyrights.

Investments: These are financial securities owned by the firm. Some investments represent long-term commitments of funds. Usually those are the equity shares of other firms held for income and control purpose. Other investments are short term in nature and are rightly classified under current assets for managerial purpose.

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Current Assets, Loans and Advances: This category consists of cash and other resources, which get converted into cash during the operating cycle of the firm current assets, are held for a short period of time as against fixed assets, which are held for relatively longer periods. The major component of current assets is: cash, debtors, inventories, loans and advances and pre-paid expenses.

Miscellaneous expenditure and losses: The consist of two items miscellaneous expenditure and losses miscellaneous expenditure represent outlays such as preliminary expenses and pre-operative expenses, which outlays such as preliminary expenses which have not written off loss is shown on the right hand side (Assets side) of the balance sheet.

RESEARHC METHODOLOGY The focus of this chapter is on the methodology used for the collection of data for research. Data constitutes the subject matter of the analyst. The primary sources of the collection of sources of the collection of data are observations, Interviews and the questionnaire technique. The secondary sources are collections of data are from the printed and annually published materials. A questionnaire form is prepared to secure responses to certain questions. It is device for securing answers to questions by using a form. The questionnaire technique is economical and time saving and is an important tool of collecting information.

Tools and Techniques – In this industry project work the ratio analysis technique has been used. In this project ratio analysis technique is used for interpretation and evaluation of financial statements.

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4.1 Title of the Study:

“ Ratio Analysis “

4.2 Duration of the Project:

45 Days

4.3 Objectives of the Study 

To understand the importance and use of different types of ratios in business.



To assess the liquidity of the company.



To evaluate the financial condition and profitability of the company.



To know the different ratios of the company.



To compare the past performance of the company systematically.



To identify the financial strengths and weakness of the company.

To find out the utility of financial ratios in credit analysis and determining the financial capability of the firm.

4.4 Type of Research:

Research:Research methodology is defined as a highly intellectual human activity used in the investigation of nature and matter and deals specifically with the manner in which the data is collected, analyzed and interpreted.

Research Design:Research design is a blueprint for any kind of research. It provides direction to the researcher for further carrying on the research in the Population. Research design provides the glue that holds the research project together. A design is used to structure the research, to show how all of the major parts of the research project- the samples or groups, measures, treatments or programs, and methods of assignment- work together to try to address the central research questions. A research design lays the foundation for conducting the project. A good research 48

will ensure that the research project is conducted effectively and efficiently. Research design involves following components or tasks:

Define the information needed



Design the exploratory, descriptive and causal phases of research.



Specify the measurement and scaling procedure.



Construct a questionnaire or an appropriate form for data collection



Specify the sampling process and sample size



Develop a plan for data analysis

Types of Research Designs:1. Exploratory Design. 2. Descriptive Design. 3. Causal Design.

Descriptive Design:Descriptive research also known as statistical research, describes data and characteristics about the population or phenomenon being studied. It basically deals with everything that can be counted and studied. Descriptive research is preplanned and structured. A descriptive design requires clear specification of the WHO, WHAT, WHEN, WHERE, WHY and WAY (the six Ws) of the research. The objective is to know the percentage (%) of phenomenon in population.  All perceptual studies are come under Descriptive study.  Where comparisons of two variables are done that is descriptive research.  In this design the variables are being predicted.

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4.5 Sample Size and method of selecting sample: Sample:A sample is a sub – group of the elements of the population selected for participation in the study. Sampling plan:Sampling is one of the most important aspects of Research design. It involves several basic questions like should sample be taken, the size of sample, the kind of sample, process to be followed etc. The objective of most marketing research projects is to get information about the parameters of population. Sampling unit:It is the basic unit containing the elements of the sample to be collected. In this report the unit is the INR.Here the sampling unit comprises of respondents as industries from all the states of north India. Sampling Technique:For conducting this research, researcher had used 

