Ratio Analysis.docx

PROJECT REPORT ON “RATIO ANALYSIS AT AMARARAJA BATTERIES LIMITED (ARBL)” By Taniya S.Gupta

Submitted to

Savitribai Phule Pune University In partial fulfillment of Bachelors of Business Administration (BBA) Academic Session 2017-2018 Under the Guidance of Prof. Urmila Karale

Progressive Education Society’s MODERN COLLEGE OF ARTS, SCIENCE AND COMMERCE Business Administration Campus, Pune 05 Shivaji Nagar, Pune – 05

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ACKNOWLEDGEMENT

I, Taniya S.Gupta Place on the records with great pleasure and express my sincere and deep gratitude to the help and encouragement from those who are responsible for fetching me explore In-depth and provide with the fountain of valuable knowledge and experience that I have gained in the completion of those felicitations project.

I express my deepest gratitude to our guide Prof. URMILA KARALE extending her helping hands to me was almost important in completing the project. Also million sincere thanks to ask others faculty members of our college for providing inspiration throughout the project work.

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DECLARATION

I hereby declare that the Project Report entitled “A STUDY ON RATIO ANALYSIS AT AMARARAJA BATTERIES LIMITED(ARBL)” is a record of independent research work submitted by me to SRM University, Chennai, for developing the real time experience as well as award the degree of Master of Business Administration and has been carried out during the period of my study at SRM UNIVERSITY, Chennai, Under the guidance of Prof. Urmila Karale, Department of MBA.

PLACE: Chennai

(Taniya

S.Gupta)

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Table of Contents ACKNOWLEDGEMENT............................................................................................................ 2 DECLARATION ....................................................................................................................... 3 INTRODUCTION ..................................................................................................................... 6 ABOUT RATIO ANALYSIS .................................................................................................................6 DEFINITION: ...................................................................................................................................6

NEED OF THE STUDY .............................................................................................................. 7 SCOPE OF THE STUDY ............................................................................................................ 8 OBJECTIVE’S OF STUDY .......................................................................................................... 9 REVIEW OF LITERATURE....................................................................................................... 10 FINANCIAL ANALYSIS .................................................................................................................... 10 Objectives of the financial analysis...................................................................................................... 10 Parties interested in financial analysis ................................................................................................ 10 Significance of financial analysis .......................................................................................................... 11 METHODS OF ANALYSIS:...................................................................................................................... 13 NATURE OF RATIO ANALYSIS ............................................................................................................... 13 STANDARDS OF COMPARISON ............................................................................................................ 14

Research Methodology ........................................................................................................ 29 LIMITATIONS ....................................................................................................................... 31 COMPANY PROFILE.............................................................................................................. 32 CULTURE AND ENVIRONMENT ...................................................................................................... 32 QUALITY POLICY ........................................................................................................................... 33 RESEARCH & DEVELOPMENT ......................................................................................................... 34 FUTURE PLAN OF ACTION ............................................................................................................. 35 AWARDS ...................................................................................................................................... 36 AMARA RAJA GROUP OF COMPANIES ........................................................................................... 36 INDUSTRIAL BATTERY DIVISION (IBD) ............................................................................................ 37 2. PLATE PREPARATION ................................................................................................................ 38 3. CALL ASSEMBLY ........................................................................................................................ 38 4. FORMATION ............................................................................................................................. 38 AUTOMOTIVE BATTERY DIVISION (ABD) ........................................................................................ 38 Capacity ....................................................................................................................................... 39 Products ....................................................................................................................................... 39 Customers .................................................................................................................................... 40 COMPETITORS .............................................................................................................................. 40 MAJOR USERS .............................................................................................................................. 40 3. POWER SYSTEMS ............................................................................................................................. 41 4. UPS SYSTEM ..................................................................................................................................... 41 5. TRACTION......................................................................................................................................... 41 6. PETROCHEMICALS............................................................................................................................ 41 7. DEFENCE .......................................................................................................................................... 41 PRODUCTION PROCESS ................................................................................................................. 41

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DATA ANALYSIS AND INTERPRETATIONS.............................................................................. 43 FINDINGS ............................................................................................................................ 56 SUGGESTIONS ..................................................................................................................... 59 Conclusion........................................................................................................................... 60 BIBLOGRAPHY ..................................................................................................................... 61 Appendix............................................................................................................................. 62

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INTRODUCTION ABOUT RATIO ANALYSIS The ratio analysis is the most powerful tool of financial analysis. Several ratios calculated from the accounting data can be grouped into various classes according to financial activity or function to be evaluated.

DEFINITION: “The indicate quotient of two mathematical expressions “and as “The relationship between two or more things. “It evaluates the financial position and performance of the firm. As started in the beginning many diverse groups of people are interested in analyzing financial information to indicate the operating and financial efficiency and growth of firm. These people use ratios to determine those financial characteristics of firm in which they interested with the help of ratios one can determine. •

The ability of the firm to meet its current obligations.

•

The extent to which the firm has used its long-term solvency by borrowing funds.

•

The efficiency with which the firm is utilizing its assets in generating the sales revenue.

•

The overall operating efficiency and performance of firm. The information contained in these statements is used by management, creditors,

investors and others to form judgment about the operating performance and financial position of firm. Uses of financial statement can get further insight about financial strength and weakness of the firm if they properly analyze information reported in these statements. Management should be particularly interested in knowing financial strength of the firm to make their best use and to be able to spot out financial weaknesses of the firm to take suitable

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corrective actions. The further plans firm should be laid down in new of the firm’s financial strength and weaknesses. Thus financial analysis is the starting point for making plans before using any sophisticated forecasting and planning procedures. Understanding the past is a prerequisite for anticipating the future.

NEED OF THE STUDY

The prevalent educational system providing the placement training at an industry being a part of the curriculum has helped in comparison of theoretical knowledge with practical system. It has led to note the convergences and divergence between theory and practice. The study enables us to have access to various facts of the organization. It helps in understanding the needs for the importance and advantage of materials in the organization, the study also helps to exposure our minds to the integrated materials management the various procedures, methods and technique adopted by the organization. The study provides knowledge about how the theoretical aspects are put in the organization in terms of described below  To pay wages and salaries.   For the purchase of raw materials, spares and components parts.   To incur day-to-day expenses.   To meet selling costs such as packing, advertising.   To provide credit facilities to customers.   To maintain inventories and raw materials, work-in-progress and finished stock.

