Chapter

CHAPTER -11. INTRODUCTION Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated quotient of two mathematical expressions and the relationship between two or more things. In financial analysis, a ratio is used as a benchmark for evaluation the financial position and performance of a firm. The absolute accounting figures reported in the financial statements do not provide a meaningful understanding of the performance and financial position of a firm. An accounting figure conveys meaning when it is related to some other relevant information. For example, an Rs.5 core net profit may look impressive, but the firms performance can be said to be good or bad only when the net profit figure is related to the firms Investment. The relationship between two accounting figures expressed mathematically, is known as a financial ratio (or simply as a ratio). Ratios help to summarize large quantities of financial data and to make qualitative judgment about the firms financial performance. For example, consider current ratio. It is calculated by dividing current assets by current liabilities; the ratio indicates a relationship- a quantified relationship between current assets and current liabilities. This relationship is an index or yardstick, which permits a quantitative judgment to be formed about the firms liquidity and vice versa. The point to note is that a ratio reflecting a quantitative relationship helps to form a qualitative judgment. Such is the nature of all financial ratios.Standards of comparison:The ration analysis involves comparison for a 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 may consist of: Past ratios, i.e. ratios calculated form the past financial statements of the same firm; Competitors ratios, i.e., of some selected firms, especially the most progressive and successful competitor, at the same pint in time; Industry ratios, i.e. ratios of the industry to which the firm belongs; and Protected ratios, i.e., developed using the protected or preform, financial statements of the same firm.In this project calculating the past financial statements of the same firm does ratio analysis.1.1 Theoretical background:1.1.1 Use and significance of ratio analysis:-The ratio is one of the most powerful tools of financial analysis.It is used as a device to analyze and interpret the financial health of enterprise. Ratio analysis stands for the process of determining and presenting the relationship of items and groups of items in the financial statements. It is an important technique of the financial analysis. It is the way by which financial stability and health of the concern can be judged. Thus ratios have wide applications and are of immense use today. The following are the main points of importance of ratio analysis:a) Managerial uses of ratio analysis:-1. Helps in decision making:-Financial statements are prepared primarily for decision-making. Ratio analysis helps in making decision from the information provided in these financial Statements.2. Helps in financial forecasting and planning:-Ratio analysis is of much help in financial forecasting and planning. Planning is looking ahead and the ratios calculated for a number of years a work as a guide for the future. Thus, ratio analysis helps in forecasting and planning.3. Helps in communicating:-The financial strength and weakness of a firm are communicated in a more easy and understandable manner by the use of ratios. Thus, ratios help in communication and enhance the value of the financial statements.4. Helps in co-ordination:-Ratios even help in co-ordination, which is of at most importance in effective business management. Better communication of efficiency and weakness of an enterprise result in better co-ordination in the enterprise

5. Helps in control:-Ratio analysis even helps in making effective control of business. The weaknesses are otherwise, if any, come to the knowledge of the managerial, which helps, in effective control of the business.b) Utility to shareholders/investors:-An investor in the company will like to assess the financial position of the concern where he is going to invest. His first interest will be the security of his investment and then a return in form of dividend or interest. Ratio analysis will be useful to the investor in making up his mind whether present financial position of the concern warrants further investment or not.C) Utility to creditors: - The creditors or suppliers extent short-term credit to the concern. They are invested to know whether financial position of the concern warrants their payments at a specified time or not. d) Utility to employees:-The employees are also interested in the financial position of the concern especially profitability. Their wage increases and amount of fringe benefits are related to the volume of profits earned by the concern.e) Utility to government:-Government is interested to know overall strength of the industry. Various financial statement published by industrial units are used to calculate ratios for determining short term, long-term and overall financial position of the concerns.

f) Tax audit requirements:-Sec 44(A) (B) was inserted in the income tax act by financial act; 1984.Caluse 32 of the income tax act requires that the following accounting ratios should be given: 1. Gross profit/turnover.2. Net profit/turnover.3. Stock in trade/turnover.4. Material consumed/finished goods produced.Further, it is advisable to compare the accounting ratios for the year under consideration with the accounting ratios for earlier two years so that the auditor can make necessary enquiries, if there is any major variation in the accounting ratios.Objectives of the study: To examine the financial performance of the ram raj industries pvt.lit. for the period of 2010 to 2014. To analyses interpret and to suggest the operational efficiency of the ram raj industries pvt.lit. by comparing the balance sheet& profit & loss A\c To critically analyses the financial performance of the ram raj industries pvt.lit. With Help of the ratios. To study the growth and development of the company. To study the behavior of liquidity and profitability of the companies. To analyze the factors determining the liquidity and profitability. To comparative study of selected companies on the basis of selected ratios.