Convenience sampling

Convenience Sampling:It is a Non – probability sampling technique that attempts to obtain a sample of convenient elements. The selection of sampling units is left primarily to the researcher. It is an easy to measure and accessible. Universe:Universe comprises of the past five year’s Balance Sheet.. Population:It is the aggregate of all the elements that share some common characteristics and which comprise the universe for the purpose of marketing research problem. Population in this study

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is all the industries in North India. In this report, population is the data pertaining in the P&L A/c and Balance Sheet. Sampling Size:It refers to the number of elements to be included in the study and for conducting this research researcher have selected sample size of 100 respondents

Data Collection:There are two types of Data Collection methods which are as following:1. Primary Research 2. Secondary Research. Primary Research Primary research (also called field research) involves the collection of data that does not already exist. This can be through numerous forms, including Questionnaires and telephone interviews amongst others. Secondary Research Secondary research (also called desk research) involves the summary, collation and/or synthesis of existing research rather than primary research, where data is collected from, for example, research subjects or experiments. In doing this research the both methods are being used:

Primary data is being collected by direct interview through Schedules.



Secondary data is being collected with the help of internet.

4.6 Scope of Study 

The report contains the company’s profile and data about the owners, senior executives, locations, subsidiaries, markets, products, and company history.



The SWOT-analysis provides information about the company’s strengths, weaknesses, opportunities, and possible threats against it.

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

The report outlines the main financial ratios pertaining to profitability, margin analysis, asset turnover, credit ratios, and company’s long-term solvency.



It also shows the company’s income statement and ratio trend-charts, with balance sheets.



Company’s financial ratios are directly compared with its past records.

4.7 Limitation of the Study 

Ratio analysis of particular company is limited to that company. There are lot of variation in inventory valuation and deprecation methods, estimated working life of assets etc. are varying as per past records.



Ratio analysis is affected by inflation.



It may lack complete and accurate financial information due to some confidential matters of the company.



Time given by the company to carry out research was limited.



The data provided by the company was not sufficient and accurate.

Data was kept confidential, so Researcher have to depend on the company’s balance sheet and profit and loss acount.

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Facts and Findings 

As Company’s current ratio is satisfactory so it should not further increase current assets in comparision to current liabilities.



As company’s fixed assets turnover ratio is continuously decreasing it means it has under utilization of available resources. So it can expand its activity level without any additional capital investment.



The absolute liquidity ratio was 0.15 in the year 2007-2008 and decreased to 0.10 in the year 2008 – 2009 and it does not increase further up to 2011-2012



Company utilized its resources efficiently having high inventory turnover ratio and operating with reduced cost.



It can reduce the need of working capital by availing credit period from suppliers.



Liquidity Ratio has increased 5.42 because the C.L has decreased. It shows that the liquidity position of the company is satisfactory..

Recently proportion of debt in comparision to equity capital is higher in Mar’09 which results in cash outflow in the form of interest.

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Ratio Analysis and Interpretation 1) Net Working Capital:Net working capital is the difference between current assets and current Liabilities. Years

Current Asset

Current Liabilities

NWC

2007-08

26352381.81

6122630.12

20229751.69

2008-09

30087971.00

6843164.00

23244807.00

2009-10

46858833.00

9979106.00

36879727.00

2010-11

44389218.00

12123368.00

32265850.00

2011-12

62495041.00

11527167.00

50967874.00

80000000

2007-2008

60000000

2008-2009

40000000 20000000 0 Current Current Assets Liabilites

2011-2012 2010-2011 2009-2010 2008-2009 2007-2008

2009-2010 2010-2011 2011-2012

Interpretation:- In The year 2007-08 the company has 20229751.69 N.W.C. In the year 2008-09 the N.W.C is 23244807.00 and in the year 2009-10 the company has 36879727.00.NW.C But in the year 2010-11 the company has 32265850.00 N.W.C but the N.W.C has decline drastically compared to the previous years, but in the year 2011-12 the company has 50967874.00 N.W.C that means the company in a favorable position & N.W.C has improved vary fast as compared to the previous years which show liquidity Position of Venus Footart Ltd has always more & sufficient working capital available to pay off its current liabilities.

