Sri Murugan Credits (1).docx

A STUDY ON FINANCIAL PERFORMANCE ANALYSIS FOR SRI MURUGAN CREDITS CHAPTER -1 1.1ABOUT THE STUDY Meaning of Financial Statement: Financial statements are meant to present the financial information of the entity in question as clearly and concisely as possible for both the entity and for readers. Financial statements for businesses usually include: income statements, balance sheet, statements of retained earnings and cash flows, as well as other possible statement Financial performance analysis is an analysis of a company’s past and current financial performance and compares such performance to similar sized companies within its industry providing insight into a company’s historical growth, profitability, debt capacity and overall liquidity. All such factors can be important indicators of a company’s ultimate value. The financial performance analysis is carried out with data available in historical records viewing the past performance helps the future expectations in the analysis. The financial performance analysis indicates the period of time. The Financial performance analysis helps to compare the company’s actual performance .It refers to the results of the decisions over the time.

DEFINITION: A subjective measure of how well a firm can use assets from its primary mode of business and generate revenues. This term is also used as a general measure of a firm's overall financial health over a given period of time, and can be used to compare similar firms across the same industry or to compare industries or sectors in aggregation.

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Advantages of Financial Statements: 

Goals financial statements are supposed to accomplish. The intent of financial statements is to provide information useful in economic decision making.



Financial statements should provide a reliable indication of a company's financial position, operating results, and changes in financial position.



Financial statements may provide information in addition to that specified by authoritative requirements and regulatory groups.



Management knows the most about the business, it is encouraged to identify certain circumstances and explain their financial effects on the enterprise.

Disadvantages of Financial Statement: 

Past financial performance, good or bad, is not necessarily an accurate predictor of future performance.



Financial statements do not tell you about changes in senior management.



Financial statements do not tell you about the loss of major customers.



Financial statements do not tell you about the competitive environment in which the company operates.



The more out-of-date a customers financial statements are, the less reliable they are as a risk management tool.



Without reading the Notes to the financial statements, credit managers cannot get a clear idea of the risk they are evaluating.

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Finance is one of the most primary requisites of a business and the modern management obviously depends largely on the efficient management of the finance. In our present day economic finance is defined and the provision of money at the time when it is required. Every enterprise whether big, medium or small, needs finance to carry on its operations and to achieve its targets, infact finance is indispensable today that it is rightly said to be the life blood of an enterprise without adequate and enterprise can possibly accomplish its objectives. The subject of finance has been traditionally classified in to two classes (i) public finance and (ii) private finance. Public finance deals with the requirements, receipts and disbursement of funds in the government institution like states, local self government and central government. Private finance is concerned with requirements receipts and organizations and a nonprofit organization. Present finance deals with the analysis of principles and practice needs of funds. The study principles practice, procedures and problems involved in financial management of charitable, religions, educational and social and the other similar banks. The present study is based on the financial performance of Salem District Central Co-operative Bank. The researcher tries to identify the effectiveness of the financial position, earnings capacity and its effectiveness utilization of assets.

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CHARACTERSTICS: Financial analysts often assess the following elements of a firm: 1. Profitability - its ability to earn income and sustain growth in both the short- and long-term. A company's degree of profitability is usually based on the income statement, which reports on the company's results of operations; 2. Solvency - its ability to pay its obligation to creditors and other third parties in the longterm; 3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate obligations; 4. Stability - the firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of the income statement and the balance sheet, as well as other financial and non-financial indicators. etc. METHODS OF FINANCIAL STATEMENT Vertical Analysis Analyzing a single period financial statement works well with vertical analysis. On the income statement, percentages represent the correlation of each separate account to net sales. Express all accounts other than net sales as a percentage of net sales. Net income represents the percentage of net sales not used on expenses. For example, if expenses total 69 percent of net sales, net income represents the remaining 31 percent. Vertical analysis performed on balance sheets uses total assets and total liabilities for comparison of individual balance sheet accounts. Horizontal Analysis 4

Horizontal analysis is the comparison of data sets for two periods. Financial statements users review the change in data much like an indicator. Optimistic analysts look for growth in revenue, net income and assets in addition to reductions in expenses and liabilities. Calculating absolute dollar changes requires the user to subtract the base figure from the current figure. Expressing changes with percentages requires the user to divide the base figure by the current figure, and multiply by 100. Trend Analysis Review of three or more financial statement periods typically represents trend analysis, a continuation of horizontal analysis. The base year represents the earliest year in the data set. Although dollars can represent subsequent periods, analysts commonly use percentages for comparability purposes. Users review statements for patterns of incremental change representing changes in the business in questions. Financial statement improvements include increased income and decreased expenses. Ratio Analysis Ratios express a relationship between two more financial statement totals, and compare to budgets and industry benchmarks. Five common categories of ratios exist: liquidity, asset turnover, leverage, profitability and solvency. Reviewing ratios for performance compared with prior periods or industry specific benchmarks provides financial statements users with recognition of strengths and weaknesses. Risk Management Association, or RMA, publishes data on industry specific benchmarks for more in-depth analysis.

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1.2. INTRODUCTION ABOUT THE INDUSTRY:

History financial services: The term "financial services" became more prevalent in the United States partly as a result of the Gramm-Leach-Bliley Act of the late 1990s, which enabled different types of companies operating in the U.S. financial services industry at that time to merge.[1] Companies usually have two distinct approaches to this new type of business. One approach would be a bank which simply buys an insurance company or an investment bank, keeps the original brands of the acquired firm, and adds the acquisition to its holding company simply to diversify its earnings. Outside the U.S. (e.g., in Japan), non-financial services companies are permitted within the holding company. In this scenario, each company still looks independent, and has its own customers, etc. In the other style, a bank would simply create its own brokerage division or insurance division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company.

The Indian money market is classified into: the organised sector (comprising private, public and foreign owned commercial banks and cooperative banks, together known asscheduled banks); and the unorganised sector (comprising individual or family owned indigenous bankers or money lenders and non-banking

financial

companies (NBFCs)).