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SCOPE OF THE STUDY

The scope of the study is limited to collecting financial data published in the annual reports of the company every year. The analysis is done to suggest the possible solutions. The study is carried out for 4 years (2015 – 18). Using the ratio analysis, firms past, present and future performance can be analyzed and this study has been divided as short term analysis and long term analysis. The firm should generate enough profits not only to meet the expectations of owner, but also to expansion activities.

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OBJECTIVE’S OF STUDY

1. To study and analyze the financial position of the Company through ratio analysis.

2. To suggest measures for improving the financial performance of organization.

3. To analyze the profitability position of the company.

4. To assess the return on investment.

5. To analyze the asset turnover ratio.

6. To determine the solvency position of company.

7. To suggest measures for effective and efficient usage of inventory.

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REVIEW OF LITERATURE

FINANCIAL ANALYSIS Financial analysis is the process of identifying the financial strengths and weakness of the firm. It is done by establishing relationships between the items of financial statements viz., balance sheet and profit and loss account. Financial analysis can be undertaken by management of the firm, viz., owners, creditors, investors and others.

Objectives of the financial analysis Analysis of financial statements may be made for a particular purpose in view. 1. To find out the financial stability and soundness of the business enterprise.

2. To assess and evaluate the earning capacity of the business

3. To estimate and evaluate the fixed assets, stock etc., of the concern.

4. To estimate and determine the possibilities of future growth of business.

5. To assess and evaluate the firm’s capacity and ability to repay short and long term loans

Parties interested in financial analysis The users of financial analysis can be divided into two broad groups.

Internal users

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1. Financial executives

2. Top management

External users 1. Investors

2. Creditor.

3. Workers

4. Customers

5. Government

6. Public

7. Researchers

Significance of financial analysis Financial analysis serves the following purpose:

To know the operational efficiency of the business: The financial analysis enables the management to find out the overall efficiency of the firm. This will enable the management to locate the weak Spots of the business and take necessary remedial action.

Helpful in measuring the solvency of the firm:

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The financial analysis helps the decision makers in taking appropriate decisions for strengthening the short-term as well as long-term solvency of the firm.

Comparison of past and present results: Financial statements of the previous years can be compared and the trend regarding various expenses, purchases, sales, gross profit and net profit can be ascertained.

Helps in measuring the profitability:

Financial statements show the gross profit, & net profit.

Inter‐firm comparison: The financial analysis makes it easy to make inter-firm comparison. This comparison can also be made for various time periods.

Bankruptcy and Failure: Financial statement analysis is significant tool in predicting the bankruptcy and the failure of the business enterprise. Financial statement analysis accomplishes this through the evaluation of the solvency position.

Helps in forecasting: The financial analysis will help in assessing future development by making forecasts and preparing budgets.

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METHODS OF ANALYSIS:

A financial analyst can adopt the following tools for analysis of the financial statements. These are

also termed as methods of financial analysis. A. Comparative statement analysis B. Common-size statement analysis C. Trend analysis D. Funds flow analysis E. Ratio analysis

NATURE OF RATIO ANALYSIS

Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as "the indicated quotient of mathematical expression" and as "the relationship between two or more things". A ratio is used as benchmark for evaluating the financial position and performance of the firm. The relationship between two accounting figures, expressed mathematically, is known as a financial ratio. Ratio helps to summarizes large quantities of financial data and to make qualitative judgment about the firm's financial performance. The persons interested in the analysis of financial statements can be grouped under three head owners (or) investors who are desired primarily a basis for estimating earning capacity. Creditors who are concerned primarily with Liquidity and ability to pay interest and redeem loan

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within a specified period. Management is interested in evolving analytical tools that will measure costs, efficiency, liquidity and profitability with a view to make intelligent decisions.

STANDARDS OF COMPARISON The ratio analysis involves comparison for an useful interpretation of the financial statements. A single ratio in itself does not indicate favorable or unfavorable condition. It should be compared with some standard. Standards of comparison are: 1. Past Ratios

2. Competitor's Ratios

3. Industry Ratios

4. Projected Ratios

Past Ratios: Ratios calculated from the past financial statements of the same firm. Competitor's Ratios: Ratios of some selected firms, especially the most progressive and successful competitor at the same point in time.

Industry Ratios: Ratios of the industry to which the firm belongs. Projected Ratios: Ratios developed using the projected financial statements of the same firm.

TIME SERIES ANALYSIS The easiest way to evaluate the performance of a firm is to compare its present ratios with past ratios. When financial ratios over a period of time are compared, it is known as the time series

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analysis or trend analysis. It gives an indication of the direction of change and reflects whether the firm's financial performance has improved, deteriorated or remind constant over time.

CROSS SECTIONAL ANALYSIS Another way to comparison is to compare ratios of one firm with some selected firms in the industry at the same point in time. This kind of comparison is known as the cross-sectional analysis. It is more useful to compare the firm's ratios with ratios of a few carefully selected competitors, who have similar operations.

INDUSTRY ANALYSIS To determine the financial conditions and performance of a firm. Its ratio may be compared with average ratios of the industry of which the firm is a member. This type of analysis is known as industry analysis and also it helps to ascertain the financial standing and capability of the firm & other firms in the industry. Industry ratios are important standards in view of the fact that each industry has its characteristics which influence the financial and operating relationships.

TYPES OF RATIOS Management is interested in evaluating every aspect of firm's performance. In view of the requirement of the various users of ratios, we may classify them into following four important categories:

1. Liquidity Ratio

2. Leverage Ratio

3. Activity Ratio

4. Profitability Ratio

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3.1 Liquidity Ratio It is essential for a firm to be able to meet its obligations as they become due. Liquidity Ratios help in establishing a relationship between cast and other current assets to current obligations to provide a quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity and also that it does not have excess liquidity. A very high degree of liquidity is also bad, idle assets earn nothing. The firm's funds will be unnecessarily tied up in current assets. Therefore, it is necessary to strike a proper balance between high liquidity. Liquidity ratios can be divided into three types:

3.1.1 Current Ratio 3.1.2 Quick Ratio 3.1.3 Cash Ratio

3.1.1 Current Ratio Current ratio is an acceptable measure of firm’s short-term solvency Current assets includes cash within a year, such as marketable securities, debtors and inventors. Prepaid expenses are also included in current assets as they represent the payments that will not made by the firm in future. All obligations maturing within a year are included in current liabilities. These include creditors, bills payable, accrued expenses, short-term bank loan, income-tax liability in the current year.