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 5years (2010-2014).

LIMITATIONS: The study is based on only secondary data. The period of study was 2010-14 financial years only.

CHAPTER-2REVIEW OF LITRATURE Review of literatureFinancial statements have two major uses in financial analysis .first; they are used to present a historical recover of the firms financial development. Second, they are used for a course of action for the firm.A performance financial statement is prepared for a future period. It is the financial managers estimate of the firms future performance.The operation and performance of a business depends on many individuals are collective decisions that are continually made by its management team. Every one of these decisions ultimately causes a financial impact, for better or works on the condition and the periodic results of the business. In essence, the process of managing involves a series of economic choices that activates moments of financial resources connected with the business. Some of the decisions made by management one will be the major, such as investment in a new facility, raising large amounts of debts or adding a new line of products or services. Most other decisions are part of the day to day process in which every functional area of the business is managed. The combine of effect of all decisions can be observed periodically when the performance of the business is judged through various financial statements and special analysis.These changes have profoundly affected all our lives and it is important for corporate managers, share holders, tenders, customers and suppliers to investment and the performance of the corporations on which then relay. All who depend on a corporation for products, services, or a job must be med about their companys ability to meet their demands time and in this changing world. The growth and development of the corporate enterprises is reflected in their financial statement.LIQUIDITY AND PROFITABILITY: Liquidity and profitability are two important demanders in determining the soundness of an enterprise. Liquidity means ability of a firm to meet its current obligations when they become due for payment. It has two aspects quantitative and qualitative. Qualitative aspect implies the quantum of current assets a firm possesses irrespective of making any difference b/w various types of current assets such as inventories, cash and so on. Qualitative aspect reforms the quality of current in terms of their realization in to cash considering time dimension involved in maturing different components of current assets.Profitability is the capacity of earning profits and due most important measure of performance of affirms. It is generally assumed that there is negative relationship b/w liquidity and profitability i.e. higher liquidity results in lower profitability and vice-versa.Statement of the problem: Development of industries depends on several factors such as financial personnel, technology, and quality of the product and marketing art of these. Financial aspects assume a significant role in determining the growth of industries. All of the companys operations virtually affect its need for cash. Most of these data covering operations areas are however outside the direct responsibility of the financial executives. Values top management appreciates the value of good financial executives to know the profitability and liquidity of the concern. The firm whose present operations are inherently difficult should try to makes its financial analysis to enable its management to stay on top of its working position. In this context the researcher is interested in undertaking an analysis of the financial performance of companies to examine and to understand how management of fianc plays a crucial role of the financial performance analysis of selected companies in India has been undertaken.

CHAPTER-3RESEARCH METHODOLOGYResearch methodology is a way to systematically solve the research problem. it may be understood as a science of studying how research is done scientifically. So, the research methodology not only talks about the research methods but also considers the logic behind the method used in the context of the research study.6.1 Research Design:Descriptive research is used in this study because it will ensure the minimization of bias and maximization of reliability of data collected. The researcher had to use fact and information already available through financial statements of earlier years and analyze these to make critical evaluation of the available material. Hence by making the type of the research conducted to be both Descriptive and Analytical in nature.From the study, the type of data to be collected and the procedure to be used for this purpose were decided.6.2 Data Collection:The required data for the study are basically secondary in nature and the data are collected from the audited reports of the company.6.2.1 Primary Data: Primary data are those data, which is originally collected afresh. In this project, Questionnaire Method and Interview Method has been used for gathering required information.