The

unorganised

sector

and microcredit are still preferred over traditional banks in rural and sub-urban areas, especially for non-productive purposes, like ceremonies and short duration loans. Prime Minister Indira Gandhi nationalised 14 banks in 1969, followed by six others in 1980, and made it mandatory for banks to provide 40% of their net credit to priority sectors like agriculture, small-scale industry, retail trade, small businesses, etc. to ensure that the banks fulfill their social and developmental goals. Since then, the number of bank branches has increased from 10,120 in 1969 to 98,910 in 2003 and the population covered by a branch decreased from 63,800 to 15,000 6

during the same period. The totaldeposits increased 32.6 times between 1971 to 1991 compared to 7 times between 1951 to 1971. Despite an increase of rural branches, from 1,860 or 22% of the total number of branches in 1969 to 32,270 or 48%, only 32,270 out of 500,000 villages are covered by a scheduled bank. Since liberalisation, the government has approved significant banking reforms. While some of these relate to nationalised banks (like encouraging mergers, reducing government interference and increasing profitability and competitiveness), other reforms have opened up the banking and insurance sectors to private and foreign players. As of 2007, banking in India is generally mature in terms of supply, product range and reach-even, though reach in rural India still remains a challenge for the private sector and foreign banks.] In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies of Asia. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate.

There are ample evidence suggesting that financial sector development plays a significant role in economic development. It promotes economic growth through capital accumulation and technological advancement by boosting savings rate, delivering information about investment, optimizing the allocation of capital, mobilizing and pooling savings, and facilitating and encouraging foreign capital inflows.[4] A meta-analysis of 67 empirical studies finds that financial development is robustly associated with economic growth.[5] Countries with better-developed financial systems tend to enjoy a sustained period of growth, and studies confirm the causal link between the two: financial development is not simply a result of economic growth; it is also the driver for growth.[6] Additionally, it reduces poverty and inequality by enabling and broadening access for the poor and vulnerable groups, facilitating risk management by reducing their vulnerability to shocks, and raising investment and productivity that generates higher income.[7]

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Financial sector development also assists the growth of small and medium-sized enterprises (SMEs) by giving them with access to finance. SMEs are typically labor-intensive and create more jobs than large firms, which contributes significantly to economic development in emerging economies. Additionally, financial sector development also entails establishing robust financial policies and regulatory framework. The absence of adequate financial sector policies could have disastrous outcome, as illustrated by the global financial crisis. Financial sector development has heavy implication on economic development‐‐both when it functions and malfunctions.[8] The crisis has challenged conventional thinking in financial sector policies and sparked debate on how best to achieve sustainable development. To effectively reassess and re-implement financial policies, publications such as Global Financial Development Report (GFDR) by the World Bank and Global Financial Stability Report (GFSR) by the IMF can play an important role. The Global Financial Development Report, a new initiative by the World Bank, highlights issues that have come to the forefront after the crisis and presents policy recommendation to strengthen systems and avoid similar crisis in the future. By gathering data and knowledge on financial development around the world, the GFDR report aims to put into spotlight issues of financial development and hopes to present analysis and expert views on current policy issues. In Malaysia, the Asian Institute of Finance was established by Bank Negara Malaysia and Securities Commission Malaysia to develop human capital in the financial services industry. A good measurement of financial development is crucial in evaluating the progress of financial sector development and understanding the corresponding impact on economic growth and poverty reduction. However in practice, it is difficult to measure financial development given the complexity and dimensions it encompasses. Empirical work done so far is usually based on standard quantitative indicators available for a longer time period for a broad range of countries. For instance, ratio of financial institutions’ assets to GDP, ratio of liquid liabilities to GDP, and ratio of deposits to GDP.[2] 8

However, since the financial sector of a country comprises a variety of financial institutions, markets and products, these measures only serve as a rough estimate and do not fully capture all aspects of financial development. The World Bank’s Global Financial Development Database (GFDD) developed a comprehensive yet relatively simple conceptual 4x2 framework to measure financial development worldwide. This framework identifies four sets of proxy variables characterizing a well-functioning financial system: financial depth, access, efficiency, and stability.[9] These four dimensions are then broken down for two major components in the financial sector, namely the financial institutions and financial markets: The industry now lends plaintiffs over $100 million a year and remains unregulated in most states.[9] Commentators have noted that the industry is free to ignore laws that protect consumers who borrow from other kinds of lenders. The industry, however, asserts that they are not lenders because plaintiffs are not required to repay the money if they lose their cases.[10] The industry refers to the transactions as investments, advances, financing or funding, as opposed to loans.[11] This is an argument that has persuaded regulators in many states, including New York, that lawsuit lenders are not subject to existing lending laws.[12] To fortify its position, the industry has started volunteering to be regulated—but on its own terms.[13] The companies and lawyers who support the industry have also lobbied state legislatures to establish rules like licensing and disclosure requirements.[14] In 2003, the Ohio Supreme Court struck down a legal financing agreement. A legal financing company advanced $7,000 to a woman injured in a car accident. The woman prevailed, and the company was allowed to claim over $30,000 of her future winnings. The court refused to allow this, noting that an "intermeddler is not permitted to gorge upon the fruits of litigation".[15] This decision, however, was overturned when, five years later, the Ohio General Assembly voted unanimously to make lawsuit funding legal.[16] The campaign to influence legal financing laws came from an increasing number of lawyers, judges, and regulators. Some are worried that the legal financing industry is taking too much money away from plaintiffs, where interest rates can exceed 100% with no cap. Legal financing companies defend their positions by pointing out the risks that they face. The money

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they advance to clients should not be regulated as loans because plaintiffs do not have to pay anything back if they lose their case. The industry has recently obtained lobbying victories in many other states. In Texas, the industry fought a bill introduced in 2005 that would have subjected litigation financing to the same standards as loans.[17] The bill was ultimately defeated. There was similar success in Ohio, where a bill legalizing lawsuit lending passed in 2008 with little or no opposition [18] In 2019, the industry also defeated efforts by Maryland legislators that would have reined in lawsuit funding.[19] Maine and Connecticut allow litigation funding by statute, and similar legislation is pending in Kentucky. Furthermore, courts in Texas, Florida, New Jersey, Mississippi, Massachusetts, North Carolina, South Carolina, and New Hampshire have allowed litigation funding contracts