The current ratio is a measure of the firm's short term solvency. It indicated the availability of current assets in rupees for every one rupee of current liability. A current ratio of 2:1 is considered satisfactory. The higher the current ratio, the greater the margin of safety; the larger the amount of current assets in relation to current liabilities, the more the firm's ability to meet its obligations. It is a cured -and -quick measure of the firm's liquidity. Current ratio is calculated by dividing current assets and current liabilities.

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Current Assets Current Ratio =

________________ Current Liabilities

3.1.2 Quick Ratio Quick Ratio establishes a relationship between quick or liquid assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Cash is the most liquid asset, other assets that are considered to be relatively liquid asset and included in quick assets are debtors and bills receivables and marketable securities (temporary quoted investments).

Inventories are converted to be liquid. Inventories normally require some time for realizing into cash; their value also has a tendency to fluctuate. The quick ratio is found out by dividing quick assets by current liabilities. Current assets - Inventories Quick Ratio =

_________________________ Current Liabilities

Generally, a quick ratio of 1:1 is considered to represent a satisfactory current financial condition. Quick ratio is a more penetrating test of liquidity than the current ratio, yet it should be used cautiously. A company with a high value of quick ratio can suffer from the shortage of funds

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if it has slow- paying, doubtful and long duration outstanding debtors. A low quick ratio may really be prospering and paying its current obligation in time.

3.1.3 Cash Ratio Cash is the most liquid asset; a financial analyst may examine Cash Ratio and its equivalent current liabilities. Cash and Bank balances and short-term marketable securities are the most liquid assets of a firm, financial analyst stays look at cash ratio. Trade investment is marketable securities of equivalent of cash. If the company carries a small amount of cash, there is nothing to be worried about the lack of cash if the company has reserves borrowing power. Cash Ratio is perhaps the most stringent Measure of liquidity. Indeed, one can argue that it is overly stringent. Lack of immediate cash may not matter if the firm stretch its payments or borrow money at short notice.

Cash and bank balances + Current Investment Cash Ratio= --------------------------------------------------------------------

Current Liabilities

3.2 LEVERAGE RATIOS Financial leverage refers to the use of debt finance while debt capital is a cheaper source of finance: it is also a riskier source of finance. It helps in assessing the risk arising from the use of debt capital. Two types of ratios are commonly used to analyze financial leverage. 1. Structural Ratios &

2. Coverage ratios.

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Structural Ratios are based on the proportions of debt and equity in the financial structure of firm. Coverage Ratios shows the relationship between Debt Servicing, Commitments and the sources

for meeting these burdens. The short-term creditors like bankers and suppliers of raw material are more concerned with the firm's current debt-paying ability. On the other hand, long-term creditors like debenture holders, financial institutions are more concerned with the firm's long-term financial strength. To judge the long-term financial position of firm, financial leverage ratios are calculated. These ratios indicated mix of funds provided by owners and lenders. There should be an appropriate mix of Debt and owner's equity in financing the firm's assets. The process of magnifying the shareholder's return through the use of Debt is called "financial leverage" or "financial gearing" or "trading on equity". Leverage Ratios are calculated to measure the financial risk and the firm's ability of using Debt to share holder's advantage. Leverage Ratios can be divided into five types.

3.2.1 Debt equity ratio. 3.2.2 Debt ratio. 3.2.3 Interest coverage ratio 3.2.4 Proprietary ratio. 3.2.5 Capital gearing ratio

3.2.1 Debt equity ratio It indicates the relationship describing the lenders contribution for each rupee of the owner's contribution is called debt-equity ratio. Debt equity ratio is directly computed by dividing

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total debt by net worth. Lower the debt-equity ratio, higher the degree of protection. A debt-equity ratio of 2:1 is considered ideal. The debt consists of all short term as well as long-term and equity consists of net worth plus preference capital plus Deferred Tax Liability.

Long term Debts Debt Equity Ratio = ---------------------Share holder funds (Equities)

3.2.2 Debt ratio Several debt ratios may used to analyze the long-term solvency of a firm. The firm may be interested in knowing the proportion of the interest-bearing debt in the capital structure. It may, therefore, compute debt ratio by dividing total total debt by capital employed on net assets. Total debt will include short and long-term borrowings from financial institutions, debentures/bonds, deferred payment arrangements for buying equipment, bank borrowings, public deposits and any other interest-bearing loan. Capital employed will include total debt net worth. Debt Debt Ratio = ---------Equity

3.2.3 Interest Coverage Ratio

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The interest coverage ratio or the time interest earned is used to test the firms’ debt servicing capacity. The interest coverage ratio is computed by dividing earnings before interest and taxes by interest charges. The interest coverage ratio shows the number of times the interest charges are covered by funds that are ordinarily available for their payment. We can calculate the interest average ratio as earnings before depreciation, interest and taxes divided by interest. EBIT Interest Coverage ratio = --------------Interest

3.2.4 Proprietary ratio The total shareholder's fund is compared with the total tangible assets of the company. This ratio indicates the general financial strength of concern. It is a test of the soundness of financial structure of the concern. The ratio is of great significance to creditors since it enables them to find out the proportion of share holders funds in the total investment of business.

Net worth Proprietary Ratio = -------------------------------------- x 100 Total tangible assets

3.2.5 Capital gearing ratio: 21

This ratio makes an analysis of capital structure of firm. The ratio shows relationship between equity share capital and the fixed cost bearing i.e., preference share capital and debentures.

Equity capital Capital gearing ratio = ----------------------------------------------P.S capital +Debentures +Loans

3.3 ACTIVITY RATIOS Turnover ratios also referred to as activity ratios or asset management ratios, measure how efficiently the assets are employed by a firm. These ratios are based on the relationship between the level of activity, represented by sales or cost of goods sold and levels of various assets. The improvement turnover ratios are inventory turnover, average collection period, receivable turn over, fixed assets turnover and total assets turnover. Activity ratios are employed to evaluate the efficiency with which the firm manages and utilize its assets. These ratios are also called turnover ratios because they indicate the speed with which assets are being converted or turned over into sales. Activity ratios thus involve a relationship between sales and assets. A proper balance between sales and assets generally reflects that asset utilization.