6.2.2 Sources of Data:The sources of data are from the annual reports of the company from the year 2009-2010 to 2013-2014.6.3 Methods of Data Analysis:The data collected were edited, classified and tabulated for analysis. The analytical tools used in this study.6.3.1 Analytical Tools Applied: The study employs the following analytical tools: Comparative statement. Common Size Statement. Trend Percentage. Ratio Analysis. RATIO ANALYSISFinancial Analysis:Financial analysis is the process of identifying the financial strengths and weaknesses of the firm and establishing relationship between the items of the balance sheet and profit & loss account.Financial ratio analysis is the calculation and comparison of ratios, which are derived from the information in a companys financial statements. The level and historical trends of these ratios can be used to make inferences about a companys financial condition, its operations and attractiveness as an investment. The information in the statements is used by Trade creditors, to identify the firms ability to meet their claims i.e. liquidity position of the company. Investors, to know about the present and future profitability of the company and its financial structure. Management, in every aspect of the financial analysis. It is the responsibility of the management to maintain sound financial condition in the company.

Ratio Analysis:The term Ratio refers to the numerical and quantitative relationship between two items or variables. This relationship can be exposed as Percentages Fractions Proportion of numbersRatio analysis is defined as the systematic use of the ratio to interpret the financial statements. So that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition can be determined. Ratio reflects a quantitative relationship helps to form a quantitative judgment.Ratios Are Useful For Several Parties Such As:1) Investors, both present as well as potential investors.2) Financial analyst.3) Mutual funds.4) Stock broker and stock exchange authorities.5) Government.6) Tax department.7) Competitors.8) Research analysts and students.9) Companys management.10) Creditors and Suppliers11) Lending Institutions Banks and Financial Institutions12) Financial Manager13) Other Interested parties like credit rating agencies etc.

Nature of Ratio Analysis:Ratio analysis is a technique of analysis and Interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. It is only a means of understanding of financial strengths and weaknesses of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios. The following are the four steps involved in the ratio analysis. Selection of relevant data from the financial statements depending upon the objective of the analysis. Calculation of appropriate ratios from the above data. Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios developed from projected financial statements or the ratios of some other firms or the comparison with ratios of the industry to which the firm belongs.

Classification of Ratios:A) Liquidity RatiosIt is also known as liquidity ratios. It includes the following1) Measures ability of a company to meet its current obligations.2) Indicates short term financial stability of a company.3) Indicates present cash solvency and ability to remain solvent in times of adversities.To measure the liquidity of a firm the following ratios can be calculated Current ratio Quick (or) Acid-test (or) Liquid ratio

(a) Current Ratio: Current ratio is useful to find out solvency of the company. High current ratio indicates that company will be able to pay its debt maturity within a year. Low current ratio indicates that company will not be able to meet its short term debts. Minimum standard current ratio is 2:1. Current Assets Current Ratio= Current Liabilities

(b) Quick Ratio: Quick ratio is also known as acid test ratio. It indicates immediate ability of a company to pay off its current obligations. And also shows the solvency and financial soundness of the business. Greater the ratio stronger the financial position of the company.The standard quick ratio should be 1:1 Quick Assets Quick Ratio= Quick Liabilities

B) Profitability Ratios:The primary objectives of business undertaking are to earn profits. Because profit is the engine, that drives the business enterprise.It measures the overall efficiency of the business. It indicates whether utilization of business assets and funds are done efficiently and best way or not, so as to generate adequate profits or returns.Profitability ratios fall in two categories:a) Related To Sales:1) Gross Profit Ratio: It shows the operating efficiency of the business. It measures the efficiency of production as well as pricing. Decrease in the ratio indicates reduction in selling price or increase in the cost of production or decline in the business activity. Increase in the ratio indicates increase in the selling price or reduction in the cost of production. Gross Profit Gross Profit Ratio = X 100 Sales2) Operating Profit Ratio: It indicates profitability of entire business after meeting all operating cost including direct and indirect cost of administrative and distribution expenses. Operating ProfitOperating Profit Ratio: X 100 Sales3) Net Profit Ratio: It shows the overall efficiency of the business. Higher the ratio indicates higher efficiency of business and better utilization of total resources. In addition it indicates efficiency of financing operations as well as tax management. Net profit after tax Net Profit Ratio: X 100 Sales

b) Related To Investment Of Capital Employed:1) Return On Investment: It measures the overall performance of the company that is utilization of total resources and funds available with the company. Higher the ratio better utilization of funds. It indicates earning capacity of the business. It measures the management performance. EBT But AT Return on Investment: X 100 Total Assets/ Liability

2) Return On Net Worth Or Proprietors Funds: It measures the productivity of shareholders funds. Higher the ratio indicates better utilization of shareholders funds or higher productivity of owners funds. It helps to investor to compare the earning capacity of company with that of other companies. Net Profit after Tax Return on Net Worth: X 100 Equity Shareholder Fund

C) Turnover Ratio- It measures how efficiently the assets are employed. These ratios are expressed in number of times the assets is used during the period.1) Inventory Turnover Ratio: It indicates number of times the replacement of inventory during the given period usually a year. Higher the ratio more efficient is the management of inventory. But higher inventory turnover ratio is not always good if it is lower level of inventory because it invites problem of frequency stock outs and loss of sales and customer or goodwill.