Growth of financial industry: Financial Institutions 



Depth

Private Sector Credit to

Financial Markets 

Stock market capitalization and

GDP

outstanding domestic private debt

Financial Institutions’

securities to GDP

asset to GDP



Private Debt securities to GDP



M2 to GDP



Public Debt Securities to GDP



Deposits to GDP



International Debt Securities to GDP



Gross value added of the



Stock Market Capitalization to GDP

financial sector to GDP



Stocks traded to GDP

Accounts per thousand



Percent of market capitalization outside



adults(commercial banks)

Access 

Branches per 100,000

of top 10 largest companies 

10

Percent of value traded outside of top 10

adults (commercial banks) 

% of people with a bank

traded companies 

account (from user survey) 

% of firms with line of credit (all firms)



10 years) 

Ratio of domestic to total debt securities



Ratio of private to total debt securities

% of firms with line of credit (small firms)

Government bond yields (3 month and

(domestic) 

Ratio of new corporate bond issues to GDP



Net interest margin



Turnover ratio for stock market



Lending-deposits spread



Price synchronicity (co-movement)



Non-interest income to



Private information trading

total income



Price impact

Overhead costs (% of total



Liquidity/transaction costs

assets)



Quoted bid-ask spread for government



Efficiency 

Profitability (return on assets, return on equity)





Boone indicator (or Herfindahl or H-statistics)

Stability

bonds Turnover of bonds (private, public) on securities exchange 

Settlement efficiency



Volatility (standard deviation / average)



Z-score

of stock price index, sovereign bond



Capital adequacy ratios

index



Asset quality ratios



Liquidity ratios



Others (net foreign



Vulnerability to earnings manipulation

exchange position to



Price/earnings ratio

capital etc.)



Duration



Ratio of short-term to total bonds



Skewness of the index (stock price, sovereign bond)

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(domestic, int’l) 

Correlation with major bond returns (German, US)

Commercial banking services A "commercial bank" is what is commonly referred to as simply a "bank". The term "commercial" is used to distinguish it from an "investment bank," a type of financial services entity which, instead of lending money directly to a business, helps businesses raise money from other firms in the form of bonds (debt) or stock (equity). The primary operations of banks include: 

Keeping money safe while also allowing withdrawals when needed



Issuance of chequebooks so that bills can be paid and other kinds of payments can be delivered by post



Provide personal loans, commercial loans, and mortgage loans (typically loans to purchase a home, property or business)



Issuance of credit cards and processing of credit card transactions and billing



Issuance of debit cards for use as a substitute for cheques



Allow financial transactions at branches or by using Automatic Teller Machines (ATMs)



Provide wire transfers of funds and Electronic fund transfers between banks



Facilitation of standing orders and direct debits, so payments for bills can be made automatically



Provide overdraft agreements for the temporary advancement of the bank's own money to meet monthly spending commitments of a customer in their current account.

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

Provide internet banking system to facilitate the customers to view and operate their respective accounts through internet.



Provide charge card advances of the bank's own money for customers wishing to settle credit advances monthly.



Provide a check guaranteed by the bank itself and prepaid by the customer, such as a cashier's check or certified check.



Notary service for financial and other documents



Accepting the deposits from customer and provide the credit facilities to them.



Sell investment products like mutual funds etc.

Commercial banking services A "commercial bank" is what is commonly referred to as simply a "bank". The term "commercial" is used to distinguish it from an "investment bank," a type of financial services entity which, instead of lending money directly to a business, helps businesses raise money from other firms in the form of bonds (debt) or stock (equity). The primary operations of banks include: 

Keeping money safe while also allowing withdrawals when needed



Issuance of chequebooks so that bills can be paid and other kinds of payments can be delivered by post



Provide personal loans, commercial loans, and mortgage loans (typically loans to purchase a home, property or business)



Issuance of credit cards and processing of credit card transactions and billing



Issuance of debit cards for use as a substitute for cheques



Allow financial transactions at branches or by using Automatic Teller Machines (ATMs)



Provide wire transfers of funds and Electronic fund transfers between banks



Facilitation of standing orders and direct debits, so payments for bills can be made automatically



Provide overdraft agreements for the temporary advancement of the bank's own money to meet monthly spending commitments of a customer in their current account.



Provide internet banking system to facilitate the customers to view and operate their respective accounts through internet.

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

Provide charge card advances of the bank's own money for customers wishing to settle credit advances monthly.



Provide a check guaranteed by the bank itself and prepaid by the customer, such as a cashier's check or certified check.



Notary service for financial and other documents



Accepting the deposits from customer and provide the credit facilities to them.



Sell investment products like mutual funds etc.

STATEMENT OF PROBLEM The company need to reduce the funds locked up in inventory (application funds). Then source for such finds awaited from the funds is constituted by financial performance facilities availed from commercial . The role of faster cash accuracy in the efficient management of financial performance has been illustrated 2.3. OBJECTIVES OF THE STUDY  To analyze the financial changes over a period of five years  To analyze the financial statement of the company by using financial tools  To evaluate the financial position of the company in terms of solvency, profitablity, activity and earnings ratios.  It assists in decision making  To provide valuable suggestion based on findings

2.4 SCOPE OF THE STUDY:  Finance is a life-blood of business it is rightly termed as the science of money.  Finance is very essential for the smooth running of the business  Finance controls the policies, activities and decision of every business

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 Finance management is that management activity which is concerned with the planning and controlling of a firm financial reserve  Financial anal analysis is as the final step of accounting that result in the presentation of final and the business manage, crediting and investors.  Financial performance is an important aspect when intended the long term stability, profitability and liquidity of an organization  Financial management as an academic changes as regards its scope and coverages  In the early years of its evaluation it way treated synonymously with the rising of funds  In the current literature pertaining to this growing academic discespline a broader scope as to include in addition to procurement of finding officient use of resource is universally recognized.