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2. Current Ratio:Current ratio is a measure of firm’s short-term solvency. This ratio is also known as working capital Ratio. Current ratio is a measure of general liquidity and is most widely used to check the relationship of the current assets and current liability. The standard current ratio is 2:1. Current Ratio = Current Assets/Current Liabilities Years

Current Asset

Current Liabilities

Ratio

2007-08

26352381.81

6122630.12

4.304

2008-09

30087971.00

6843164.00

4.397

2009-10

46858833.00

9979106.00

4.696

2010-11

44389218.00

12123368.00

3.661

2011-12

62495041.00

11527167.00

5.422

80000000 70000000 60000000 50000000 40000000

current liabilities

30000000

current assets

20000000 10000000 0 2007-08

2008-09

2009-10

2010-11

2011-12

Interpretation:-The current ratio was 4.304 in the year 2007 – 2008 and the year 2008-2009 the current ratio was 4.397 and in the year 2009 -2010 the current ratio was 4.696 this show the current ratio has increase every year but in the year 2010-2011 the current ratio was decreased to 3.661.in the year 2011 – 2012 the current ratio has increases 5.422 .The current ratio is above the standard of 2: 1 ratio and hence it can be said that there is enough working capital in Venus Footart Ltd to meet its current liabilities.

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3. Absolute Liquidity Ratio:Absolute liquidity ratio is a ratio of cash in hand and cash at bank to current liabilities. The standard ratio is 0.5: 1. Absolute liquidity Ratio = Cash in hand + Cash at bank/ Current Liability Years

Cash in hand

Cash at bank

Current Liabilities

Absolute Liquidity Ratio

2007-08

322305.70

600000.00

6122630.12

0.15

2008-09

151478.00

600000.00

6843164.00

0.10

2009-10

125254.00

600000.00

9979106.00

0.07

2010-11

95663.00

600000.00

12123368.00

0.05

2011-12

64627.00

600000.00

11527167.00

0.05

2007-08

0.15

2008-09

0.1

2009-10

0.05

2010-11

0

2011-12

Absolute Liquid ratio

INTERPRETATION:- The absolute liquidity ratio was 0.15 in the year 2007-2008 and decreased to 0.10 in the year 2008 – 2009 and it does not increase further up to 20112012.But in the year 2010 -2011 and 2011-2012 it was same. The absolute liquidity ratio is below the standard of 0.5: 1 ratio. It shows that the liquidity position of the concern is unsatisfactory

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4. Liquidity Ratio or Liquid ratio:This ratio indicates very short term or immediate or very instant financial position. Quick Assets Liquidity Ratio = -----------------------Quick Liabilities Years

Current Assets

Current Liabilities

Liquidity Ratio

2007-08

26352381.81

6122630.12

4.30

2008-09

30087971.00

6843164.00

4.40

2009-10

46858833

9979106.00

4.70

2010-11

44389218.00

12123368.00

3.66

2011-12

62495041.00

11527167.00

5.42

6 5 4 3 2 1 0

2007-08 2011-12 2010-11 2009-10 2008-09 2007-08

2008-09 2009-10 2010-11 2011-12

Liquidity Ratio

INTERPRETATION:- The absolute liquidity ratio was 4.30 in the year 2007-2008 and increases to 4.40 in the year 2008 – 2009 and 4.70 in the year 2009-10, 3.66 in the year 20102011 it was decrease due to increase of labilities.But in the year 2011 -2012 the L.R has increased 5.42 because the C.L has decreased. The liquidity ratio is above the standard of 1: 1 ratio. It shows that the liquidity position of the company is satisfactory.