Cost of Goods SoldInventory Turnover Ratio: Average Stock in Hand

2) Average Collection Period: It indicates credit and collection policy and also indicates efficiency in management of debtors. Smaller no. of dates, higher will be the efficiency of the collection department.Avg. collection period should not exceed 1.5 times the credit period allowed. Receivable (Debtors)Avg. Collection Period: Average Sales per Day.

3) Receivable Turnover Ratio: The ratio indicates average credit period enjoyed by debtors. Debtors + Bills Receivable Receivable Turnover Ratio: X 100 Total Credit Sales

4) Fixed Asset Turnover Ratio:It indicates efficiency in the utilization of fixed assets like plant and machinery by management. Net SalesFixed Assets Turnover Ratio = Fixed Assets

5) Total Asset Turnover Ratio =It indicates how efficiently the assets are employed overall. It indicates relationships between the amount invested in the assets and the result accrues in terms of sales. Net Sales Total Asset Turnover Ratio = Total Assets 6) Creditors Turnover Ratio: It indicates the how the credit period enjoyed by the creditors. Net Credit PurchasesCreditors Turnover Ratio= Average Creditors

D) Financial Ratio 1) Capital Gearing Ratio: This ratio indicates the relationship between preferential capital, debenture. Term loan and capital which does not carry fixed rate of interest or dividend.When the ratio is more than one then the capital is said to be highly geared that means low equity share capital and greater amount of preference share capital, debenture, long term loan. When the ratio is less than one then the capital is said to be very lowly geared that means low earning per share. Equity shareholder will control the company. It results in over capitalization. Preferential Capital + Debenture + Term LoanCapital Gearing Ratio: Equity Share Capital + Reserve and Surplus

2) Proprietary Ratio:It measures the relationship between funds invested in business by the owners with the total funds invested in business. It indicates long run solvency of the business. High ratio means company is less dependent on outside funds and company is quite solvent. Low ratio indicates company is more dependent on outside funds solvency and solvency may be danger.

Proprietary Fund Proprietary Ratio: Total Assets

3) Stock Working Capital Ratio:It indicates weightage of stock in the current assets or in the working funds. It indicates strength and weaknesses of working capital; high ratio indicates slow movement in stock and also reflects better management of inventory as well as working capital. StockStock Working Capital Ratio: Working CapitalE) Financial Leverage Ratio:It indicates financial structure of the organization that is proportion of debts as compare to owners fund. 1) Debt Equity Ratio: Higher the ratio less secured is the creditors, lower the ratio creditors enjoy higher degree of safety. Debt Debt Equity Ratio: Equity 2) Debt Asset Ratio:It indicates the percentage of the total asset created by the company through short term and long term debt. Higher the ratio less safe is the creditors and vice versa. Debt Debt Asset Ratio: Total Assets

3) Long Term Debt to Total Capitalization:It explains the relationship between long term debts borrowed from outsiders with owners contribution. Lower the ratio better is the solvency of the business and safer is the creditor so far as his repayment. Long Term Debt Long Term Debt to Total Capitalization: Total Capital Employed

4) Interest Coverage Ratio: This indicates earning capacity of the business to pay its interest burden. Higher the ratio business can easily pay the interest. Earnings before Interest and TaxInterest Coverage Ratio: InterestF) Dividend Ratio: These ratios for a particular company are relevant for an investor for making an investment decision as to whether he should invest in the share of the company.1) Earnings per Share: This ratio indicates weather over a given period there have been change in the wealth per share holder. Other the ratio increases the possibility for the higher dividends and increase in the market price of the shares. Earnings after Tax Preference Dividend Earnings per Share: No. Of Shares Paid Up2) Price Earnings Ratio: It indicates relationship between market price of the share and the current earnings per share. It helps to determine the future price of the share. Market Price per SharePrice Earnings Ratio: Earning Per Equity Share 3) Payout Ratio: It indicates how much proportion of the earning per share is retaining for plaguing back and portion distributed as dividend to the shareholder. Dividend per Equity SharesPayout Ratio: Earnings per Share4) Dividend Yield Ratio: It indicates the ultimate current return which investor will get as a percentage of is investment. It indicates the feature like the profitability and dividend policy of the company. When dividend yield is lower than the expected return, market price for the share may fall in future or vice versa. Equity DividendDividend per Share: No. Of Equity Shares