2.4 LIMITATION OF THE STUDY  The study is restricted for a period of five years.  The analysis is based on annual reports of the company.

2.5 RESEARCH METHODOLOGY The study is aimed at systematic collection, analysis, reporting of data and finding relevant to Prince Auto liners. Research is a serious academic activity with a set of objectives to explain or analyze or understand a problem or finding the solutions(s) for problem(s) adopting a systematic approach in collecting, organizing the information relating to a problem.

2.5.1 Research Design: The research design is a desk research. In other words, a research design is a description of conceptual structure within which the research will be conducted. Here the method of data collection, the time and other resources available are explained clearly.

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In many projects, carrying out an initial desk research stage is strongly recommended to again background knowledge to a subject as well as providing useful leads that will help to get the maximum from a research.

2.5.2 Research methodology: The study is aimed at systematic collection, analysis, reporting of data and finding relevant to prince auto liners. Research is a serious academic activity with a set of objectives to explain or analyze or understand a problem or finding the solutions(s) for problem(s) adopting a systematic approach in collecting, organizing the information relating to a problem.

2.5.3 Analytical Research Analytical research is a type of research that utilizes critical thinking to find out facts about a given topic and from the answers obtained develop new and useful ways of doing things. Critical thinking is a method of thinking that puts assumptions into question to decide whether a given claim is true or false.

2.5 Period of Study: The study covers fiver year’s performance of Sri murugan credits. The year taken from the study is from 2008-2016.

2.6 Data Collection The required data for the study are basically secondary in nature and the data are collected from the annual reports of the company. Sources of Data Collection:

2.6.1 Secondary Data: The secondary data for analysis are taken from the company. 16

•

Annual reports

•

Financial statements

•

Company profile

2.7 Tools and Techniques of the Study: For analysis purpose the researcher has adopted various tools and techniques such as •

Ratio analysis

•

Comparative statement

•

Trend analysis

RATIO ANALYSIS Ratio analysis is powerful tool of financial analysis. A ratio is a statistical yard stick that provides a measures of relationship between two accounting figures. The term “ratio” refers to a simple arithmetic expression of one number to another.

DEFINITION According to Kennedy, ratio may be defined as “the indicated quotient of two mathematical expressions and as the relationship between two or more things”. According to wixon, kell and Bedford, a ratio is defined as “an expression of the quantitative relationship between two numbers”.

FINANCIAL STATEMENT

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There are number ratios, which can be calculated from the information given in the profit and loss account and balance sheet. The selection of particular ratio dependents upon the purpose of firm which it is calculated by the analyst.

RATIO ANALYSIS INVOLVES THE FOLLOWING STEPS:  Selection of relevant data from the financial statement depending upon the analysis.  Calculation of calculated ratio with the standard ratio or with the past ratio of the same Concern or projected ratio.  Interpretation based on comparison.

IMPORTANCE OF RATIOS Importance of ratio analysis lies in the fact that it presents facts on a comparative basic and enables the sawing of inferences regarding the performance off a firm.  Difficulty in comparison  Impact of inflation  Conceptual diversity

TO TEST THE ASSOCIATION OF OVERHEADS AND TURNOVER: To the association of overheads and turnover with the help of correlation table, which shows both are in positive manner. The result of analyzing the overheads and turnover with Karl Pearson’s correlation model is given in the table.

BALANCE SHEET:

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Balance sheet has been defined by textile as a statement of financial position and an economic unity disclosing as at a given movement of time its assets, at cost depreciated cost, on their incited value; its liabilities; and its ownership equities usually, the balance sheet is prospered by a firm to present a summary of financial position at the end of financial year. It balances the assets of a firm against its financing.

CURRENT ASSESTS: Current assets which are changed to liquid assets of the firm are convertible into cash within an accounting period. Cash in hand, cash at bank and other short term investments constitute these assets.

FIXED ASSESTS: Assets acquired for utilization and not for resale are termed as fixed or permanent assets, are those assets, which are intended to be held for a long period.

CURRENT LIABILITIES: The current liabilities are those liabilities, which are expected to be discharged within a period of one year.

LIABILITIES: A liability is a amount which a business is legally bound to pay. It is a claim by an outsider on the assets of a business.

RATIOS: Ratio analysis is one of the techniques of financial analysis where ratio is used a sa yardstick for evaluating for financial conditions and performance of a firm. 19

DATA ANALYSIS & INTERPERTATION RATIO ANALYSIS The primary uses of financial statement are evaluating past performance and predicting future performance and both of these are facilitated by comparison. Therefore the focus of financial analysis is always on the crucial information contained in the financial statements. This depends on the objectives and performance of such analysis. The purpose of evaluating such financial statement is different from person to person depending on its relationship. In other words, even though the business unit itself and shareholders, debentures holders, investors, etc. all undertake the financial analysis, the purpose, means and extent of such analysis differs. For example, trade creditors may be interested primarily in the liquidity of the firm because the ability of the business unit to the business unit to pay their claims are best judged by means of through analysis of its liquidity. The shareholder and the potential investors may be interested in the present and the further earnings per share, the stability of such earnings and comparison of these earnings with other units in the industry. Similarly the debenture holders and the financial institution lending long term loans term may be concerned with the cash flow ability of the business unit to pay pack the debt in the long run. The management of the business unit, in contrast, looks to the financial statement from various angles. These statement are required not only for the management own evaluation and decision making but also for internal control and overall performance of the firm. Thus the scope, extent and means of any financial analysis are a part of the larger information processing system which from the very basic of any “decision making” process. The financial analysts always need certain yardstick to evaluate the efficiency and performance of any business unit. The one of the most frequently used yardstick is ratio analysis. Ratio analysis involves the use of various methods for calculating and interpreting financial ratios of assess the performance and status of the business unit. It is a tool of financial analysis, which studies the numerical or quantitative relationship between two variables and item. A ratio can be worked out by dividing one of the variables of the relationship with other variable and such ratio value is compared with standards/ norms. 20

In other words, ratio are relative figures reflection the relationship between variables and enable the analysis to draw conclusion regarding the financial operations. It is very important that the base(or denominator) selected for each ratio is relevant with the numerator. The two must be such that one is closely connected with and is influenced by the other. This is the measure of inter relationship between different sections of the financial statement which then is compared with the budgeted or forecasted results, prior year results and or the industrial results. To be most important ratios must include a study of underlying data. Ratios should be taken as guides that are useful in evaluating a company’s financial position and operations and making comparison with results in previous year of with other companies. The primary purpose of ratios is to point out areas needing further investigations. A part from the ratios other information which should be looked at includes.

