Design Of The Study
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A Study On Financial Analysis Of K.S.F.C
3. DESIGN OF THE STUDY “Analysis of the Financial Statement of Karnataka State Financial Corporations” 3.1 INTRODUCTION : A research is a study on a problem of, What, Where, When, How much, by what means and a solution to the problem constitutes a research design. A research is a method of collecting, analyzing, interpreting observations that guide the investigators to find the solution to the given problem. It constitutes the print for the collection, measurement and analysis of data. 3.2 STATEMENT OF THE PROBLEM : To find the Financial position of KSFC by analyzing its critical analysis of Financial statements. 3.3 OBJECTIVE OF THE STUDY : The main objective of this study is to understand and ascertain the financial performance of KSFC and to meet the other objective of the study. The objective is to analysis the financial performance using RATIO ANALYSIS METHOD. The objectives are as follows : • • • • • • • •
To analyze the financial statements. To analyze the liquidity position of the company. To analyze the profitability of the company. To analyze both the Long-term and Short-term solvency of the company. To identify the degree of relationship between two or more years. To analyze the overall performance of the company. To analyze the management’s efficiency of the company. To analyze the management’s efficiency of the company.
TOOLS USED FOR ANALYSIS : 1. RATIO ANALYSIS 2. Comparative BALANCE SHEET. 3. Comparative INCOME STATEMENT. 3.4 SCOPE OF THE STUDY : The scope of the financial analysis of KSFC covers the comparison of assets and liabilities of current year with previous two year’s performance of the corporation and relationship of various assets with the other assets. The Study will help in analyzing the ratios for a period of four years i.e. from 2003 to 2007 of KSFC. Ratios may prescribe practical standards, DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
as they are several in numbers for each element of study. The study helps us in finding out how well organization is managing them. • • • • • •
The importance of study of Financial Analysis is – Useful in financial position analysis. Useful in simplifying accounting figures. Useful in assessing operational efficiency. Useful in forecasting purpose. Useful in locating the weak spots of the business. Useful in comparison of performance.
METHODOLOGY : Data Collection :The data collection is one of the important aspect in the research design purely because, it is the way that how we can get answer to the research questions. Date Details :Data relating to working capital is required for the study i.e. about the sources of funds and application of funds and balance sheet for calculating various ratios. The data is collected in two ways : • •
Primary Data. Secondary Data. Primary Data : The primary data collected is one of the key tools used by the researcher for data collection. It is the first hand information collected by the researcher from the respondents directly. Primarily data is collected through observation. Secondary Data : The secondary data is anther from of data collection, where the data is collection from the existing records, company manual and previously carried out research work and also through internet. Sources of Data Collection : All the details are collected from secondary sources only. Secondary data includes, the annual reports, financial reports of the company etc., discussion with the concerned official has also helped to verify and evaluate the variations and either to confirm it. 3.6 LIMITATION OF THE STUDY :
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
The analysis done using ratio is only a partial interpretation since all the ratio
are not covered. Even though these are many other methods of analysis the financial performance, the result got though this research can be used for major decisions to take. The information used in the report is not full, due to the provision of disclosure of the norms of the company. The information collection and the figure got are only from the head office which has a coverage performance of all its zonal offices. The comparative study of each and branch office could not be done since the area to cover is very large. The study has been restricted to the head office in Bangalore. Inter firm and inter firm comparison is not possible. Limitation of historical accounts. Conclusion will be drown based on theory and supplemented by figure wherever feasible.
4. ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT Meaning : In the words of Milers “Financial Statement Analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements, and the study of the trend of these factors as shown in a series statement. From these definitions, it is clear that analysis interpretation of Financial Statement is the methodical classification of the data given in the financial statements into simple component parts or elements, established and study of relationship between the classified component parts or elements and explanations of the significance of the relationship between the classified component parts or elements. Objective of Analysis and Interpretation : • • • • • • • • •
Return on investment and profitability. Future trend of earnings. Solvency of the concern, both short-term and long- term. Financial stability. Capital gearing. Trading or equality. Operational efficiency. Valuation of Shares. Costing and budgeting.
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
RATIO ANALYSIS 4.1 Introduction : Ratio analysis is the one of the powerful tools of the Financial Analysis. A ratio can be defined as “The indicated quotient of two mathematical expressions” and as” the relationship between two or more things” Ratio of thus, the numerical or an arithmetical relationship between two figures, it is expressed where one figure is divided by another. A Ratio can be used as yardstick for evaluating the financial position and performance of a concern, because the absolute accounting data cannot provide meaningful and interpretation. A Ratio is the relationship between two accounting items expressed mathematically. Ratio analysis helps the analysis to make quantitative judgment with regard to concern’ financial position and performance. 4.2 CLASSIFICATION OF RATIOS : Accounting ratios may be classified in a number of ways on different basis. Some of the important bases of classification of accounting ratios are : 1. On the basis of FINANCIAL STATEMENT from which the figures use for the computation of ratios are derived i.e., on the basis of source of the figures used for the computation of ratios. 2. On the basis of the point of time in relation to which ratios are calculated. 3. On the basis of the importance of ratios. 4. on the basis of the tests of satisfied i.e. on the basis of the functions of ratios. 5. On the basis of the uses of ratios.