Dividend per ShareDividend Yield Market Price per Share

Interpretation of the Ratios:The Interpretation of ratios is an important factor. The inherent limitations of ratio analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accounting policies, window dressing etc.

Guidelines or Precautions for Use of Ratios:The calculation of ratios may not be a difficult task but their use is not easy. Following guidelines or factors may be kept in mind while interpreting various ratios is Accuracy of financial statements Objective or purpose of analysis Selection of ratios Use of standards should also be kept in mind when attempting to interpret ratios.

CHAPTER 4DATA ANALYSIS AND INTERPRETATIONCurrent ratio:TABLE 4-1yearcurrent assetscurrent liabilitiescurrent ratio

2010522.22380.271.37

2011668.35463.391.44

2012784.23533.951.47

2013954.74628.271.52

20141106.98637.921.74

(Source: annual reports) Chart No.1

.INFERANCE: In above table shown the current ratio of five years (2010-2014). The Current Ratio of Ram raj industries ltd. Varied from 1.37 to 1.74 with an average of 1.51 during the study period. The solvency position of Ram raj industries ltd. In terms of current ratio was below the standard norm volume of 2:1 for the entire period. The current Ratio in the year 2010-11 was 1.37. This average increase to 1.74 in the last years this shows utilization of idle funds in the company.

Quick Ratio: TABLE 4-2YearQuick AssetsCurrent LiabilitiesQuick Ratio

2010272477.950.71

2011314581.810.62

2012388673.180.58

2013504805.990.54

2014599842.010.57

(Source: Annual Reports)Chart No.2

INFERANCE: The Ideal Ratio is 1:1 except in the first year the firms has a good capacity to pay of current obligations immediately and is a test of liquidity. The high Quick Ratio indicates that the firm has the ability to meet its current liabilities. The above table shows the Quick Ratio of five years (2010-2014). The Quick Ratio of Ram raj industries ltd. Varied from 0.57 to 0.71 with an average of 0.60. It was not above the standard norm of 1:1 for the entire period. It confirms that the liquidity position of this Ram raj industries ltd. In terms of quick ratio was more than not standard.

CASH RATIO: TABLE 4-3YearCash & Bank BalancesCurrent LiabilitiesCash Ratio

201032.83380.270.086

201127.32463.390.059

201261.81533.950.016

2013136.82628.270.218

2014145.18637.920.223

(Source: Annual Reports)

Chart No.3

INFERENCE: This Cash Ratio indicates that the capacity of the company to realize current liabilities with its liquidity position. In the above Table the Cash Position Ratio of Five Years (2010-2015). The Cash Ratio of Ram raj industries ltd. has undergone many fluctuations. It started with high ratio at first by 0.45 in the year 2010; it was decreased to 0.19 by next year it was slightly increased in next year i.e.2012 to 0.30.again fallen down to 0.295 in the year 2013 and decreased to 0.22 in the year 2010.Net working capital Ratio: TABLE 4-4YearNetworking capitalNet assets (FA+WC)Ratio

20101569.801359.091.155

20111959.071426.261.368

20122348.601639.791.434

20132757.791732.441.592

20143247.672047.201.586


Chart No.4

INFERENCE: Net working capital has increase from 0.47 in 2010 to 0.606 in 2012 and decreased to 0.54in 2010. So this clearly shows that the firm has sufficient amount of working capital

LEVERAGE RATIOS: Debt equity ratio: TABLE 4-6 YearTotal debtNet worthRatio

2010218.4550.614.32

201185.9450.611.70

2012230.5650.774.50

2013-81.26-

20147.6851.260.15

(Source: Annual Reports)Chart No.5 INFERENCE: The standard norm for the ratio is 2:1. The actual debt-equity ratio in the above table shows, the last two years less than the stand ratio after the ratio has decreased from 0.15 in 2014 to 0 in 2013. Before that the ratio starts increasing trend from 4.32 in 2010 to 1.7 in 2011. And again rises to 4.5 in 2012 this indicates from the study that the firm tries to reduce the debt and reducing financial risk of the firm when both ratios of the years 2010 and 2014 are compared.