TYPES OF RATIO Several ratios calculated from the accounting data, can be grouped into various classes according to financial activity or function to be evaluated, as stared earlier, the parties interested in financial analysis are short-term and long-term creditors. Owners and management interest is in liquidity position or the short-term solvency of the firm. Long-term creditors, on the other hand, more interested in the long- term solvency and profitability of the firm. Similarly owners concentrate on the firm profitability and financial condition. Management is interested in evaluating every aspect of the firm’s performance. In view of the requirements of the various users of ratios, classifying into following four important categories.  Current ratio  Proprietary ratio  Debt equity ratio  Return on total resources ratio 21

 Return on capital employed  Reserve to equity share capital ratio  Equity ratio  Net working capital ratio

CURRENT RATIO The current ratio compares the total current assets with the total current liabilities. A high current ratio indicates a large preparation of current assets to current liabilities.

The current ratio is calculated as: Current Assets Current Ratio

= --------------------------Current Liabilities

Table = 3.1.1

CURRENT RATIO OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2016 TO 2017 Rs. In Cr Year

Current assets

Current liabilities

Current ratio

2014-2015

3223.03

5490.7

0.58

2015-2016

4849.54

9196.27

0.53

2016-2017

5652.18

9679.5

0.58

2017-2018

10188.37

12381.77

0.82

2018-2019

15906.56

19791.4

0.80

Inference:

22

An ideal ratio is 2. The above table shows the current ratio indicates the availability of current assets in rupees for every one rupee of current liability. The current ratio has been increased in the 2016 the ratio is 0.82 times. The current ratio has been decrease in the year 2019 ratio 0.53 times.

3.1 RATIO ANALYSIS Chart = 3.1.1 CURRENT RATIO OF SRIIPL STEEL FOR THE PERIOD FROM 2019 TO 2015

25000

20000

15000 CURRENT ASSETS CURRENT LIABILITIES

10000

5000

0 2014-2015

2015-2016

2016-2017

2017-2018

23

2018-2019

QUICK RATIO Quick ratio provides an even more critical look at the ability of the company to meet day-today obligations. It signifies a very short-term liquidity of a business concern and is, therefore also called as liquid ratio. Quick ratio is calculated as: Quick Asset Quick Ratio =

_________________ Current Liabilities

Table = 3.1.2 QUICK RATIO OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2019 TO 2015 Rs. In Cr Year

Quick ratio

Current liabilities

Liquid ratio

2014-2015

1673.87

5490.7

0.30

2015-2016

2798.12

9196.27

0.30

2016-2017

3066.41

9679.5

0.32

2017-2018

6049.96

12381.77

0.49

2018-2019

10727.48

19791.4

0.54

Inference:An ideal ratio is 2. The above table shows the quick ratio indicates the availability of quick assets in rupees for every one rupee of current liability. The quick ratio has been increased 24

in the 2019 the ratio is 0.54 times. The quick ratio has been decrease in the year 2019 and 2015 ratio 0.30 times. Chart = 3.1.2 QUICK RATIO OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2019 TO 2015

25000

20000

15000 QUICKRATIO Column1

10000

5000

0

2014-2015

2015-2016

2016-2017

GROSS PROFIT RATIO 25

2017-2018

2018-2019

This ratio is also known as gross margin or trading margin ratio gross profit ratio indicates the difference between sales and direct cost. Gross profit relationship between gross profit and net sales. Gross Profit Gross Profit

=

▬▬▬▬▬▬▬▬▬

X

100

Net sales Table = 3.1.3 GROSS PROFIT RATIO OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2019 TO 2015 Rs. In Cr Year

Gross profit

Net sales

Gross profit

2014-2015

4024.5

11391.05

35.33

2015-2016

3658.3

14006.59

26.11

2016-2017

5371.58

18167.46

29.56

2017-2018

5387.67

23098.85

23.32

2018-2019

7344.05

32040.95

22.92

(Source: secondary data) Inference: Gross profit ratio relates gross profit to sales. The ratio depicts the amount of gross profit required to generate sales of re.1. The Gross profit ratio has been higher in the year 2019 the ratio is 335.33% and the lowest in the year 2019 the ratio is 22.92%. Chart= 3.1.3

26

GROSS PROFIT RATIO OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2019 TO 2015

35000 30000 25000 20000 GROSSPROFIT NETSALES

15000

10000 5000 0 2014-2015

2015-2016

2016-2017

NET PROFIT RATIO 27

2017-2018

2018-2019

Net profit Net profit ratio

=

________________ x 100 Sales Table = 3.1.4

NET PROFIT RATIO OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2019 TO 2015 Rs. In Cr Year

Net profit

Net sales

Net profit ratio

2014-2015

3382.58

11391.05

29.69

2015-2016

1967.48

14006.59

14.05

2016-2017

4683.07

18167.46

25.78

2017-2018

4090.42

23098.85

17.71

2018-2019

4658.44

32040.95

14.54

Inference: Net profit ratio relates net profit to sales. The ratio depicts the amount of net profit required to generate sales of re.1. The Net profit ratio has been increase in the year 2019 the ratio is 29.69% and the lowest in the year 2015 the ratio is 14.05%.