Classification on the basis of source of figures used for the computation of Ratios : This is the traditional classification of accounting ratios. This is the most common, convenient method of classification of accounting ratios. Under this classification of accounting ratios are classified on the basis of the origin or source of the figure used for the computation of the accounting ratios, i.e. on the basis of the financial statement from which the figure used for the computation of the accounting ratios are derived. Under this classification, accounting ratios are usually classified in to 3 categories they are :
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
1. Balance Sheet Ratios or Financial Ratios : Balance sheet ratios are calculated by taking two items or two groups of items appearing in the balance sheet some of the important balance sheet ratios are as follows : a. Current ratio. b. Working capital ratio. c. Quick ratio, liquid or acid test ratio. d. Absolute liquid ratio. e. Debt-equity ratio. f. Proprietary ratio, equity or net worth. g. Stock turnover ratio. h. Ratio of fixed assets to net worth. 2. Profit and Loss Account Ratios : Profit and loss account ratios are ratios, which are calculated by taking two items or two groups of items appearing in the profit and loss account. Some of the important profit and loss account ratios are : a. Net profit ratio. b. Operating ratio. c. Operating profit ratio. d. Stock turnover ratio. 3. Mixed ratios, Combined ratios or inter-statement ratios : Mixed ratios are ratios, which are calculated by taking one item or one group of item from the balance sheet and other item or the group of item from the profit and loss account. Some of the important mixed ratios are : a. Debtor’s turnover ratio. b. Total assets turnover ratio. c. Return on capital employed ratio. d. Return on proprietor’s funds or equity share holders ratio. e. Fixed assists turnover ratio. f. Current assets turnover ratio. g. Current liabilities turnover ratio. h. Working capital turnover ratio. 4.3 ANALYSIS THE RATIOS : 1. Current Ratio : This ratio measures the solvency of the company in the short term. Current Assets are those assets which can be converted in to cash in one year. Current Liabilities and provisions are those liabilities that are payable in one year. A Current Ratio of 2:1 indicates a highly solvent position. A current ratio of 1:33:1 is considered by the bank as the minimum acceptable level for providing working capital finance. A very current ratio will have a adverse impact on profitability of the organization. A high current ratio may be due o the piling up of inventory,
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A Study On Financial Analysis Of K.S.F.C
inefficiency in collection of debtors, high balance in cash and bank accounts without proper investments. TABLE – 1 Table Showing current Ratio of KSFC from the year 2003-04to 2007-08. Current Ratio =
Current Assets Current Liabilities
Year
Current Assets
Current Liabilities
2003-04 2004-05 2005-06 2006-07 2007-08
17544.88 19019.60 34517.42 19612.14 27933.61
11219.28 18577.85 12417.40 7816.77 18900.97
Current Ratio (Rupees in Lakhs) 1.56 1.02 2.78 2.51 1.48
ANALYSIS : The above table indicates that Current ratios are, in the year 2003-04 was 1.56, in the year 2004-05 was 1.02, in the year 2005-06 is 2.78 ,2006-07 is 2.51 and in the year2007-08 was 1.48 INFERENCE : From the above table, it can be inferred that the Current Ratio of the KSFC is showing increasing and decreasing trend. It has recorded the highest in the 2005-06 i.e., 2.78, and the lowest in the year 2004-05 i.e., 1.02. The current ratio standard is 2.0 and its fluctuating around it. GRAPH – 1 Graph Showing Current Ratios of KSFC from the year 2003-04 to 2007-08
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A Study On Financial Analysis Of K.S.F.C
3 2.5 2 1.5 1 0.5 0 2003-04
2004-05
2005-06
2006-07
2007-08
2. Quick Ratio or liquid ratio or acid test ratio : Quick ratio is used as a measure of the company’s ability to meet its current obligations. Since bank overdraft is secured by the inventories, the other current assets must be sufficient to meet the other current liabilities. A quick ratio of 1:1 indicates highly solvent position. This ratio is also called as Quick ratio or liquid ratio or acid test ratio. This ratio serves as a supplement to the current ratio in analyzing liquidity. TABLES – 2 Table Showing Quick Ratio of KSFC from the year 2003-04to 2007-08 Quick Ratio =
Quick Assets Current Liabilities
Quick Assets : Current Assets, loans and advances, inventories Year
Quick Assets
Current Liabilities
2003-04 2004-05 2005-06 2006-07 2007-08
17544.88 19019.60 34517.42 19612.14 27933.61
11219.28 18577.85 12417.40 7816.77 18900.97
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
Quick Ratio (Rupees in Lakhs) 1.56 1.02 2.78 2.51 1.48
A Study On Financial Analysis Of K.S.F.C
ANALYSIS : The above table indicates that Quick ratios are, in the year 2003-04 was 1.56, in the year 2004-05 was 1.02, in the year 2005-06 is 2.78 ,2006-07 is 2.51 and in the year2007-08 was 1.48 INFERENCE : From the above table, it can be inferred that the Quick Ratio of the KSFC is same as the current ratio. Because of no stock so both the ratios are one and the same.
GRAPH – 2 Graph Showing Quick Ratios of KSFC from the year 2003-04to 2007-08 3 2.5 2 1.5 1 0.5 0 2003-04
2004-05
2005-06
2006-07
2007-08
3. Debt-equity Ratio : Debt- equity ratio is also known as “External internal” equity ratio. It is the ratio of total outside liabilities to owner total funds. In other words, it is the ratio of
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A Study On Financial Analysis Of K.S.F.C
the amount invested by outsides to the amount invested by the owners of business. The Debt-Equity ratio if determined to ascertain the soundness of the long-term financial policies. TABLE - 3 Table Showing Debt-equity Ratio of KSFC from the year 2003-04to 2007-08 Total Debt (Term Borrowings) Debt-equity Ratio = Share holders fund (Share capital + reserve fund) Year
Total Debt
Equity Share holders
2003-04 2004-05 2005-06 2006-07 2007-08
182492.79 177458.24 176808.83 164985.10 156142.19
12892.55 12892.55 12892.55 12892.55 33108.24
Debt-equity Ratio (Rupees in Lakhs) 14.15 13.76 13.71 12.80 4.72
ANALYSIS : The above table indicates that Debt-equity ratios are, in the year 2003-04 was 14.15, in the year 2004-05 was 13.76, in the year 2005-06 is 13.71 , 2006-07 is 12.80 and in the year 2007-08 is 4.72 INFERENCE : From the above table, it can be inferred that the Debt-equity Ratio of the KSFC is decreasing gradually. Because of constant equity share holders. Corporation is in a better position because of decreasing in total debt.In the last year due to increased share capital and decreased debt the ratio is decreased drastically. GRAPH – 3 Graph Showing Debt-equity Ratios of KSFC from the year 2003-04to 2007-08
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A Study On Financial Analysis Of K.S.F.C
4. Debt-Assets Ratio :
TABLE - 4 Table Showing Debt-Assets Ratio of KSFC from the year 2003-04to 2007-08 Debt-Assets Ratio = Total Debt (Term Borrowings) Total Assets
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
Total Assets : Cash and bank balances + investments + Loans and Advances + Fixed Assets + Current Assets + Profit and Loss Account Balance. Year
Total Debt
Total Assets
2003-04 2004-05 2005-06 2006-07 2007-08
182492.79 177458.24 176808.83 164985.10 156142.19
207522.31 207557.29 203036.48 186612.11 209069.08
Debt-Assets Ratio (Rupees in Lakhs) 0.88 0.85 0.87 0.88 0.75
ANALYSIS : The above table indicates that Debt-Assets ratios are, in the year 2003-04 was 0.88, in the year 2004-05 was 0.85, in the year 2005-06 is 0.87 ,2006-07 is 0.88 and in the year 2007-08 is 0.75 INFERENCE : From the above table, it can be inferred that the Debt-assets Ratio of the KSFC is constant in the two years i.e., 2003-04, 2006-07 due to gradual decrease in total assets and decrease in total debt. The decrease in debt and increase in assets in the year 2007-08 has brought down the ratio . GRAPH – 4 Graph Showing Debt-Assets Ratios of KSFC from the year 2003-04 to 2007-08
5. Proprietary Ratio : It is called as ‘Equity ratio’ or ‘Capital ratio or Net worth to total assets ratio’ where in proprietary fund is called net worth. The relationship between owner’s / proprietor’s fund with total assets is called proprietary ratio. TABLE - 5 Table Showing Proprietary Ratio of KSFC from the year 2003-04 to 2007-08 Proprietary Ratio =
Share Holders Fund Total Assets
Total Assets : Cash and bank balances + investments + Loans and Advances + Fixed Assets + Current Assets + Profit and Loss Account Balance.