Activity ratios are divided into four types: 3.3.1 Total capital turnover ratio 3.3.2 Working capital turnover ratio 3.3.3 Fixed assets turnover ratio 3.3.4 Stock turnover ratio

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3.3.1 Total capital turnover ratio: This ratio expresses relationship between the amounts invested in this assets and the resulting in terms of sales. This is calculated by dividing the net sales by total sales. The higher ratio means better utilization and vice-versa. Some analysts like to compute the total assets turnover in addition to or instead of net assets turnover. This ratio shows the firm's ability in generating sales from all financial resources committed to total assets. Sales Total assets turnover = ---------------------------Capital employed.

3.3.2 Working capital turnover ratio: This ratio measures the relationship between working capital and sales. The ratio shows the number of times the working capital results in sales. Working capital as usual is the excess of current assets over current liabilities. The following formula is used to measure the ratio: Sales Working capital turnover ratio = ------------------------------Working capital

3.3.3 Fixed asset turnover ratio: The firm may which to know its efficiency of utilizing fixed assets and current assets separately. The use of depreciated value of fixed assets in computing the fixed assets turnover may render comparison of firm's performance over period or with other firms.

The ratio is supposed to measure the efficiency with which fixed assets employed a high ratio indicates a high degree of efficiency in asset utilization and a low ratio reflects inefficient 23

use of assets. However, in interpreting this ratio, one caution should be borne in mind, when the fixed assets of firm are old and substantially depreciated, the fixed assets turnover ratio tends to be high because the denominator of ratio is very low Net sales Fixed asset turnover ratio = ------------------------Fixed assets

3.3.4 Stock turnover ratio Stock turnover ratio indicates the efficiency of firm in producing and selling its product. It is calculated by dividing the cost of goods sold by the average stock. It measures how fast the inventory is moving through the firm and generating sales. The stock turnover ratio reflects the efficiency of inventory management. The higher the ratio, the more efficient the management of inventories and vice versa .However, this may not always be true. A high inventory turnover may be caused by a low level of inventory which may result if frequent stock outs and loss of sales and customer goodwill. Cost of goods sold Stock turnover ratio = -----------------------------Average stock Opening stock + Closing stock Average stock

= --------------------------------------------

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3.4 PROFITABILITY RATIOS

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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 maximizing profits. Profit is the difference between revenues and expenses over a period of time. Profit is the ultimate 'output' of a company and it will have no future if it fails to make sufficient profits. The financial manager should continuously evaluate the efficiency of company in terms of profits. The profitability ratios are calculated to measure the operating efficiency of company. Creditors want to get interest and repayment of principal regularly. Owners want to get a required rate of return on their investment. Generally, two major types of profitability ratios are calculated: •

Profitability in relation to sales

•

Profitability in relation to investment

Profitability Ratios can be divided into six types: 3.4.1 Gross profit ratio 3.4.2 Operating profit ratio 3.4.3 Net profit ratio 3.4.4 Return on investment 3.4.5 Earns per share 3.4.6 Operating expenses ratio

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3.4.1 Gross profit ratio First profitability ratio in relation to sales is the gross profit margin the gross profit margin reflects. The efficiency with which management produces each unit of product. This ratio indicates the average spread between the cost of goods sold and the sales revenue. A high gross profit margin is a sign of good management. A gross margin ratio may increase due to any of following factors: higher sales prices cost of goods sold remaining constant, lower cost of goods sold, sales prices remaining constant. A low gross profit margin may reflect higher cost of goods sold due to firm's inability to purchase raw materials at favorable terms, inefficient utilization of plant and machinery resulting in higher cost of production or due to fall in prices in market. This ratio shows the margin left after meeting manufacturing costs. It measures the efficiency of production as well as pricing. To analyze the factors underlying the variation in gross profit margin, the proportion of various elements of cost (Labor, materials and manufacturing overheads) to sale may studied in detail. Gross profit Gross profit ratio = ------------------------x 100 Net sales

3.4.2 Operating profit ratio This ratio expresses the relationship between operating profit and sales. It is worked out by dividing operating profit by net sales. With the help of this ratio, one can judge the managerial efficiency which may not be reflected in the net profit ratio. Operating profit Operating profit ratio = ---------------------------x 100 Net sales

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3.4.3 Net profit ratio Net profit is obtained when operating expenses, interest and taxes are subtracted from the gross profit. Net profit margin ratio established a relationship between net profit and sales and indicates management's efficiency in manufacturing, administering and selling products. This ratio also indicates the firm's capacity to withstand adverse economic conditions. A firm with a high net margin ratio would be in an advantageous position to survive in the face of falling selling prices, rising costs of production or declining demand for product This ratio shows the earning left for share holders as a percentage of net sales. It measures overall efficiency of production, administration, selling, financing. Pricing and tax management. Jointly considered, the gross and net profit margin ratios provide a valuable understanding of the cost and profit structure of the firm and enable the analyst to identify the sources of business efficiency / inefficiency.

Net Profit x 100

Net Profit Ratio = ---------------------------

Net sales

3.4.4 Return on investment: This is one of the most important profitability ratios. It indicates the relation of net profit with capital employed in business. Net profit for calculating return of investment will mean the net profit before interest, tax, and dividend. Capital employed means long term funds.

E.B.I.T x 100

Return on investment = ----------------------------------------

Capital employed

3.4.5 Earnings per share

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This ratio is computed by earning available to equity share holders by the total amount of equity share outstanding. It reveals the amount of period earnings after taxes which occur to each equity share. This ratio is an important index because it indicates whether the wealth of each share holder on a per share basis as changed over the period. Net profit x 100

Earnings per share = ------------------------------------

Number of equity shares

3.4.6 Operating expenses ratio It explains the changes in the profit margin ratio. A higher operating expenses ratio is unfavorable since it will leave a small amount of operating income to meet interest, dividends. Operating expenses ratio is a yardstick of operating efficiency, but it should be used cautiously. It is affected by a number of factors such as external uncontrollable factors, internal factors. This ratio is computed by dividing operating expenses by sales. Operating expenses equal cost of goods sold plus selling expenses and general administrative expenses by sales. Operating expenses x 100

Operating expenses ratio = -----------------------------

Sales

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Research Methodology

Research Design In view of the objects of the study listed above an exploratory research design has been adopted. Exploratory research is one which is largely interprets and already available information and it lays particular emphasis on analysis and interpretation of the existing and available information. •

To know the financial status of the company.

•

To know the credit worthiness of the company.

•

To offer suggestions based on research finding.

Data Collection Methods Primary Data Information collected from internal guide and finance manager. Primary data is first hand information. Secondary Data Company balance sheet and profit and loss account. secondary data is second hand information.