Chart= 3.1.4 28

NET PROFIT RATIO OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2019 TO 2015

40000 35000 30000 25000 NETSALES

20000

NETPROFIT 15000 10000 5000 0 2014-2015

2015-2016

2016-2017

29

2017-2018

2018-2019

FIXED ASSET RATIO The ratio establishes the relationship between fixed assets and long-term funds. The objective of calculating this ratio is to ascertain the proportion of long-term funds invested in fixed assets. The ratio is calculated as given below: Fixed Asset Fixed Asset ratio =

_______________ Long term fund

Table = 3.1.5 FIXED ASSETS RATIO OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2019 TO 2015

Rs. In Cr Year

Fixed assets

Long term fund

Fixed assets ratio

2014-2015

16567.92

15223.78

1.09

2015-2016

22328.5

19231.97

1.16

2016-2017

23550.41

21290.44

1.11

2017-2018

27271.2

29176.61

0.93

2018-2019

30271.13

30799.71

0.98

30

Inference Fixed assets ratio relates long term fund to fixed assets. The Fixed assets ratio has been increase in the year 2015 the ratio is 1.16% and the lowest in the year 2017 the ratio is 0.93%. Chart = 3.1.5 FIXED ASSETS RATIO OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2019 TO 2015 35000 30000 25000 20000 FIXED ASEET LONGTERM FUND

15000 10000 5000 0 2014-2015

2015-2016

2016-2017

2017-2018

31

2018-2019

STOCK TURNOVER RATIO This ratio is also called stock velocity ratio. It is calculated to ascertain the efficiency of inventory management in term of capital investment. It shows the relationship between the cost of goods sold and the amount of average inventory. Stock turnover ratio is obtained by dividing the cost of sales by average stock. Cost of goods sold Stock turnover ratio

=

___________________ Average stock

Table = 3.1.6 STOCK TURNOVER RATIO OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2019 TO 2015 Rs. In Cr Year

Cost of goods sold

Stock

Stock turnover ratio

2014-2015

7366.55

1549.16

4.76

2015-2016

10348.29

2051.24

5.04

2016-2017

12795.88

2585.77

4.95

2017-2018

17711.18

4138.41

4.28

2018-2019

24696.9

5179.08

4.77

Inference: Stock turnover ratio relates stock to sales. The Stock turnover ratio has been increase in the year 2015 the ratio is 5.04 times and the lowest in the year 2016 the ratio is 4.28 times. 32

Chart = 3.1.6 STOCK TURNOVER RATIO OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2019 TO 2015 30000

25000

20000

COST OF GOOD

15000

STOCK 10000

5000

0 2014-2015

2015-2016

2016-2017

2017-2018

33

2018-2019

3.2 COMPARATIVE BALANCE SHEET Table – 3.2.1 COMPARATIVE BALANCE SHEET OF SRIIPL STEEL FOR THE PERIOD FROM 2017 TO 2019 Rs. In Cr Increase(+) or

% of increase or

decrease(-)

decrease

22328.5

+5760.58

34.77

923.53

1250.11

+326.58

35.36

current assets

3223.03

4849.54

+1626.51

50.47

TOTAL

20714.48

28428.15

+7713.67

37.24

shareholders fund

7677.25

7959.34

+282.09

3.67

loan funds

7546.53

11272.63

+3726.1

49.38

Deferred liabilities

15223.78

19231.88

+4008.1

26.33

5490.7

9196.27

+3705.57

67.49

35938.26

47660.12

+11721.86

32.62

Particulars

2019

2019

fixed assets

16567.92

Investment

ASSETS

LIABILITIES

current liability & provisions TOTAL

34

Inference 1. The comparative balance sheet of the company current liabilities increase in 67.49% the amount compare to (2008-2019). Fixed assets and current assets also increase. 2. The share holder fund is increased in 3.67 % in the year (2019). 3. The overall financial position of the company is satisfactory.

35

Table – 3.2.2 COMPARATIVE BALANCE SHEET OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2015TO 2016 Rs. In Cr Increase(+) Particulars

2015

2016

or decrease(-)

% of increase or decrease

ASSETS Fixed assets

22328.5

23550.41

+1221.91

5.47

Investment

1250.11

1768.35

+518.24

41.45

Current assets

4849.54

5652.18

+802.64

16.55

TOTAL

28428.15

30970.94

+2542.79

8.94

Shareholders fund

7959.34

9705.34

+1746

21.92

Loan funds

11272.63

11585.1

+312.47

2.77

Deferred liabilities

19231.88

21291.44

+2059.56

10.71

9196.27

9679.5

+483.23

5.25

47660.12

52261.38

+4601.26

9.65

LIABILITIES

Current liability & provisions TOTAL

36

Inference 1. The comparative balance sheet of the company current liabilities increase in 5.25% the amount compare to (2015-2016 ). Fixed assets and current assets also increase. 2. The share holder fund is increased in 21.92 % in the year (2016). 3. The overall financial position of the company is satisfactory. Table – 3.2.3 COMPARATIVE BALANCE SHEET OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2016-2017 Rs. In Cr Increase(+) or

% of increase or

decrease(-)

decrease

27271.2

+3720.79

15.79

1768.35

4098.81

+2330.46

131.79

Current assets

5652.18

10188.37

+4536.19

80.25

TOTAL

30970.94

41558.38

+10587.44

34.19

Shareholders fund

9705.34

17225.27

+7519.93

77.48

Loan funds

11585.1

11951.34

+366.24

3.16

Deferred liabilities

21291.44

29176.61

+7885.17

37.03

9679.5

12381.77

+2702.27

27.92

2016

2017

Fixed assets

23550.41

Investment

Particulars

ASSETS

LIABILITIES

Current liability & provisions

37

TOTAL

52261.38

70734.99

+18473.61

35.35

Inference 1. The comparative balance sheet of the company current liabilities increase in 27.92% the amount compare to (2017-2018 ). Fixed assets and current assets also increase. 2. The share holder fund is increased in 77.48 % in the year (2017). 3. The overall financial position of the company is satisfactory.