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5. Return on Current Assets:This ratio indicates the amount of current assets employed in the working capital of the assets employed in the working capital of the firm as to run the day to day operations of the firm which helps the firm for its easy flow of goods in the trading activity. Profit after Tax Return on Current Assets =

---------------------Current Asset

Year

Profit After Tax

Current Asset

Ratio

2007 – 2008

437894.00

26352381.81

0.016

2008 – 2009

423298.00

30087971.00

0.014

2009 – 2010

592576.00

46858833.00

0.012

2010 - 2011

843910.00

44389218.00

0.019

2011 - 2012

1039889.00

62495041.00

0.016

2011-12 2010-11 2009-10 2008-09

0.02 0.01

2007-08

0 Return on Current Assets

2007-08 2008-09 2009-10

2010-11 2011-12

INTERPRETATION:- The Returns on current assets was 0.016 in the year 2007-2008 and it decreased to 0.12 in the year 2009-2010. It further increased to 0.019 in the year 2010-2011 and further decreased 0.016 in the year 2011-2012 .It shows that profit will increase then asset turnover ratio will decline then C.A will increase but in the year 2010-2011 asset ratio was increased 0.19 because C.A has fall that year. Company has profit transferred to the reserve and surplus Account shown in balance sheet.

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6. Current Asset Ratio:This ratio measures sales per rupee of investment in current assets. This ratio measures the efficiency with which current assets are employed a high ratio indicates a high degree of efficiency is asset utilization and a low ratio reflects inefficient use of current assets. Net Sales Current Asset Ratio = ------------------------------Average Current Assets

Year

Sales

Average Current

Ratio

Asset 2007 – 2008

102199181.00

19967762.36

5.11 time

2008 – 2009

132858985.00

28220176.41

4.70 time

2009 – 2010

171671451.00

38473402.00

4.46 time

2010 - 2011

221246824.00

45624025.5

4.84 time

2011 - 2012

286246257.00

53442129.5

5.35 time

5.4 5.2

2007-08

5

2008-09

4.8

2011-12 201011

4.6

2009-10

4.4

2009-10 201011

2011-12

2008-09

4.2

2007-08

4 Category 1

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INTERPRETATION:- The current asset ratio was 5.11 times in the year 2007-2008 and 4.70 in the year 2008-09 and 4.46 in the year 2009-2010 it was decreased. It further increased to 4.48 in the year 2010-11 & 5.35 in the year 2011-2012. It shows that the current assets are not utilized properly.

7 .Debtors Turnover Ratio:Debtors are expected to be converted into cash over a short period of time and therefore are included in current assets. It shows how many times debtors are converted into cash in a year.

Net credit sales Debtors Turnover Ratio =

------------------------------Average Debtors

Year

Credit sales

Average Debtors

Ratio

2007 – 2008

102199181.00

19080194.95

5.35 times

2008 – 2009

132858985.00

27192101.00

4.88 times

2009 – 2010

171671451.00

36302837.00

4.72 times

2010 - 2011

221246824.00

42584634.5

5.19 times

2011 - 2012

286246257.00

50516905.00

5.66 times

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2007-08 2011-12 2010-11 2009-10 2008-09 2007-08

6 5.5 5 4.5 4

2008-09 2009-10 2010-11

2011-12

Debtors Turnover Ratio

INTERPRETATION:-The debtor’s turnover ratio was very less in the year 2009-10 at 4.72 times, but them it has increased to 5.19, 5.66 times in the year 2010-11 and 2011-12. This shows that the company is making all the offers to speed up the collection process.

8. Creditors Turnover Ratio Creditors’ turnover ratio establishes relationship between not credit purchases and average trade creditors and accounts payable. The ratio indicates the velocity with which the creditors are turned over in relation to purchases. Net Credit Purchases Creditors Turnover Ratio = ----------------------------------Average creditors Year

Credit Purchases

Average Creditors

Ratio

2007 – 2008

96724469.00

82074994.50

1.17 times

2008 – 2009

127553879.00

112554635.00

1.13 times

2009 – 2010

165680148.00

146617013.50

1.13 times

2010-2011

213323185.00

189501666.50

1.12 times

2011-2012

276775674.00

245049429.50

1.12 times

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1.17 2007-08

1.16 1.15 1.14 1.13 1.12 1.11 1.1 1.09

2011-12 2010-11

2008-09 2009-10 2010-11

2009-10

2011-12

2008-09 2007-08 Creditors Turnover Ratio

INTERPRETATION:-The creditors turnover ratio was 1.17 times in the year 2007-08 & it decreased to 1.13 times in the year 2009-2010 but creditor turnover will be remain same two year 2008-09 and 2009-07.Thean it was again declined 1.12 in the Year 2010-11. But it was remain same in the year 2010-11 and 2011-12. Generally lower the ratio better is the liquidity position of the firm and vice versa

9. Net Profit Ratio:Net profit ratio indicates the relation ship between net profit & sales .It is also known as margin on sales ratio.