Data Collection Tools

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To analyze the data acquire from the secondary sources “Ratio Analysis” The scope of the study is defined below in terms of concepts adopted and period under focus. First the study of Ratio Analysis is confined only to the Amarraja Batteries Limited. Secondly the study is based on the annual reports of the company for a period of 4 years from 2014-15 to 2017-18 the reason for restricting the study to this period is due time constraint.

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LIMITATIONS



The study was limited to only four years Financial Data.



The study is purely based on secondary data which were taken primarily from Published annual reports of Amararaja batteries Ltd.,



There is no set industry standard for comparison and hence the inference is made on general standards.



The ratio is calculated from past financial statements and these are not indicators of future.



The study is based on only on the past records.



Non availability of required data to analysis the performance.



The short span of the time provided also one of limitations.

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COMPANY PROFILE Amara Raja Batteries (ARBL) incorporated under the companies Act, 1956 in 13th February 1985, and converted into public Limited Company on 6th September 1990. The chairman and Managing Director of the company is “Sri Gala Ramachandra Naidu”, ARBL is a first company in India, which manufactures Values regulated Lead Acid (VRLA) Batteries. The main objectives of the company are a manufacturing of good quality of “Sealed Maintenance Free” (SMF) acid batteries. The company is setting up to Rs.1, 920 lakhs plant is in 185 acres in Karakambadi village, Renigunta Mandal. The project site is notified under “B” category. The company has the clear-cut policy of direct selling without any intermediate. So they have set up six branches and are operated by corporate operations office located in Chennai. The company has virtual monopoly in higher A.H.(Amp Hour) rating Market its product VRLA . It is also having the facility for industrial and automotive batteries. Amara Raja is 5 ‘S ’Company and its aim are to improve the work place environment by using 5‘S techniques which is A systematic and rational approach to workplace organization and methodical house keeping with a sense of purpose, consisting of the following five elements

CULTURE AND ENVIRONMENT ™ Amara Raja is putting a number of HRD initiatives to foster a spirit of togetherness and a culture of meritocracy. Involving employees at all levels in building organizational support plans and in evolving our vision for the organization.

™ ARBL encourages initiative and growth of young talent allows the organization to develop innovation solution and ideas.

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™ Benchmark pollution control measures, energy conversation measures, waste reduction schemes, massive green belt development programs, employee health monitoring and industrial safety programs have helped ARBL to take further environment management program.

™ Amara Raja has now targeted to secure the ISO 14001 certification.

QUALITY POLICY

ARBL’s main aim is to achieve customer satisfaction through the collective commitment of employees in design; manufacture and marketing of reliable power systems, batteries, allied products and services. To accomplish above, ARBL focus on

™ Establishing superior specifications for our products and processes.

™ Employing state-of-the-art technologies and robust design principles.

™ Striving for continuous improvements in process and product quality.

™ Implementing methods and techniques to monitor quality levels.

™ Providing prompt after sales service.

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RESEARCH & DEVELOPMENT Specific areas in which the company carries out R&D are; ™ New product development.

™ Process technology up gradation.

™ Application engineering for new market place.

™ Quality improvement.

™ Developed 4v/200 AH batteries.

™ Design optimization of higher AH batteries for DOT application.

™ Design optimization of batteries 92v/1285 AH for TL/AC-Railway application.

™ Formation cycle optimization results in reduced duration and rejection.

™ Chemist curing cycle optimization.

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™ Manufacture of automobile battery for four-wheeler vehicles.

FUTURE PLAN OF ACTION ™ Commercialization of motorcycle batteries.

™ Development of new range high integrity VRLA cell design.

™ Establishment of product for new application segment.

™ Studies on paste additives to enhance the battery performance.

™ In-depth evaluation of metal surface treatment chemical to reduce the process cycle time.

™ Validating alternative grades of propylene to conserve energy and to improve productivity. MILE STONES YEAR

Mile stone

1997

100 crores turnover

1997

ISO-9001 Accreditation

1999

S-9000 Accreditation

2002

SO-14001 Certification

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AWARDS ™ “The spirit of Excellence”- Awarded by academy of fine arts, Tirupati.

o “Best Entrepreneur of the year 1998”-awarded by Hyderabad Management Association.

o “Industrial Economist Business Excellence Award – 1991”- Awarded by the industrial Economist, Chennai.

o “Excellence Award”-by institution of economic studies (ES), New Delhi.

o “Udyog Rattan Award”- by institution of economic studies, New Delhi.

o “QI CERTIFICATE” –2002 - By FORD Company

AMARA RAJA GROUP OF COMPANIES o AMARA RAJA POWER SYSTEMS PRIVATE Ltd. (ARPSL), Karakambadi, Tirupati.

o MANGAL PRECISION PRODUCTS PRIVATE Ltd1. (MPPL1), Karakambadi, Tirupati.

o MANGAL PRECISION PRODUCTS PRIVATE Ltd2. (MPPL2), Petamitta, Chittoor.

o AMARA RAJA ELECTRONICS PRIVATE LIMITED (AREPL), Dighavamgham, Chittoor.

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o GALLA FOODS PRIVATE LIMITED (GFPL), Puthalapattu Mandal, Chittoor.

This ratio is calculated by dividing sales in to current assets. This ratio expressed the number of times current assets are being turn over in stated period. This ratio shows how well the current assets are being used in business. The higher ratio is showing that better utilization of the current assets another a low ratio indicated that current assets are not being efficiently utilized.

INDUSTRIAL BATTERY DIVISION (IBD) Amara Raja has become the benchmark in the manufacturer of industrial batteries. India is one of the largest and fastest growth markets for industrial batteries in the world. Amara Raja is leading in the front, with an 80% market share is stand by VRAL batteries point of view. It is also having the facility for production plastic components. ARBL id the first company in India to manufacture VRLA (SMF) Batteries. The initial investment of the company has Rs.1920 lakhs; the total land is around 18 acres in Karambadi village, Renigunta Mandal. The project site is notified under ‘B’ category. Capacity The capacity per the year 2005-2006 of IBD is 3, 70,000 cells per annum. Products Amara Raja being the first entrant in this industry and has the privilege of pioneering VRLA technology in India. Amara Raja has established itself as a reliable supplier of high quality products to major segments like Telecom, Railways and power.

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2. PLATE PREPARATION Using lead oxide production in earlier stage positive and negative paste is prepared with addition of sulphuric acid and water. These pastes are applied to respective grids using industrial fasting machines.