Capital Equity Ratio:TABLE 4-7YearCapital EmployedNet worthRatio

201010506.323580.792.934

201114459.765798.872.493

201220555.9410221.722.011

201349792.3219048.732.613

201485736.2942340.982.025


INFERENCE: The above table shows the Capital Equity Ratio of five years (2010-2015). The Capital Equity Ratio of Ram raj industries ltd. Shows fluctuation in the period of study. The ratio goes down from 2.93 in 2010 to 2.011 in the year 2013 an again raises to 2.613 in 2013 and reaches to 2.025 in 2014.COVERAGE RATIOS:Interest Coverage Ratio:

EBIT Interest Coverage Ratio = Interest

TABLE 4-8YearEBITinterestratio

20103914.25883.364.43

20115282.30738.687.15

20129533.821139.768.36

201316453.771329.3012.38

201426083.303439.737.58


INFERENCE: Interest coverage ratio 7 to 8 percent is considered an ideal. .The interest coverage ratio is highly increased during the study period from 4.43 in 2010 to 12.38 in 2013 and gone down to 7.58 in 2014.But these figures is indicates very high.

ACTIVITY RATIOS: Inventory turnover Ratio: TABLE 4-9YearNet salesinventoryratio

20101.631250.637

20112.031354.446

20122.478396.36

20132.719451.166

20143.205508.26


INFERENCE: The Inventory Turnover Ratio increased and decreased on the buys of sales that sales increased. The ratio increased because the year sales are increased. The ratio is decreased because the year sales are decreased. In the above Table shows the Inventory Turnover Ratio of five years (2010-2014).The inventory ratio of Ram raj industries ltd. was started from 6. In the year 2010 and it was slightly decreased to 35.4 in the next year. It was decreased to 15.14 in the year 2012, it increased slightly by next two years.

INVENTORY CONVERSION PERIOD: No. of days in the yearInventory conversion period= Inventory turnover ratio

TABLE 4-10YearDays (360 days)Inventory turnover ratioConversion days

2010360751

2011360660

2012360660

2013360660

2014360660


.Net Assets Turnover Ratio:

Net assets turnover can be computed simply by dividing sales by net sales

Sales Total Assets Turnover = Net assets TABLE 4-13YearSalesNet assetsRatio

20102028.73153.5513

20112495.10252.479

20122974.68422.797

20133331.69243.0713

20143878.24431.029

(Source: Annual Reports) INFERENCE: Net assets turnover ratio was 1.56 in 2010 and 1.74 in 2011, 2.53 in 2012 and 1.67 in 2013 and 1.56 in 2014.so this company earned least turnover ratio in the year 2010 and 2010FIXED ASSETS TURNOVER RATIO: Sales Fixed Assets Turnover Ratio = Fixed Assets

TABLE 4-14YearSalesNet fixed assetsRatio

20102028.73153.5513

20112495.10252.479

20122974.68422.797

20133331.69243.0713

20143878.24431.029

(Source: Annual Reports) INFERENCE: Fixed assets turnover ratio was 2.95, 3.68, 6.43, 4.16, 3.41 in respective years of 2010, 2011, 2012, 2013, and 2014 so the company achieved maximum fixed asset turnover ratio in 2012.CURRENT ASSETS TURNOVER RATIO: Sales Current assets turnover = Current assets TABLE 4-15YearsalesCurrent assetsRatio

20102028.73522.223

20112495.10668.353

20122974.68784.233

20133331.69954.743

20143878.241106.983


INFERENCE: In this chart it shows the current assets turnover ratio by which company is currently rotating the assets for business purpose. It was highly purchased current assets by the end of the year 2012. The Current Assets Turnover Ratio for the five years (2010-2014). Current assets turnover ratio was 2.14, 1.84, 2.13, 1.54 and 1.58 in respective year of 2010, 2011, 2012, 2013 and 2014 so the company achieved maximum Current assets turnover ratio in 2012.