Net profit after Tax Net Profit Ratio:-

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

x 100

Sales

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Year

Net Profit After Tax

Sales

Ratio

2007 – 2008

437894.00

102199181.00

0.43 %

2008 – 2009

423298.00

132858985.00

0.32 %

2009 – 2010

592576.00

171671451.00

0.35 %

2010-2011

843910.00

221246824.00

0.38 %

2011-2012

1039889.00

286246257.00

0.36 %

0.5

2007-08

0.4

2008-09 2011-12 2010-11

0.3

2009-10

0.2

2008-09

0.1

2009-10 2010-11 2011-12

2007-08

0 Net Profit Ratio

INTERPRETATION:- The Net profit of the company 0.43% in the year 2007-08,0.32 in the year 2008-09 , 0.35 in the year 2009-10 ,0.36 in the year 2011-12. Net profit ratio was show the net profit after tax in the year 437894 in 2007-2008 but it was fall in the year 2008-2009 there for net profit ratio is falling.

10. Debt / Equity Ratio:This Ratio indicate how much of the total funds employed are our owned & how much are borrowed there is no standard fixed for this ratio but financial institute favors a ratio of 2:1. Long Term Borrowing Debt / Equity Ratio= -------------------------Share holder fund

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Long Term Borrowing

Share holder fund

Ratio

2007 – 2008

17020534.74

3281899.00

5.19

2008 – 2009

18599175.00

4705197.00

3.95

2009 – 2010

30650881.00

6297773.00

4.87

2010 - 2011

25230306.00

7141683.00

3.53

2011 - 2012

43831794.00

8181572.00

5.36

Year

6 2007-08

5

2008-09

4

2011-12 2010-11

3

2009-10

2

2008-09

1

2009-10 2010-11 2011-12

2007-08

0 Debt / Equity Ratio

INTERPRETATION:- In The year 2007 -2008 debt equity ratio was 5.19 and 3.59 ,4.87 in the year 2008-09 and 2009-10 .in the year 2008 debt equity ratio fall because shareholder fund was increased. But long term borrowing slow increasing .But in the year debt ratio has decreased 3.53 in the year 2010-11.but in the year 2011-12 the debt equity ratio has increased 5.36. Because long term borrowing and shareholder fund also increases.

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11. Working Capital Turnover Ratio:It is taken as one of the primary indicators of the short-term solvency of the business. It establishes the relationship with the net sales. It measures the efficiency with which the working capital is being used by the firm. Net Sales WORKING CAPITAL TURNOVER RATIO = -------------------Net Working Capital Year

Net Sales

Net Working Capital

Ratio

2007 – 2008

102199181.00

20229751.69

5.05 TIME

2008 – 2009

132858985.00

23244807.00

5.72 TIME

2009 – 2010

171671451.00

36879727.00

4.65 TIME

2010-2011

221246824.00

32265850.00

6.86 TIME

2011-2012

286246257.00

50967874.00

5.62 TIME

8

2011-12 2010-11 2009-10 2008-09

6 4 2

2007-08

0

2007-08 2008-09 2009-10 2010-11 2011-12

Working Capital Turnover Ratio

INTERPRETATION:- In The year 2007-08 working capital t/o ratio was5.05 time ,5.72 time in the year 2008-2009.In the year 2008-09 the working capital has increases because sales of the company has increases. in the year 2009-10 it was 4.65, 6.86,5.62 in the year 2010-2011 and 2011-12.it show the newly established company because the working capital up and down year to year.