3. CALL ASSEMBLY Here positive and negative grids are separated by a sheet of fibreglass mat bush bars are welded and as assembled into a jar or container to form battery cells. Then these cells are assembled according to the customer’s specification into battery sets or systems.

4. FORMATION In this process cells are filled with the electrolyte (surphuric acid) and then the set is charged and discharged repeatedly, after final charging the battery comes out ready to be used. Competitors The Major competitors for Amara Raja Batteries are “Exude industries Ltd, and GNB”.

AUTOMOTIVE BATTERY DIVISION (ABD) ARBL has inaugurated its new automotive plant at Karakambadi in Tirupati on September 24th, 2001. This plan is a part of the most completely integrated battery manufacturing facility in India with all critical components, including plastics sourced in-house from existing facilities on site. In this project, Amara Raja’s strategic alliance partners Johnson Control Inc., of USA have

38

closely worked technology and plant engineering. It is also having the facility for producing plastic components required for automotive batteries.

Capacity With an existing production capacity of 5 lakhs units of automotive batteries, the new Greenfield plant will now be able to produce 1 million batteries per annum. This is the first phase in the enhancement of Amara Raja’s production capacity, for this the company has invested Rs.45 crores and the next phase, at an additional cost of Rs.25 crores, for this the production capacity will be increase to 2 million units and the company has estimated to complete around 3 years, after that ARBL will become the single largest battery of manufacturer in Asia. The fiscal year 20052006’s capacity Of ABD is 2.2 million numbers of batteries per year.

Products The products of ABD are Amaron Hi-way

Amaron Harvest

Amaron shield

Amaron Highlife The plastic products of ABD are”jars” and “jar covers”.

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Customers ARBL has prestigious OEM (Original Equipment Manufacture) clients like FORD, GENERAL MOTORS, DAEWOO MOTORS, MERCEDES BENZ, DAIMLER CHRYSLER, MARUTI UDYOG LTD., premier Auto Ltd., and recent acquired a preference supplier alliance with ASHOK LEYLAND, HINDUSTAN MOTORS, TELCO, MAHINDRA & MAHINDRA and SWARAJ MAZDA.

COMPETITORS EXIDE

PRESTOLITE

AMCO.

MAJOR USERS

1. RAILWAYS Train lighting air conditioning, diesel engine starting, signaling systems, control systems, emergency breaking systems, and telecommunications. 2. TELECOMMUNICATION Central office power plants, microwave repeaters station, RAX in public building, emergency lighting system at airports, fire alarm system etc.,

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3. POWER SYSTEMS Switch gear control systems, powerhouse control systems, rural street lighting etc.

4. UPS SYSTEM Back up power to computers in progress control systems in industry etc.

5. TRACTION Forklift trucks, earth moving machinery, mining locomotives and road vehicles etc.

6. PETROCHEMICALS Off—share and no—shore oil exploration lighting systems, security systems etc.

7. DEFENCE Defence communication, aircraft and helicopter ground starting, stationary and mobile diesel engine starting etc.

PRODUCTION PROCESS The process for the production of lead acid batteries consists essentially of five operations described below 1. GRID CASTING

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In the process grids to hold the active materials are made. Battery grids are produced using microprocessor-casting machines with patented alloys. Different sizes of moulds are used to get the required size of grids. 2. PLATE PREPARATION Using lead oxide production in earlier stage positive and negative paste is prepared with addition of sulphuric acid and water. These pastes are applied to respective grids using industrial fasting machines. 3. CALL ASSEMBLY Here positive and negative grids are separated by a sheet of fibreglass mat bush bars are welded and as assembled into a jar or container to form battery cells. Then these cells are assembled according to the customer’s specification into battery sets or systems. 4. FORMATION In this process cells are filled with the electrolyte (surphuric acid) and then the set is charged and discharged repeatedly, after final charging the battery comes out ready to be used. 5. TESTING & INSPECTION Testing the battery is discharged to the customer it is tested for quality specifications.

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DATA ANALYSIS AND INTERPRETATIONS 4.1 LIQUIDITY RATIO’S 4.1.1 CURRENT RATIO The ratio between all current assets and all current liabilities; another way of expressing liquidity. It is a measure of the firm’s short-term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. A ratio of greater than one means that the firm has more current assets than current claims against them. Current Assets Current ratio = ----------------------------------------Current Liabilities Table 4.1.1 Current ratio Year

Current Assets

Current Liabilities

Current Ratio

2015

727.04

450.5

1.61

2016

721.79

635.96

1.13

2017

783.03

828.41

0.95

2018

1031.05

1071.62

0.96

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Current Ratio 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 1

2

3

4

Interpretation: The standard norm for current ratio is 2:1. During the year 2015 the ratio is 1.61 and it has decreased to 0.96 by 2018. T he ratio above was standard all throughout the years from 2015 2018. So the ratio was satisfactory.

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4.1.2. Quick ratio Quick ratio establishes a relationship between quick, or liquid, assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value.

Current Assets – Inventories Quick Ratio = _______________ Current liabilities Table 4.1.2 Quick Ratio Year

Current Assets

Inventory

Current Liabilities

Quick Ratio

2015

727.04

418.13

450.5

0.69

2016

721.79

601.65

635.96

0.19

2017

783.03

816.95

828.41

-0.04

2018

1031.05

1049.71

1071.62

-0.02

Quick Ratio 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 -0.10

1

2

3

4

Interpretation: The standard norm for quick ratio is 1:1. During the year 2015 the ratio is 0.69 and it has decreased to -0.02 by 2018. The ratio above was standard during 2015 – 16 but went worst during 2017 - 18. So the ratio was not satisfactory.

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4.1.3. Cash ratio: The ratio between c ash plus marketable securities and current liabilities. Cash + Bank balances Cash Ratio = ___ _ ___________ Current liabilities Table 4.1.3 Cash Ratio Year

Cash + Bank

Current Liabilities

Cash Ratio

2015

222.17

450.5

0.49

2016

150.26

635.96

0.24

2017

170.92

828.41

0.21

2018

111.28

1071.62

0.10

Cash Ratio 0.60 0.50 0.40 0.30 0.20 0.10 0.00 1

2

3

4

Interpretation: In all the above years the absolute cash ratio is very low. The standard norm for absolute quick ratio is 1:2 the company is failed in keeping sufficient Cash & Bank Balances and Marketable Securities.

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4.1.4 NET WORKING CAPITAL RATIO: The difference between current assets and current liabilities excluding short-term bank borrowing is called net working capital or net current assets.