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
Share holders fund : Share capital + Reserve fund and other reserve. Year 2003-04 2004-05 2005-06 2006-07 2007-08
Share Holders Fund 12892.55 12892.55 12892.55 12892.55 33108.24
Total Assets 207522.31 207557.29 203036.48 186612.11 209069.08
Proprietary Ratio (Rupees in Lakhs) 0.0.62 0.062 0.063 0.069 0.16
ANALYSIS : The above table indicates that Proprietary ratios are, in the year 2003-04 was 0.062, in the year 2004-05 was 0.062, in the year 2005-06 is 0.063 , 2006-07 is 0.069 and in the year 2007-08 is 0.16 INFERENCE : From the above table, it can be inferred that the Proprietary Ratio of the KSFC is constant in the two years i.e., 2003-04, 2004-05. is increasing in all the four years. Due to increase in shareholders fund the ratio has shooted up GRAPH – 5 Graph Showing Proprietary Ratios of KSFC from the year 2003-04 to 2007-08
6. Liquid Assets to Total Assets Ratio : The liquid assets to total asset ratio means total liquid assets plus total assets this ratio measure the total cash and bank balance and current assets. TABLE - 6 Table Showing Liquid assets to total assets Ratio of KSFC from the year 2003-04 to 2007-08 Liquid assets to total assets Ratio =
Liquid Assets Total Assets
x 100
Liquid Assets : Cash and bank balances + Current Assets. Total Assets : Cash and bank balances + investments + Loans and Advances + Fixed Assets + Current Assets + Profit and Loss Account Balance.
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A Study On Financial Analysis Of K.S.F.C
Year
Liquid Assets
Total Assets
2003-04 2004-05 2005-06 2006-07 2007-08
17544.80 19019.60 34517.42 19612.14 27933.61
207522.31 207557.29 203036.48 186612.11 209069.08
Total Assets Ratio (Rupees in Lakhs) 8.45 9.16 17.0 10.51 13.36
ANALYSIS : The above table indicates that Liquid assets to total assets ratio are, in the year 2002-03 was 5.81, in the year 2003-04 was 8.45, in the year 2004-05 was 9.16, in the year 2005-06 is 17.0 and in the year 2006-07 is 10.51. INFERENCE : From the above table, it can be inferred that the liquid assets to total assets Ratio of the KSFC is gradually increasing year after year. Because of increase in liquid assets in 2005-06 and decreasing in the 2006-07. in the decrease total assets in the year 2006-07. GRAPH – 7 Graph Showing Liquid assets to total assets Ratios of KSFC from the year 2003-04 to 2007-08 Liquid Assets to Total Assets Ratio 18 16 14
Ratios
12 10 8 6 4 2 0 2002-03
2003-04
2004-05 Years
2005-06
2006-07
8. Liquidity Ratio : If it is decided to study the liquidity position of the concern, in order to highlight the relative strength of the concerns in meeting their current obligations to maintain sound liquidity and to pinpoint the difficulties if any in it, then liquidity ratios are calculated. These ratios are used to measure the fir’s ability to meet short term obligation.
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A Study On Financial Analysis Of K.S.F.C
TABLE - 8 Table Showing Liquidity Ratio of KSFC from the year 2003-04 to 2007-08 Liquid Assets Current Liabilities
Liquidity Ratio =
Liquid Assets : Cash and bank balances + Current Assets. Year
Liquid Assets
Current Liabilities
2002-03 2003-04 2004-05 2005-06 2006-07
15419.72 17544.80 19019.60 34517.42 19612.14
16518.47 11219.28 18577.85 12417.41 7816.77
Liquidity Ratio (Rupees in Lakhs) 0.93 1.56 1.02 2.78 2.51
ANALYSIS : The above table indicates that Liquidity ratio are, in the year 2002-03 was 0.93, in the year 2003-04 was 1.56, in the year 2004-05 was 1.02, in the year 2005-06 is 2.78 and in the year 2006-07 is 2.51 INFERENCE : From the above table, it can be inferred that the liquidity Ratio of the KSFC has been increasing in the current year i.e., 2005-06. Because liquid assets have been increased and current liability has decreased. in the 2006-07. in the decreasing liquid assets in the year 2006-07. GRAPH – 8 Graph Showing Liquidity Ratios of KSFC from the year 2003-04 to 2007-08
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A Study On Financial Analysis Of K.S.F.C
Liquidity Ratio 3 2.5
Ratios
2 1.5 1 0.5 0 2002-03
2003-04
2004-05
2005-06
2006-07
Years 9. Long term funds to Fixed assets Ratio : TABLE -9 Table Showing Long term fund to Fixed assets ratio of KSFC from the year 2003-04 to 2007-08 Fixed assets Ratio =
Share holders fund + Long term Loans Net Fixed assets
Year
Share holders fund + Long term Loans
Net Fixed assets
2002-03 2003-04 2004-05 2005-06 2006-07
22356.55 15654.55 15181.59 15123.49 15321.49
2199.76 1366.46 1022.14 821.85 748.21
Long term fund to Fixed assets ratio (Rupees in Lakhs) 10.16 11.45 14.85 18.40 20.48
ANALYSIS : The above table indicates that Long term funds to fixed assets ratio are, in the year 2002-03 was 10.16, in the year 2003-04 was 11.45, in the year 200405 was 14.85, in the year 2005-06 is 18.40 and in the year 2006-07 is 20.48
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A Study On Financial Analysis Of K.S.F.C
INFERENCE : From the above table, it can be inferred that the Long term funds to fixed assets Ratio of the KSFC has been increased and net fixed assets have been decreased in the year to year current year. GRAPH – 9 Graph Showing Long term funds to fixed assets Ratios of KSFC from the year 2003-04 to 2007-08 Long Term Funds to Fixed Assets Ratio 25