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SWOT Strengths 

Track record of growth in turnover and profits



Superior quality



Vast experience in domestic and export market

Weaknesses 

High prices



High lead time



Less Variety in sports shoes

Opportunity 

Quicker response to customers need



To increase share in non leather products

Threats 

Heavy competition



More aggressive marketing by foreign competitors in sports shoe markets

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Conclusion 

Venus Footart Ltd has profit oriented company .The profit of the company will be increases every year .The company has able to the repay the amount of the creditor. The company has more working capital and also sale has increases year to year .The company current ratio has above the standard current ratio i.e. 2:1 but company current ratio is above 3:1.The Company has financially soundness.



The Ratio Anaysis contributes much in the over all management of the organization affairs, efficiency of organization operations depend on how it manages its short term business dealings. Ratio Analysis contributes for the firm efficiency as well as the finance manager is proper utilizing the available wealth and maintaining the required liquidity.



Venus Footart Ltd working capital has increased which is favorable position to the company. It clearly shows that Venus Footart Ltd has profit orient company. So it was not facing shortage of working capital in initial years. So it had to increase its working capital to stand in the business world.



There is enough working capital in Venus Footart Ltd to meet its current liabilities.



The absolute liquidity ratio is below the standard of 0.5: 1 ratio. It shows that the liquidity position of the concern is unsatisfactory

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Recommendation and Suggestions 

The absolute liquidity ratio was 0.15 in the year 2007-2008 and in 2011-2012 it was 0.05. It shows that the liquidity position of the concern is unsatisfactory.Management of the company should understand the importance of assets in liquid form which help to meet the uncertain situations.



The liquidity ratio is above the standard of 1: 1 ratio. It shows that the liquidity position of the company is satisfactory.



In the year 2010-2011 asset ratio was increased 0.19 because C.A has fall in that year but in 2011-12 company’s assets increases and get back in the good assets turnover position.



Company should increase its employee’s efficiency which related with the marketing separtment. This is because of the problem of high lag in payments by debtors. More credit sales increases the requirement of high working capital.



Overall comoany is in a good financial position but company should increase the amount involved in its Research & Development department by which it can exports its goods outside the country also.

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Appendix FINANCIAL STATEMENT 2011-2012

PROVISIONAL BALANCE SHEET AS AT 31st MARCH, 2012 Particulars

SCHEDULE

As At 31.03.2012

SOURCES OF FUNDS SHAREHOLDERS FUNDS Share capital

A

45,00,000.00

Reserves and Surplus

B

36,81,572.00 8181572.00

Share Application money Pending allotment

3,73,46,016.00

Secured Loans

C

64,85,778.00

Unsecured Loans

D

5,146.00

52,018,512.00

TOTAL

APPLICATIONS OF FUNDS

E

Fixed Assets: Gross Block Less: Accumulated Depreciation Net Block

12,91,998.00 2,67,700.00 10,24,298.00

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INVESTMENTS

F

5,94,88,569.00

Current Assets, Loans & Advances

G

6,64,627.00

Sundry Debtors

H

23,41,845.00

Cash and bank balances

62,495,041.00

Loans and Advances

Less: Current Liabilities & provisions

93,35,077.00

Current Liabilities

21,92,090.00

Provisions

5,09,67,874.00

NET CURRENT ASSETS 26,340.00 Miscellaneous Expenditure ( To the extent not written off or adjusted)

5,20,18512.00

TOTAL

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Bibliography: From Books: Jat D.R. (2010). Elements of Financial Management. Jaipur: Malik And company.  Ghose Gourab (2012). Analysis of profit. Allahabad: Shuchita Prakashan (P) Ltd.

 Gopala Krishna Murthy G(2012).Towards Better Working Capital Management: ICFAI.

 Dr Alok B Shah(2012). Working Capital Management.

From Websites: MBA Project guide(2008, Oct. 31) . Retrieved(2012, Sept. 26) from http://www.mbaclubindia.com/forum/project-guide-for-mba-service-offered.asp  http://www.venusfootarts.com/about_us.html  http://www.indiamart.com/company/2530780/  http://catalogs.eworldtradefair.com/venusfootartsltd_contactus_81313.html

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