38

Table -3.2.5 COMPARATIVE INCOME STATEMENT OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2019-2015 Increase(+) or

% of increase

decrease(-)

or decrease

14006.59

+2615.54

22.96

7366.55

10348.29

+2981.74

40.47

4024.5

3658.3

-366.2

-9.09

Administrative expenses

639.26

717.74

+78.48

12.27

Other expenses

312.57

364.61

+52.04

16.65

Total operating expenses

951.83

1082.35

+130.52

13.71

Operating profit

3072.67

2575.95

-496.72

-16.16

Interest & other income

309.91

-608.47

-918.38

-296.33

EBIT

3382.58

1967.48

-1415.1

-41.83

Less: Interest

494.84

836.82

+341.98

69.11

Particulars

2019

2015

Net sales

11391.05

Less: cost of goods sold Gross profit Less: operating expenses

Add: non operating income

39

PBT

2887.74

1130.66

-1757.08

-60.85

Less: Tax

722.77

306.52

-416.25

-57.59

PAT

2164.97

824.14

-1340.83

-61.93

Inference: Show above the table is comparing the income statement of 2019and 2015. Sales (22.96%) increase in compare to previous year (2019).Expenses (13.71%) increase and the net profit (61.93%) decrease.

40

Table -3.2.6 COMPARATIVE INCOME STATEMENT OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2015 TO 2016 Increase(+) or

% of increase

decrease(-)

or decrease

18167.46

+4160.87

29.71

10348.29

12795.88

+2447.59

23.65

3658.3

5371.58

+1713.28

46.83

Administrative expenses

717.74

724.63

+6.89

0.96

Other expenses

364.61

438.13

+73.52

20.16

Total operating expenses

1082.35

1162.76

+80.41

7.43

Operating profit

2575.95

4208.82

+1632.87

63.39

Interest & other income

-608.47

474.25

+1082.72

-177.94

EBIT

1967.48

4683.07

+2715.59

138.02

Less: Interest

836.82

900.26

+63.44

7.58

Particulars

2015

2016

Net sales

14006.59

Less: cost of goods sold Gross profit Less: operating expenses

Add: non operating income

41

PBT

1130.66

3782.81

+2652.15

234.56

Less: Tax

306.52

797.43

+490.91

160.15

PAT

824.14

2985.38

+2161.24

262.24

Inference: Show above the table is comparing the income statement of 2015 and 2016. Sales (29.71%) increase in compare to previous year (2019).Expenses (7.42%) increase and also net profit (262.24%) increase.

42

Table -3.2.7 COMPARATIVE INCOME STATEMENT OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2016 TO 2017 Increase(+) or

% of increase

decrease(-)

or decrease

23098.85

+4931.39

27.14

12795.88

17711.18

+4915.3

38.41

5371.58

5387.67

+16.09

0.29

Administrative Expenses

724.63

819.68

+95.05

13.12

Other Expenses

438.13

676.62

+238.49

54.43

Total Operating Expenses

1162.76

1496.3

+333.54

28.68

Operating Profit

4208.82

3891.37

-317.45

-7.54

Interest & Other Income

474.25

199.05

-275.2

-58.03

EBIT

4683.07

4090.42

-592.65

-12.65

Particulars

2016

2017

Net Sales

18167.46

Less: Cost Of Goods Sold Gross Profit Less: Operating Expenses

Add: Non Operating Income

43

Less: Interest

900.26

850.92

-49.34

-5.48

PBT

3782.81

3239.5

-543.31

-14.36

Less: Tax

797.43

759.02

-38.41

-4.81

PAT

2985.38

2480.48

-504.9

-16.91

Inference : Show above the table is comparing the income statement of 2016and 2017. Sales (27.14%) increase in compare to previous year (2016).Expenses (28.68%) increase and the net profit (16.91%) decrease.

44

Table -3.2.8 COMPARATIVE INCOME STATEMENT OF SRI MURUGAN CREDITS FOR THE PERIOD FROM 2017 TO 2019 increase(+) or

% of increase

decrease(-)

or decrease

32040.95

+8942.1

38.71

17711.18

24696.9

+6985.72

39.44

5387.67

7344.05

+1956.38

36.31

Administrative Expenses

819.68

1105.58

+285.9

34.87

Other Expenses

676.62

985.08

+308.46

45.58

Total Operating Expenses

1496.3

2090.66

+594.36

39.72

Operating Profit

3891.37

5253.39

+1362.02

35.00

Interest & Other Income

199.05

-594.95

-794

-398.89

EBIT

4090.42

4658.44

+568.02

13.88

Particulars

2017

2019

Net Sales

23098.85

Less: Cost Of Goods Sold Gross Profit Less: Operating Expenses

Add: Non Operating Income

45

Less: Interest

850.92

1186.41

+335.49

39.43

PBT

3239.5

3472.03

+232.53

7.17

Less: Tax

759.02

468.7

-290.32

-38.24

PAT

2480.48

3003.33

+522.85

21.08

Inference: Show above the table is comparing the income statement of 2017 and 2019. Sales (38.71%) increase in compare to previous year (2016).Expenses (39.72%) increase and also net profit (21.08%) increase

CHAPTER – 2 2.1 REVIEW LITERATURE: In this chapter some of the earlier work on ratio analysis considered as a part of this research work. Brief reviews of all those works are given below i.e., research name, his name of university, his objectives methodology and his major finding and suggestions are referred. P.V vasudeevan, in the research main objective is to analysis the financial performance of the company, to study the funds the flow patterns, to judge the solvency of the company. And to study the trends in financial performance analysis of the company. The research adopted financial statement analysis, ratio analysis and comparative balance sheet analysis. 46

The company need to reduce the funds locked up in inventory (application funds). Then source for such finds awaited from the funds is constituted by financial performance facilities availed from commercial . The role of faster cash accuracy in the efficient management of financial performance has been illustrated by the performance during 1986-86 crushing reasons. When deposits a higher levels of inventory, the has still been as appreciable reduction in the interest cost. K.Srinivas the researcher’s main objective are to critically examine and high lights the financial performance of the company for the period 1981-82 to 1985-86 to study the liquidity and profitability of the company and to study. To the expected level. It needs to be improved by effective utilization and control of current assets. Dr.Sukumal it was found trident is the highest profit earning concern. It has sufficient working capital all the year, their decrease in refer and surplus is mainly due to issue to bonus shared. This above the study was prepared Dr.Sumumal the management account I.C.WA.I in (November 1995) vol, 30, number11, page 826. Dr.Debasish banerjee and manish kumar from 1985-86 to 1989-90. It was observed that the company has taken funds for financing performance analysis in all the years.