Net working capital Net working capital ratio =

____ ____________

Net assets Table 4.1.4 Net working capital ratio Year

Working Capital

Assets

WC Ratio

2015

86.32

727.04

0.12

2016

0

721.79

0.00

2017

240.25

783.03

0.31

2018

226.38

1031.05

0.22

Working Capital Ratio 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 1

2

3

4

Interpretation: Net Working Capital ratio is 0.12 in 2016 and was increased to 0.31 in the 2017. From that year the ratio decreased again to 0.22 in 2018 depicting that condition of business working capital is not shortage.

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4.2 LEVERAGE RATIOS 4.2.1 Debt Ratio If the firm may be Interested in knowing the proportion of the interest bearing debt in the capital structure. Total Debt Debt ratio = ----------------------------------------Total Debt + Net Worth Table 4.2.1 Debt ratio Year

Total Debt

Net worth

Debt Ratio

2015

74.14

1699.57

0.04

2016

72.47

2101.64

0.03

2017

69.01

2593.07

0.03

2018

58.43

2938.39

0.02

Debt Ratio 0.05 0.04 0.04 0.03 0.03 0.02 0.02 0.01 0.01 0.00 1

2

3

4

Interpretation: This ratio gives results relating to the capital structure of a firm. Debt ratio is 0.04 in the year 2016 it decreased to 0.03 & 0.02 in the corresponding years 2017 & 2018. From the above fluctuating trends we can conclude that the company’s dependence on debt is decreasing. It is in better position.

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4.2.2 Debt equity ratio Debt equity ratio indicates the relationship describing the lenders contribution for each rupee of the owner’s contribution is called debt- equity ratio. Debt equity ratio is computed by dividing Long term Liabilities divided by Equity. Lower debt – equity ratio higher the degree of protection. A debt-equity ratio of 2:1 is considered ideal. LONG TERM LIABILITIES Debt equity ratio = ----------------------------------------EQUITY Table 4.2.2 Debt equity ratio Year

Long Term Liabilities

Equity

Debt Equity Ratio

2015

364.39

17.08

21.33

2016

224.77

17.08

13.16

2017

331.11

17.08

19.39

2018

215.03

17.08

12.59

Debt Equity Ratio 25.00 20.00 15.00 10.00 5.00 0.00 1

2

3

4

Interpretation Debt equity ratio is 21.33 in the year 2016 and has decreased to to13.16 in the year 2016 and further increased to 19.39 in 2017. We can conclude that the company depends on the debt fund is increasing.

49

4.2.3 INTEREST COVERAGE RATIO: The ratio shows the number of times the interest charges a re covered by funds that are ordinarily available for their payment. EBIT Interest coverage ratio =

__ __________ _________

Interest Table 4.2.3 Interest coverage ratio Year

EBIT

Interest

Interest Coverage Ratio

2015

744.09

0.24

31.00

2016

862.55

0.49

17.60

2017

897.14

5.77

1.55

2018

950.29

5.06

1.88

Interest Coverage Ratio 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 1

2

3

4

Interpretation: Interest coverage ratio is 31 in 2015 and decreased to 17.60 in 2016. It further decreased to 1.55 in 2017 going up to 1.88 in 2018. The company has been paying high interest now.

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4.2.4 TOTAL LIABILITIES RATIO

Formula: Total Liabilities Total Assets Total liabilities: Current liabilities + Secured & Unsecured Loans. Total Assets

: Fixed assets + Investments + Current assets Table 4.2.4: Total Liabilities ratio

Year

Total

Total Assets

Total Liabilities Ratio

Liabilities 2015

1773.71

1773.7

1.00

2016

2174.11

2054.2

1.06

2017

2662.08

2661.08

1.00

2018

2995.82

2995.82

1.00

Total Liabilities Ratio 1.07 1.06 1.05 1.04 1.03 1.02

1.01 1.00 0.99 0.98 0.97 1

2

3

4

Interpretation: The company has been able to manage the total liabilities ratio to 1 all throughout the years from 2015 to 2018. This signifies the healthy financial state of the company.

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4.3 ACTIVITY RATIO’S 4.3.1 Inventory turnover ratio It indicates the firm efficiency of the firm in producing and selling its product. It is calculated by dividing the cost of goods sold by the average inventory. Cost of goods sold Inventory turnover ratio

=_____________________

Average inventory Table 4.3.1: Inventory turnover ratio Year

Cost

Inventory

Inventory Turnover Ratio

2015

3192.77

418.13

7.64

2016

3525.56

601.65

5.86

2017

4172.34

816.95

5.11

2018

4707.23

1049.71

4.48

Inventory Turnover Ratio 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 1

2

3

4

Interpretation: Inventory turnover ratio is 7.64 times in the year 2016. But, it is decreased to 5.86 in the year 2016. Then, it is decreased further to 5.11 in year 2017 and again decreased to 4.48 in 2018.

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4.4 PROFITABILITY RATIOS 4.4.1 Gross profit ratio This ratio shows that the margin left after meeting manufacturing costs. It measures the efficiency of production as well as pricing. Gross profit Gross profit margin Ratio = ____________

X100

Net sales Table 4.4.1: Gross profit ratio Year

Gross Profit

Sales

Ratio

2015

709.07

4637.17

15.29

2016

816.86

5241.76

15.58

2017

849.91

5981.39

14.21

2018

883.23

6232.98

14.17

Ratio 16.00 15.50 15.00 14.50 14.00 13.50 13.00 1

2

3

4

Interpretation: From the above we can say that gross profit ratio is 15.29 in the year 2016 and increased to 15.58 in 2016. The ratio further decreased to 14.21 and 14.17 in 2017 – 2018. The company is maintaining proper control on trade activities.

53

4.4.2 Net profit ratio: This ratio also indicates t he firm's capacity to with stand adverse economic conditions. A firm with a high net margin ratio would be in an advantageous position to survive in the face falling selling prices, rising costs of production or declining demand for the product.

Net pro fit Net profit ratio=

________ X I00 Net sales

Table 4.4.2 Net Profit ratio

Year

Net Profit

Sales

Ratio

2015

410.86

4637.17

8.86

2016

489.45

5241.76

9.34

2017

478.49

5981.39

8.00

2018

471.32

6232.98

7.56

Ratio 10.00 9.00 8.00 7.00 6.00

5.00 4.00 3.00 2.00 1.00 0.00 1

2

3

4

Interpretation: During the year 2016 the net profit margin is 8.86 it suddenly increased to 9.34 in the year 2017 because of decreased in administration and selling expenses. In the next year, it again decreased to 8.00 and further increased to 7.56 in 2018.