Ratios
20 15 10 5 0 2002-03
2003-04
2004-05
2005-06
Years
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2006-07
A Study On Financial Analysis Of K.S.F.C
10. Share Holders Equity Ratio : TABLE -10 Table Showing Share Holders Equity ratio of KSFC from the year 2003-04 to 2007-08
Share Holder equity Ratio =
Share holders Equity Total Assets
Year
Share holders equity
Total assets
2002-03 2003-04 2004-05 2005-06 2006-07
12892.55 12892.55 12892.55 12892.55 12892.55
265422.95 207522.31 207557.29 203036.36 186612.11
Share Holder Equity ratio (Rupees in Lakhs) 0.048 0.062 0.062 0.064 0.069
ANALYSIS : The above table indicates that Share Holders equity ratio are, in the year 2002-03 was 0.048, in the year 2003-04 was 0.062, in the year 2004-05 was 0.062, in the year 2005-06 is 0.064 and in the year 2006-07 is 0.069 INFERENCE : From the above table, it can be inferred that the Share Holders equity Ratios of the KSFC are increasing gradually. Bust Share Holders equity is constant and decreasing in the total assets in the year 2006-07. But Share Holders equity ratio are increasing in year to year. GRAPH – 10 Graph Showing Share Holders Equity Ratios of KSFC from the year 2003-04 to 2007-08
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A Study On Financial Analysis Of K.S.F.C
Share Holders Equity Ratio 0.07 0.06 0.05
Ratios
0.04 0.03 0.02 0.01 0 2002-03 2003-04 2004-05 2005-06 2006-07 Years 11. Capital Gearing Ratio : The term ‘Capital Gearing Ratio’ is used to describe the relationship between fixed interest dividend bearing securities and the equity shareholders. It establishes the proportion between the interest or dividend payable funds and capital employed. It is useful when the objective it to show the effect of the used of fixed interest / dividend source of funds on the earning available to the equity shareholders. TABLE -11 Table Showing Capital Gearing ratio of KSFC from the year 2003-04 to 2007-08 Capital Gearing Ratio =
Fixed Interest bearing funds or dividend Equity Share Holder’s Fund
Year
Fixed Interest bearing funds
Equity Share holders Fund
2002-03 2003-04 2004-05 2005-06 2006-07
23889.30 18740.43 17670.37 16780.62 1411.66
13810.24 13810.24 13810.24 13810.24 13810.24
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Capital Gearing Ratio (Rupees in Lakhs) 1.73 1.36 1.28 1.22 1.02
A Study On Financial Analysis Of K.S.F.C
ANALYSIS : The above table indicates that Capital Gearing ratio, in the year 2002-03 was 1.73, in the year 2003-04 was 1.36, in the year 2004-05 was 1.28, in the year 2005-06 is 1.22 and in the year 2006-07 is 1.02 INFERENCE : From the above table, it can be inferred that the Capital Gearing Ratios of the KSFC are decreasing year to year, due to constant equity share holders. But in the fixed interest bearing funds is decreasing in the year to year. GRAPH – 11 Graph Showing Capital Gearing Ratios of KSFC from the year 2003-04 to 2007-08
Capital Gearing Ratio 1.8 1.6 1.4
Ratio
1.2 1 0.8 0.6 0.4 0.2 0 2002-03 2003-04 2004-05 2005-06 2006-07 Years
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A Study On Financial Analysis Of K.S.F.C
12. Interest Coverage Ratio : Interest coverage ratio, also known as ‘debt service ratio’ or ‘fixed charges ratio’ establishes the relationship between the amount of net profit before deduction of interest and tax, and the fixed interest charges. TABLE -12 Table Showing Interest Coverage ratio of KSFC from the year 2003-04 to 2007-08 Interest Coverage Ratio =
Net Profit before interest, depreciation and Tax Interest Payable
Year
Net Profit before interest, depreciation and Tax
Interest Payable
2002-03 2003-04 2004-05 2005-06 2006-07
21131.98 23916.98 22347.22 21190.63 19571.40
23889.30 18740.43 17670.37 16780.62 14110.66
Interest coverage Ratio (Rupees in Lakhs) 0.88 1.27 1.26 1.26 1.39
ANALYSIS : The above table indicates that Interest Coverage ratio, in the year 2002-03 was 0.88, in the year 2003-04 was 1.27, in the year 2004-05 was 1.26, in the year 2005-06 is 1.26 and in the year 2006-07 is 1.39 INFERENCE : From the above table, it can be inferred that the Interest Coverage Ratios of the KSFC is decreased in the year 2003-04. But again there is a decrease in the last two years i.e. 2004-05 and 2005-06. In the again increase I the year 2006-07. GRAPH – 12 Graph Showing Interest Coverage Ratios of KSFC from the year 2003-04 to 2007-08
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A Study On Financial Analysis Of K.S.F.C
Interests Coverage Ratio 1.4 1.2
Ratio
1 0.8 0.6 0.4 0.2 0 2002-03 2003-04 2004-05 2005-06 2006-07 Years 13. Book Value Ratios : TABLE -13 Table Showing Book Value ratio of KSFC from the year 2003-04 to 2007-08
Book Value Ratio = Year 2002-03 2003-04 2004-05 2005-06 2006-07
Equity Capital + Reserves – Profit and Loss Debit Balance Total Number of equity Shares
Equity Capital + Reserves – Profit and Loss Debit Balance 12892.55 12892.55 12892.55 12892.55 12892.55
Total Number of equity Shares
Book Value Ratio (Rupees in Lakhs)
8029545 8029545 8029545 8029545 8029545
0.0016 0.0016 0.0016 0.0016 0.0016
ANALYSIS : The above table indicates that Book Value ratio, in the year 2002-03 was 0.0016, in the year 2003-04 was 0.0016, in the year 2004-05 was 0.0016, in the year 2005-06 is 0.0016 and in the year 2006-07 is 0.0016.