These are no consistent relation between the growth of sales and working capital. The capital is efficient in working capital management. Another study Dr.Debasish banerjee, financial performance analysis of Grasim industries ltd. The management the cost volume profit analysis. The researcher adopted financial statement analysis, break even analysis, trend analysis, common-size balance sheet analysis, comparative balance sheet analysis.

47

For better earnings, the occupancy ration must be increased by rationalizations of routes revision of time and efficient fleet utilization. Dr.P.Indrasana reddy and K.Somaswar ratio. This study was based on the data and information obtained from the annual report of the Hindustan company ltd 1989-90 to 1993-94. This study reveals that the liquidity position of HCL is satisfactory as if current ration that the quick ratio remained above the standard norms throughout period of study. The proportion of inventory to current assets. Increased and to after reserve trends is observed. The financial performance analysis is not accounts of institute of cost and works accounts of India may 1997, vol27, number5, page336.

48

CHAPTER-3 COMPANY PROFILE Sri murgan credits was registered under the state co operative’s law, on 25 th October 1988 and started its work on 4th November in the same year..Sri murgan credits has 4182 members who have the voting power and 30 non members. Co-operative society gets funds from following ways.  By getting deposits from members of the firm  Borrow needed funds from co-operative firm and state cooperative firm.  Using retained earnings from profit  By getting interest from karur district central co-operative firm where the surplus fund is deposited.

Objectives:

The following are the objectives of

Sri murgan credits.

 To get deposits from members and non-members  To provide short term and middle term loans  To sell agri related products to farmers  To rent the agricultural equipments to farmers

MANAGEMENT:

At present there are 7 staffs have been working:

49

1. 1 secretary 2. 1 Asst secretary 3. 2 PDS salesman 4. 1 Clerks

PRODUCTS AVAILABLE IN THE FIRM:

1. AVAILABLE LOAN PRODUCTS: 

Crop loan



Jewel loan



SHG (self Help Group Loan)



Small Industries Loan

INTEREST RATE FOR DEPOSITS:



Savings Deposit: Interest rate for savings deposit is 4%



Fixed Deposits: Interest rate for fixed deposits is based on the deposit days. It has two types of

fixing interest rates.  General

Days

General

50

Old age people

15 to 45

4.5%

4.5%

46 to 179

6%

6%

180 to 364

8%

8.5%

1 year and above

9%

9.5%

3 year and above

8%

8.5%

The follwing products offering by sri murugan credits

Products:

Mortage loan

51

Gold loan:

House loans

52

Property loan

53

CHAPTER-4 4.1 FINDINGS:

The analysis of reverse the following

1. The Current assets Ratio is 0.82% high in the year 2017. 2. The liquid ratio is 0.54% high in the year 2019. 3. The gross profit is 35.33% high in the year 2019. 4. The Net profit Ratio is 29.69% high in the year 2019. 5. The fixed asset ratio is 1.16% high in the year 2019. 6. The Stock turnover Ratio is 5.04% high in the year 2015. 7. The growth rate in the net profit must be increased by reducing the non-operating expenses. 54

8. The liquidity assets of the company are to be increased to improve the liquidity position. 9. The current level of debt equity ratio shall be maintained in the future. 10. Steps must be taken the current ratio of the company to the standard norms 2:1. 11. The gross profit of the company can be increased by reducing operating expenses. 12. The debtors collection period has been increasing to 46 time from 2016-13 13. The creditors turnover ratio has been increasing to 0.49 from 2019-10 14. In the year of 2019-10, an inventory has been decreased to compare with last year 201910 15. The liabilities shows that a negative change in the year 2019-10. So to improving the profitability of the company. 16. The sundry debtors shows that decrease to compared with last year. 17. The liability shows that positive change. So the company decreasing the unwanted expenditure. 18. The cash and bank balance shows that a positive change. So improving the profitability. 19. The percentage of loans and advances has been decrease. So increasing the profit. 20. The contribution of the inventories to the current assets has been increasing. 21. The preparatory ratio of the company is to fluctuated. 22. The debt equity ratio has decrease from 2.60 to 0.94 it is a good indicate from solvency of the company. 23. The fixed asset turnover ratio has been increasing from 1.20 to 1.38 from 2015-11 to 2017-14. 24. The creditors turnover ratio has been increasing to 0.49 from 2019-10 25. In the year of 2019-10, an inventory has been decreased to compare with last year 201613

55

4.2 SUGGESTION As per the analysis of the data through various tools and techniques here are the following suggestion and recommendation to the company.  According to the financial statement of the company the sales is small level increased. So the fluctuation in sales must be controlled. Planning and demand forecasting for sales can be done in a better way. This may increase the sales in the future.  The expenses of the company is very high its reason for small increase in profit. So, expenses controlled by cost control techniques, which helps the reduction of expenses in the company. This automatically increases the profit and the income capacity of the company.  The managerial efficiency is well utilized. This must be properly maintained in future financial years. The capital employed must be used to the optimum extent.  The liquidity position is also satisfactory but it must be improved for good financial position. The inventory must also be controlled using techniques like ABC analysis.

56

4.3 CONCLUSION This study has reveals various interesting facts about the finance performance of the company who engaged themselves in financial activities. From the study I conclude that the company should maintain the financial stability, it will be more useful to the company. The study identifies the level of financial activities, strengths, and developmental needs of RCG. Based on the study conducted some recommendations were suggested to the management. The overall performance of the company found to be improving and satisfactory.

BIBLIOGRAPHY

BOOKS REFERED

1. Financial Management, Shashi K. Gupta, R.K.Sharma.

2. Cost Accounting

- M.Y Khan, P.Y.Jain Tata Mc Graw Hill

3. Research Methodology

- C.R.Kothari Wishwa Prakashan 2nd Edition, New Delhi, 1990

57

4. Management accounting, T.S.Reddy, Y.Hari Prasad Reddy

5. Textile India Progress (World textile News Leader)

58

APPENDIX

59