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4.4.3 Operating expenses ratio The Operating expenses ratio explains the changes in the profit margin ratio. A higher operating expense is unfavorable since it will leave a small amount of operating income to meet interest, dividends.

Operating expenses X 100 Operating expenses ratio= __________________

Sales Table 4.4.3: Operating expenses ratio Year

Operating Expense

Sales

Ratio

2015

0

4637.17

0.00

2016

33.15

5241.76

0.63

2017

24.35

5981.39

0.41

2018

27.89

6232.98

0.45

Ratio 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 1

2

3

4

Interpretation: Operating expenses were nil in 2015 increased to 0.63 in 2016 further decreasing to 0.41 and 0.45 in 2017 – 18. The company has managed to maintain lower operating expenses over sales.

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4.4.4 Return on Investment The conventional approach of calculated ROI is to divide PAT by investment.

Return on investment (ROI) = EBIT / Capital Employed

Table 4.4.4: Return on investment Year

EBIT

Capital

Ratio

2015

609.86

34.16

17.85

2016

722.19

34.16

21.14

2017

700.2

34.16

20.50

2018

714.89

34.16

20.93

Ratio 22.00 21.00 20.00 19.00 18.00 17.00 16.00

1

2

3

4

Interpretation: The company has been managing a good return on investment all through the years.

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FINDINGS 

The standard norm for current ratio is 2:1. During the year 2015 the ratio is 1.61 and it has decreased to 0.96 by 2018. T he ratio above was standard all throughout the years from 2015 2018. So the ratio was satisfactory.



The standard norm for quick ratio is 1:1. During the year 2015 the ratio is 0.69 and it has decreased to -0.02 by 2018. The ratio above was standard during 2015 – 16 but went worst during 2017 - 18. So the ratio was not satisfactory.



In all the above years the absolute cash ratio is very low. The standard norm for absolute quick ratio is 1:2 the company is failed in keeping sufficient Cash & Bank Balances and Marketable Securities.



Net Working Capital ratio is 0.12 in 2016 and was increased to 0.31 in the 2017. From that year the ratio decreased again to 0.22 in 2018 depicting that condition of business working capital is not shortage.



This ratio gives results relating to the capital structure of a firm. Debt ratio is 0.04 in the year 2016 it decreased to 0.03 & 0.02 in the corresponding years 2017 & 2018. From the above fluctuating trends we can conclude that the company’s dependence on debt is decreasing. It is in better position.



Debt equity ratio is 21.33 in the year 2016 and has decreased to to13.16 in the year 2016 and further increased to 19.39 in 2017. We can conclude that the company depends on the debt fund is increasing.



Interest coverage ratio is 31 in 2015 and decreased to 17.60 in 2016. It further decreased to 1.55 in 2017 going up to 1.88 in 2018. The company has been paying high interest now.



The company has been able to manage the total liabilities ratio to 1 all throughout the years from 2015 to 2018. This signifies the healthy financial state of the company.



Inventory turnover ratio is 7.64 times in the year 2016. But, it is decreased to 5.86 in the year 2016. Then, it is decreased further to 5.11 in year 2017 and again decreased to 4.48 in 2018.



From the above we can say that gross profit ratio is 15.29 in the year 2016 and increased to 15.58 in 2016. The ratio further decreased to 14.21 and 14.17 in 2017 – 2018. The company is maintaining proper control on trade activities.

57



During the year 2016 the net profit margin is 8.86 it suddenly increased to 9.34 in the year 2017 because of decreased in administration and selling expenses. In the next year, it again decreased to 8.00 and further increased to 7.56 in 2018.



Operating expenses were nil in 2015 increased to 0.63 in 2016 further decreasing to 0.41 and 0.45 in 2017 – 18. The company has managed to maintain lower operating expenses over sales.



The company has been managing a good return on investment all through the years.

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SUGGESTIONS 

The company has to increase the profit maximization and has to decrease the operating expenses.



By considering the profit maximization in the company the earning per share, investment and working capital also increases. Hence, the outsiders are also interested to invest.



The company should maintain sufficient cash and bank balances; they should invest the idle cash in marketable securities or short term investments in shares, debentures, bonds and other securities.



The company must reduce its debtors collection period from 83 & 84 days to 40 days be adopting credit policy by providing discounts to the debtors.



Return on investment is fluctuates every year. The company has to make efforts in increasing return on investments by reducing its administration, selling and other expenses.



The company should increase its interest coverage ratio to serve long term debts.



The net profit of the company is increasing over the study period. Hence the organization maintaining good control on all trees of expenses.



The dividend per share has observed as raising trend over the study period, hence it may be suggested Amara Raja Batteries Limited should take key interest to maximize the share holder wealth by increasing dividend pay out.

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Conclusion 

Liquidity ratios, both current ratio and quick ratio are showing effectiveness in liquidity as in all the years current ratio is greater than the standard 2:1 and quick ratio is greater than the standard 1:1 ratio.



The firm is maintaining a low cash balance and marketable securities which means they done cash payments.



Debt equity ratio, solvency ratio and interest coverage ratio are showing an average increase in the long term solvency of the firm.



The proprietary ratio is showing an average increase which means, the shareholders have contribute more funds to the total assets.



Average payment period of the firm is showing the credit worthiness of the firm to its suppliers.



Fixed assets turnover ratio is showing that the firm needs lesser investment in fixed assets to generate sales.



The increasing trend of current assets turnover ratio indicates that the firm needs more investment in current assets for generating sales.



The gross profit ratio, net profit ratio is showing the increasing trends. The profitability of the firm the increasing



Operating ratio of the company has observed decreasing trend, hence it may be good control over the operating expenses.



The interest that has to be paid is very less when compared to the sales. The firm is not utilizing the debt conservatively.



The firm is retaining much of the earnings (based on dividend payout ratio) .



The company financial performance is very good and also they will increase their business year by year by expanding their branches.

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BIBLOGRAPHY

1. I.M.Pandey

:

Financial Management

2. M.Y.Khan & P.K.Jai

:

Financial Management

3. S.P. Jain & K.L. Narang

:

Cost & Management accounting

4. K.Rajeswara rao & G. Prasad

:

Accounting & Finance

5. P.Kulakarni

:

Financial Management

Web-sites: www.google.com www.amaron.co.in

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Appendix

62

s

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