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A Study On Financial Analysis Of K.S.F.C
INFERENCE : From the above table, it can be inferred that the Book Value Ratios of the KSFC is constant in all the five year, due to constant Equity shares, reserves and total number of equity shares issued. But there is no profit and loss debit balance. GRAPH – 13 Graph Showing Book Value Ratios of KSFC from the year 2003-04 to 2007-08
Ratio
Book Value Ratio 0.0018 0.0016 0.0014 0.0012 0.001 0.0008 0.0006 0.0004 0.0002 0 2002-03 2003-04 2004-05 2005-06 2006-07 Years
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3. DESIGN OF THE STUDY “Analysis of the Financial Statement of Karnataka State Financial Corporations” 3.1 INTRODUCTION : A research is a study on a problem of, What, Where, When, How much, by what means and a solution to the problem constitutes a research design. A research is a method of collecting, analyzing, interpreting observations that guide the investigators to find the solution to the given problem. It constitutes the print for the collection, measurement and analysis of data. 3.2 STATEMENT OF THE PROBLEM : To find the Financial position of KSFC by analyzing its critical analysis of Financial statements. 3.3 OBJECTIVE OF THE STUDY : The main objective of this study is to understand and ascertain the financial performance of KSFC and to meet the other objective of the study. The objective is to analysis the financial performance using RATIO ANALYSIS METHOD. The objectives are as follows : • • • • • • • •
To analyze the financial statements. To analyze the liquidity position of the company. To analyze the profitability of the company. To analyze both the Long-term and Short-term solvency of the company. To identify the degree of relationship between two or more years. To analyze the overall performance of the company. To analyze the management’s efficiency of the company. To analyze the management’s efficiency of the company.
TOOLS USED FOR ANALYSIS : 1. RATIO ANALYSIS 2. Comparative BALANCE SHEET. 3. Comparative INCOME STATEMENT. 3.4 SCOPE OF THE STUDY : The scope of the financial analysis of KSFC covers the comparison of assets and liabilities of current year with previous two year’s performance of the corporation and relationship of various assets with the other assets. The Study will help in analyzing the ratios for a period of four years i.e. from 2003 to 2007 of KSFC. Ratios may prescribe practical standards, DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
as they are several in numbers for each element of study. The study helps us in finding out how well organization is managing them. • • • • • •
The importance of study of Financial Analysis is – Useful in financial position analysis. Useful in simplifying accounting figures. Useful in assessing operational efficiency. Useful in forecasting purpose. Useful in locating the weak spots of the business. Useful in comparison of performance.
METHODOLOGY : Data Collection :The data collection is one of the important aspect in the research design purely because, it is the way that how we can get answer to the research questions. Date Details :Data relating to working capital is required for the study i.e. about the sources of funds and application of funds and balance sheet for calculating various ratios. The data is collected in two ways : • •
Primary Data. Secondary Data. Primary Data : The primary data collected is one of the key tools used by the researcher for data collection. It is the first hand information collected by the researcher from the respondents directly. Primarily data is collected through observation. Secondary Data : The secondary data is anther from of data collection, where the data is collection from the existing records, company manual and previously carried out research work and also through internet. Sources of Data Collection : All the details are collected from secondary sources only. Secondary data includes, the annual reports, financial reports of the company etc., discussion with the concerned official has also helped to verify and evaluate the variations and either to confirm it. 3.6 LIMITATION OF THE STUDY :
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
The analysis done using ratio is only a partial interpretation since all the ratio
are not covered. Even though these are many other methods of analysis the financial performance, the result got though this research can be used for major decisions to take. The information used in the report is not full, due to the provision of disclosure of the norms of the company. The information collection and the figure got are only from the head office which has a coverage performance of all its zonal offices. The comparative study of each and branch office could not be done since the area to cover is very large. The study has been restricted to the head office in Bangalore. Inter firm and inter firm comparison is not possible. Limitation of historical accounts. Conclusion will be drown based on theory and supplemented by figure wherever feasible.
4. ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT Meaning : In the words of Milers “Financial Statement Analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements, and the study of the trend of these factors as shown in a series statement. From these definitions, it is clear that analysis interpretation of Financial Statement is the methodical classification of the data given in the financial statements into simple component parts or elements, established and study of relationship between the classified component parts or elements and explanations of the significance of the relationship between the classified component parts or elements. Objective of Analysis and Interpretation : • • • • • • • • •
Return on investment and profitability. Future trend of earnings. Solvency of the concern, both short-term and long- term. Financial stability. Capital gearing. Trading or equality. Operational efficiency. Valuation of Shares. Costing and budgeting.
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
RATIO ANALYSIS 4.1 Introduction : Ratio analysis is the one of the powerful tools of the Financial Analysis. A ratio can be defined as “The indicated quotient of two mathematical expressions” and as” the relationship between two or more things” Ratio of thus, the numerical or an arithmetical relationship between two figures, it is expressed where one figure is divided by another. A Ratio can be used as yardstick for evaluating the financial position and performance of a concern, because the absolute accounting data cannot provide meaningful and interpretation. A Ratio is the relationship between two accounting items expressed mathematically. Ratio analysis helps the analysis to make quantitative judgment with regard to concern’ financial position and performance. 4.2 CLASSIFICATION OF RATIOS : Accounting ratios may be classified in a number of ways on different basis. Some of the important bases of classification of accounting ratios are : 1. On the basis of FINANCIAL STATEMENT from which the figures use for the computation of ratios are derived i.e., on the basis of source of the figures used for the computation of ratios. 2. On the basis of the point of time in relation to which ratios are calculated. 3. On the basis of the importance of ratios. 4. on the basis of the tests of satisfied i.e. on the basis of the functions of ratios. 5. On the basis of the uses of ratios.