TOTAL ASSETS TURNOVER RATIO:

Sales Total Assets Turnover Ratio = Total Assets

TABLE 4-16YearsalesTotal assetsratio

20102028.731359.091.4

20112495.101426.261.7

20122974.681637.791.8

20133331.691732.441.9

20143878.242047.201.8


INFERENCE: Total Assets Turnover Ratio of the company is rotating their assets into business purpose. It shows that the company can able to rotate the total assets in the business. Above Table shows the Total Assets Turnover Ratio for the period of five years (2010-2014). Total assets turnover ratio was 1.24 in 2010 and 1.23 in 2011, 1.6 in 2012, 1.12 in 2012 and 0.39in the year 2010.so this company earned last turnover ratio in the year 2014.

WORKING CAPITAL TURNOVER RATIO: SalesWorking Capital Turnover Ratio = Working CapitalTABLE 4-17YearSalesWorking capitalratio

20102028.73141.9514

20112495.10202.9612

20122974.68250.2811

20133331.61326.4710

20143878.24469.068


INFERENCE: In the above Table and Chart the velocity of the utilization of Net Working Capital. It has been observed that the working capital turnover ratio of Ram raj industries ltd. In the above Table shows the Working Capital Turnover Ratio of five years (2010-2014). In the year 2012 Ram raj industries ltd. holds with efficient working capital. After years ratio is declined. PROFITABILITY RATIOS:Net Profit Ratio:

Net Profit Net profit Ratio = X 100 Sales TABLE 4-18YearPATsalesratio

20101,161.971,930.5960%

20111,479.022,356.1962%

20121832.082,816.3265%

20132,072.803,331.6962%

20142,538.343,878.2465%


INFERENCE: Net profit ratio was 8.78, 8.98, 8.48, 10.56, and 10.26 in respective year of 2010, 2011, 2012, 2013 and 2014 so the company achieved maximum Net profit ratio in 2013 and 2010.NET PROFIT BASED ON NO PAT:

EBIT (1-t) No PAT Net Profit Based On No PAT= = Sales Sales (Or) EBIT Sales TABLE 4-19YearEBITsalesratio

2010407.821930.590.21

2011472.052356.190.20

2012516.522816.320.18

2013684.993331.690.20

2014709.33878.240.18


RETURN ON INVESTMENT RATIO:

EBIT EBIT ROI = ROTA = = Total assets TA TABLE 4-20YearEBITTotal assetsPercentage%

2010328.861359.0924

2011397.51426.2627

2012444.091637.7927

2013619.581732.4435

2014630.982047.2063

(Source: Annual Reports) INFERENCE: Return on investment ratio was 24.1, 20.08, 24.87, 19.92 and 7.18 in respective year of 2010, 2011, 2012, 2013 and 2014 so the company achieved maximum Return on investment ratio in 2012.RETURN ON EQUITY RATIO: Profit after taxes PAT ROE = = Net worth (Equity) NW

TABLE 4-21YearPATNet worthRatio%

2010289.1250.615

2011303.8950.616

2012334.5150.776

2013460.7651.268

2014468.6151.269

(Source: Annual Reports) INFERENCE: Return on equity ratio was 42.73, 41.4, 45.08, 47.13 and 32.03 in respective year of 2010, 2011, 2012, 2013 and 2014 so the company achieved maximum Return on equity ratio in2013.

FINDINGS On the overall evaluation at each and every aspect, the following findings are found. Liquidity ratios have continuously gone under various fluctuations in the last five years. However the ratios are more than the industry standard. This indicates excess cash is maintained in the organization.

Leverage ratios are as per the industry norm of 3:1 and it is more or less is maintained steadily in 5years.

Turnover ratios are also in line with the standards.

Although a net profit ratio has been maintained constantly in the last three years i.e. 2010, 2011, 2012 it has shown steady improvement in the next 2 years.

Return on investments (ROI) and Return on equity (ROE) have declined drastically during the last two years.

Suggestions The company has a good record of quality of goods in the market with best of my enquiry and investigations.

They should see that the debtors should be collected within a specified time by the company. So, that they can discharge some of its creditors or current liabilities and avoid payment of interest.

Ratio analysis are immensely helpful in making a comparative of the financial statement for several years.

The company financial position is very secure. It is observed that most of the ratios are as per the industry standard.

Company adopts proper inventory control techniques to properly management inventory.

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