Classification on the basis of source of figures used for the computation of Ratios : This is the traditional classification of accounting ratios. This is the most common, convenient method of classification of accounting ratios. Under this classification of accounting ratios are classified on the basis of the origin or source of the figure used for the computation of the accounting ratios, i.e. on the basis of the financial statement from which the figure used for the computation of the accounting ratios are derived. Under this classification, accounting ratios are usually classified in to 3 categories they are :
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
1. Balance Sheet Ratios or Financial Ratios : Balance sheet ratios are calculated by taking two items or two groups of items appearing in the balance sheet some of the important balance sheet ratios are as follows : a. Current ratio. b. Working capital ratio. c. Quick ratio, liquid or acid test ratio. d. Absolute liquid ratio. e. Debt-equity ratio. f. Proprietary ratio, equity or net worth. g. Stock turnover ratio. h. Ratio of fixed assets to net worth. 2. Profit and Loss Account Ratios : Profit and loss account ratios are ratios, which are calculated by taking two items or two groups of items appearing in the profit and loss account. Some of the important profit and loss account ratios are : a. Net profit ratio. b. Operating ratio. c. Operating profit ratio. d. Stock turnover ratio. 3. Mixed ratios, Combined ratios or inter-statement ratios : Mixed ratios are ratios, which are calculated by taking one item or one group of item from the balance sheet and other item or the group of item from the profit and loss account. Some of the important mixed ratios are : a. Debtor’s turnover ratio. b. Total assets turnover ratio. c. Return on capital employed ratio. d. Return on proprietor’s funds or equity share holders ratio. e. Fixed assists turnover ratio. f. Current assets turnover ratio. g. Current liabilities turnover ratio. h. Working capital turnover ratio. 4.3 ANALYSIS THE RATIOS : 1. Current Ratio : This ratio measures the solvency of the company in the short term. Current Assets are those assets which can be converted in to cash in one year. Current Liabilities and provisions are those liabilities that are payable in one year. A Current Ratio of 2:1 indicates a highly solvent position. A current ratio of 1:33:1 is considered by the bank as the minimum acceptable level for providing working capital finance. A very current ratio will have a adverse impact on profitability of the organization. A high current ratio may be due o the piling up of inventory,
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
inefficiency in collection of debtors, high balance in cash and bank accounts without proper investments. TABLE – 1 Table Showing current Ratio of KSFC from the year 2003-04to 2007-08. Current Ratio =
Current Assets Current Liabilities
Year
Current Assets
Current Liabilities
2003-04 2004-05 2005-06 2006-07 2007-08
17544.88 19019.60 34517.42 19612.14 27933.61
11219.28 18577.85 12417.40 7816.77 18900.97
Current Ratio (Rupees in Lakhs) 1.56 1.02 2.78 2.51 1.48
ANALYSIS : The above table indicates that Current ratios are, in the year 2003-04 was 1.56, in the year 2004-05 was 1.02, in the year 2005-06 is 2.78 ,2006-07 is 2.51 and in the year2007-08 was 1.48 INFERENCE : From the above table, it can be inferred that the Current Ratio of the KSFC is showing increasing and decreasing trend. It has recorded the highest in the 2005-06 i.e., 2.78, and the lowest in the year 2004-05 i.e., 1.02. The current ratio standard is 2.0 and its fluctuating around it. GRAPH – 1 Graph Showing Current Ratios of KSFC from the year 2003-04 to 2007-08
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
3 2.5 2 1.5 1 0.5 0 2003-04
2004-05
2005-06
2006-07
2007-08
2. Quick Ratio or liquid ratio or acid test ratio : Quick ratio is used as a measure of the company’s ability to meet its current obligations. Since bank overdraft is secured by the inventories, the other current assets must be sufficient to meet the other current liabilities. A quick ratio of 1:1 indicates highly solvent position. This ratio is also called as Quick ratio or liquid ratio or acid test ratio. This ratio serves as a supplement to the current ratio in analyzing liquidity. TABLES – 2 Table Showing Quick Ratio of KSFC from the year 2003-04to 2007-08 Quick Ratio =
Quick Assets Current Liabilities
Quick Assets : Current Assets, loans and advances, inventories Year
Quick Assets
Current Liabilities
2003-04 2004-05 2005-06 2006-07 2007-08
17544.88 19019.60 34517.42 19612.14 27933.61
11219.28 18577.85 12417.40 7816.77 18900.97
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
Quick Ratio (Rupees in Lakhs) 1.56 1.02 2.78 2.51 1.48
A Study On Financial Analysis Of K.S.F.C
ANALYSIS : The above table indicates that Quick ratios are, in the year 2003-04 was 1.56, in the year 2004-05 was 1.02, in the year 2005-06 is 2.78 ,2006-07 is 2.51 and in the year2007-08 was 1.48 INFERENCE : From the above table, it can be inferred that the Quick Ratio of the KSFC is same as the current ratio. Because of no stock so both the ratios are one and the same.
GRAPH – 2 Graph Showing Quick Ratios of KSFC from the year 2003-04to 2007-08 3 2.5 2 1.5 1 0.5 0 2003-04
2004-05
2005-06
2006-07
2007-08
3. Debt-equity Ratio : Debt- equity ratio is also known as “External internal” equity ratio. It is the ratio of total outside liabilities to owner total funds. In other words, it is the ratio of
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
the amount invested by outsides to the amount invested by the owners of business. The Debt-Equity ratio if determined to ascertain the soundness of the long-term financial policies. TABLE - 3 Table Showing Debt-equity Ratio of KSFC from the year 2003-04to 2007-08 Total Debt (Term Borrowings) Debt-equity Ratio = Share holders fund (Share capital + reserve fund) Year
Total Debt
Equity Share holders
2003-04 2004-05 2005-06 2006-07 2007-08
182492.79 177458.24 176808.83 164985.10 156142.19
12892.55 12892.55 12892.55 12892.55 33108.24
Debt-equity Ratio (Rupees in Lakhs) 14.15 13.76 13.71 12.80 4.72
ANALYSIS : The above table indicates that Debt-equity ratios are, in the year 2003-04 was 14.15, in the year 2004-05 was 13.76, in the year 2005-06 is 13.71 , 2006-07 is 12.80 and in the year 2007-08 is 4.72 INFERENCE : From the above table, it can be inferred that the Debt-equity Ratio of the KSFC is decreasing gradually. Because of constant equity share holders. Corporation is in a better position because of decreasing in total debt.In the last year due to increased share capital and decreased debt the ratio is decreased drastically. GRAPH – 3 Graph Showing Debt-equity Ratios of KSFC from the year 2003-04to 2007-08
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
4. Debt-Assets Ratio :
TABLE - 4 Table Showing Debt-Assets Ratio of KSFC from the year 2003-04to 2007-08 Debt-Assets Ratio = Total Debt (Term Borrowings) Total Assets
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
Total Assets : Cash and bank balances + investments + Loans and Advances + Fixed Assets + Current Assets + Profit and Loss Account Balance. Year
Total Debt
Total Assets
2003-04 2004-05 2005-06 2006-07 2007-08
182492.79 177458.24 176808.83 164985.10 156142.19
207522.31 207557.29 203036.48 186612.11 209069.08
Debt-Assets Ratio (Rupees in Lakhs) 0.88 0.85 0.87 0.88 0.75
ANALYSIS : The above table indicates that Debt-Assets ratios are, in the year 2003-04 was 0.88, in the year 2004-05 was 0.85, in the year 2005-06 is 0.87 ,2006-07 is 0.88 and in the year 2007-08 is 0.75 INFERENCE : From the above table, it can be inferred that the Debt-assets Ratio of the KSFC is constant in the two years i.e., 2003-04, 2006-07 due to gradual decrease in total assets and decrease in total debt. The decrease in debt and increase in assets in the year 2007-08 has brought down the ratio . GRAPH – 4 Graph Showing Debt-Assets Ratios of KSFC from the year 2003-04 to 2007-08
5. Proprietary Ratio : It is called as ‘Equity ratio’ or ‘Capital ratio or Net worth to total assets ratio’ where in proprietary fund is called net worth. The relationship between owner’s / proprietor’s fund with total assets is called proprietary ratio. TABLE - 5 Table Showing Proprietary Ratio of KSFC from the year 2003-04 to 2007-08 Proprietary Ratio =
Share Holders Fund Total Assets
Total Assets : Cash and bank balances + investments + Loans and Advances + Fixed Assets + Current Assets + Profit and Loss Account Balance.
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
Share holders fund : Share capital + Reserve fund and other reserve. Year 2003-04 2004-05 2005-06 2006-07 2007-08
Share Holders Fund 12892.55 12892.55 12892.55 12892.55 33108.24
Total Assets 207522.31 207557.29 203036.48 186612.11 209069.08
Proprietary Ratio (Rupees in Lakhs) 0.0.62 0.062 0.063 0.069 0.16
ANALYSIS : The above table indicates that Proprietary ratios are, in the year 2003-04 was 0.062, in the year 2004-05 was 0.062, in the year 2005-06 is 0.063 , 2006-07 is 0.069 and in the year 2007-08 is 0.16 INFERENCE : From the above table, it can be inferred that the Proprietary Ratio of the KSFC is constant in the two years i.e., 2003-04, 2004-05. is increasing in all the four years. Due to increase in shareholders fund the ratio has shooted up GRAPH – 5 Graph Showing Proprietary Ratios of KSFC from the year 2003-04 to 2007-08
6. Liquid Assets to Total Assets Ratio : The liquid assets to total asset ratio means total liquid assets plus total assets this ratio measure the total cash and bank balance and current assets. TABLE - 6 Table Showing Liquid assets to total assets Ratio of KSFC from the year 2003-04 to 2007-08 Liquid assets to total assets Ratio =
Liquid Assets Total Assets
x 100
Liquid Assets : Cash and bank balances + Current Assets. Total Assets : Cash and bank balances + investments + Loans and Advances + Fixed Assets + Current Assets + Profit and Loss Account Balance.
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
Year
Liquid Assets
Total Assets
2003-04 2004-05 2005-06 2006-07 2007-08
17544.80 19019.60 34517.42 19612.14 27933.61
207522.31 207557.29 203036.48 186612.11 209069.08
Total Assets Ratio (Rupees in Lakhs) 8.45 9.16 17.0 10.51 13.36
ANALYSIS : The above table indicates that Liquid assets to total assets ratio are, in the year 2002-03 was 5.81, in the year 2003-04 was 8.45, in the year 2004-05 was 9.16, in the year 2005-06 is 17.0 and in the year 2006-07 is 10.51. INFERENCE : From the above table, it can be inferred that the liquid assets to total assets Ratio of the KSFC is gradually increasing year after year. Because of increase in liquid assets in 2005-06 and decreasing in the 2006-07. in the decrease total assets in the year 2006-07. GRAPH – 7 Graph Showing Liquid assets to total assets Ratios of KSFC from the year 2003-04 to 2007-08 Liquid Assets to Total Assets Ratio 18 16 14
Ratios
12 10 8 6 4 2 0 2002-03
2003-04
2004-05 Years
2005-06
2006-07
8. Liquidity Ratio : If it is decided to study the liquidity position of the concern, in order to highlight the relative strength of the concerns in meeting their current obligations to maintain sound liquidity and to pinpoint the difficulties if any in it, then liquidity ratios are calculated. These ratios are used to measure the fir’s ability to meet short term obligation.
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
TABLE - 8 Table Showing Liquidity Ratio of KSFC from the year 2003-04 to 2007-08 Liquid Assets Current Liabilities
Liquidity Ratio =
Liquid Assets : Cash and bank balances + Current Assets. Year
Liquid Assets
Current Liabilities
2002-03 2003-04 2004-05 2005-06 2006-07
15419.72 17544.80 19019.60 34517.42 19612.14
16518.47 11219.28 18577.85 12417.41 7816.77
Liquidity Ratio (Rupees in Lakhs) 0.93 1.56 1.02 2.78 2.51
ANALYSIS : The above table indicates that Liquidity ratio are, in the year 2002-03 was 0.93, in the year 2003-04 was 1.56, in the year 2004-05 was 1.02, in the year 2005-06 is 2.78 and in the year 2006-07 is 2.51 INFERENCE : From the above table, it can be inferred that the liquidity Ratio of the KSFC has been increasing in the current year i.e., 2005-06. Because liquid assets have been increased and current liability has decreased. in the 2006-07. in the decreasing liquid assets in the year 2006-07. GRAPH – 8 Graph Showing Liquidity Ratios of KSFC from the year 2003-04 to 2007-08
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
Liquidity Ratio 3 2.5
Ratios
2 1.5 1 0.5 0 2002-03
2003-04
2004-05
2005-06
2006-07
Years 9. Long term funds to Fixed assets Ratio : TABLE -9 Table Showing Long term fund to Fixed assets ratio of KSFC from the year 2003-04 to 2007-08 Fixed assets Ratio =
Share holders fund + Long term Loans Net Fixed assets
Year
Share holders fund + Long term Loans
Net Fixed assets
2002-03 2003-04 2004-05 2005-06 2006-07
22356.55 15654.55 15181.59 15123.49 15321.49
2199.76 1366.46 1022.14 821.85 748.21
Long term fund to Fixed assets ratio (Rupees in Lakhs) 10.16 11.45 14.85 18.40 20.48
ANALYSIS : The above table indicates that Long term funds to fixed assets ratio are, in the year 2002-03 was 10.16, in the year 2003-04 was 11.45, in the year 200405 was 14.85, in the year 2005-06 is 18.40 and in the year 2006-07 is 20.48
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
INFERENCE : From the above table, it can be inferred that the Long term funds to fixed assets Ratio of the KSFC has been increased and net fixed assets have been decreased in the year to year current year. GRAPH – 9 Graph Showing Long term funds to fixed assets Ratios of KSFC from the year 2003-04 to 2007-08 Long Term Funds to Fixed Assets Ratio 25
Ratios
20 15 10 5 0 2002-03
2003-04
2004-05
2005-06
Years
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
2006-07
A Study On Financial Analysis Of K.S.F.C
10. Share Holders Equity Ratio : TABLE -10 Table Showing Share Holders Equity ratio of KSFC from the year 2003-04 to 2007-08
Share Holder equity Ratio =
Share holders Equity Total Assets
Year
Share holders equity
Total assets
2002-03 2003-04 2004-05 2005-06 2006-07
12892.55 12892.55 12892.55 12892.55 12892.55
265422.95 207522.31 207557.29 203036.36 186612.11
Share Holder Equity ratio (Rupees in Lakhs) 0.048 0.062 0.062 0.064 0.069
ANALYSIS : The above table indicates that Share Holders equity ratio are, in the year 2002-03 was 0.048, in the year 2003-04 was 0.062, in the year 2004-05 was 0.062, in the year 2005-06 is 0.064 and in the year 2006-07 is 0.069 INFERENCE : From the above table, it can be inferred that the Share Holders equity Ratios of the KSFC are increasing gradually. Bust Share Holders equity is constant and decreasing in the total assets in the year 2006-07. But Share Holders equity ratio are increasing in year to year. GRAPH – 10 Graph Showing Share Holders Equity Ratios of KSFC from the year 2003-04 to 2007-08
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
Share Holders Equity Ratio 0.07 0.06 0.05
Ratios
0.04 0.03 0.02 0.01 0 2002-03 2003-04 2004-05 2005-06 2006-07 Years 11. Capital Gearing Ratio : The term ‘Capital Gearing Ratio’ is used to describe the relationship between fixed interest dividend bearing securities and the equity shareholders. It establishes the proportion between the interest or dividend payable funds and capital employed. It is useful when the objective it to show the effect of the used of fixed interest / dividend source of funds on the earning available to the equity shareholders. TABLE -11 Table Showing Capital Gearing ratio of KSFC from the year 2003-04 to 2007-08 Capital Gearing Ratio =
Fixed Interest bearing funds or dividend Equity Share Holder’s Fund
Year
Fixed Interest bearing funds
Equity Share holders Fund
2002-03 2003-04 2004-05 2005-06 2006-07
23889.30 18740.43 17670.37 16780.62 1411.66
13810.24 13810.24 13810.24 13810.24 13810.24
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
Capital Gearing Ratio (Rupees in Lakhs) 1.73 1.36 1.28 1.22 1.02
A Study On Financial Analysis Of K.S.F.C
ANALYSIS : The above table indicates that Capital Gearing ratio, in the year 2002-03 was 1.73, in the year 2003-04 was 1.36, in the year 2004-05 was 1.28, in the year 2005-06 is 1.22 and in the year 2006-07 is 1.02 INFERENCE : From the above table, it can be inferred that the Capital Gearing Ratios of the KSFC are decreasing year to year, due to constant equity share holders. But in the fixed interest bearing funds is decreasing in the year to year. GRAPH – 11 Graph Showing Capital Gearing Ratios of KSFC from the year 2003-04 to 2007-08
Capital Gearing Ratio 1.8 1.6 1.4
Ratio
1.2 1 0.8 0.6 0.4 0.2 0 2002-03 2003-04 2004-05 2005-06 2006-07 Years
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
12. Interest Coverage Ratio : Interest coverage ratio, also known as ‘debt service ratio’ or ‘fixed charges ratio’ establishes the relationship between the amount of net profit before deduction of interest and tax, and the fixed interest charges. TABLE -12 Table Showing Interest Coverage ratio of KSFC from the year 2003-04 to 2007-08 Interest Coverage Ratio =
Net Profit before interest, depreciation and Tax Interest Payable
Year
Net Profit before interest, depreciation and Tax
Interest Payable
2002-03 2003-04 2004-05 2005-06 2006-07
21131.98 23916.98 22347.22 21190.63 19571.40
23889.30 18740.43 17670.37 16780.62 14110.66
Interest coverage Ratio (Rupees in Lakhs) 0.88 1.27 1.26 1.26 1.39
ANALYSIS : The above table indicates that Interest Coverage ratio, in the year 2002-03 was 0.88, in the year 2003-04 was 1.27, in the year 2004-05 was 1.26, in the year 2005-06 is 1.26 and in the year 2006-07 is 1.39 INFERENCE : From the above table, it can be inferred that the Interest Coverage Ratios of the KSFC is decreased in the year 2003-04. But again there is a decrease in the last two years i.e. 2004-05 and 2005-06. In the again increase I the year 2006-07. GRAPH – 12 Graph Showing Interest Coverage Ratios of KSFC from the year 2003-04 to 2007-08
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
Interests Coverage Ratio 1.4 1.2
Ratio
1 0.8 0.6 0.4 0.2 0 2002-03 2003-04 2004-05 2005-06 2006-07 Years 13. Book Value Ratios : TABLE -13 Table Showing Book Value ratio of KSFC from the year 2003-04 to 2007-08
Book Value Ratio = Year 2002-03 2003-04 2004-05 2005-06 2006-07
Equity Capital + Reserves – Profit and Loss Debit Balance Total Number of equity Shares
Equity Capital + Reserves – Profit and Loss Debit Balance 12892.55 12892.55 12892.55 12892.55 12892.55
Total Number of equity Shares
Book Value Ratio (Rupees in Lakhs)
8029545 8029545 8029545 8029545 8029545
0.0016 0.0016 0.0016 0.0016 0.0016
ANALYSIS : The above table indicates that Book Value ratio, in the year 2002-03 was 0.0016, in the year 2003-04 was 0.0016, in the year 2004-05 was 0.0016, in the year 2005-06 is 0.0016 and in the year 2006-07 is 0.0016.
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
A Study On Financial Analysis Of K.S.F.C
INFERENCE : From the above table, it can be inferred that the Book Value Ratios of the KSFC is constant in all the five year, due to constant Equity shares, reserves and total number of equity shares issued. But there is no profit and loss debit balance. GRAPH – 13 Graph Showing Book Value Ratios of KSFC from the year 2003-04 to 2007-08
Ratio
Book Value Ratio 0.0018 0.0016 0.0014 0.0012 0.001 0.0008 0.0006 0.0004 0.0002 0 2002-03 2003-04 2004-05 2005-06 2006-07 Years
DEPT OF MANAGEMENT STUDIES, JSSATE BANGALORE
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