FINANCIAL ANALYSIS AND INTERPRETATION OF BELL CERAMICS

8/8/2019 FINANCIAL ANALYSIS AND INTERPRETATION OF BELL CERAMICS

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FINANCIAL ANALYSIS AND INTERPRETATION

CHAPTER: 1

INTRODUCTION

Finance:

Finance is something that direct the flow of economic activity and facilities its Smooth

operation. Finance is one of the major elements, which activates the overall growth of the

economy and is the life-blood of economy activity.

Financial Management:

Financial management refers to those specialized managerial activities or efforts which

are concerned with the estimation of the finance, long term as well as short term needed

by a business enterprises, determination of the source suitable under the given

circumstances, the collection and provision of funds in the time and control over the

utilization of funds.

According to Howard and Upton. Financial Management is the application of the

planning and control functions to the finance functions. Financial management involves

the application of general management principles to a particular financial operation.

Financial management is a specialized function directly associated with top

management .The significance of this function is not only seen in the line but also in the

capacity of staff in the overall administration of the company.

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Characteristics of Financial management

Financial management is regarded as a specialized managerial discipline

concerned with planning, procuring, utilization and controlling of the financial

recourses of the business enterprises.

The scope as well as the subject matter of financial management is widened.

Financial management is highly centralized function.

Financial management is intimately interwoven into the fabric of management

itself.

Financial management interacts with other disciplines like economics,

mathematics, system analysis, financial accounting, etc while taking financial

decisions.

The main objective of financial management is not only profit-extracting but

also maximization of value of the firm.

Financial management does not handle only the routine day to day problems

or matters. It also handles more complex problem, such as mergers,

reorganizations etc.

Financial management is applicable to any kind of undertaking or

organization regardless of its aim or constitution.



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Objectives of financial management :

The objectives or goals of financial management are broadly classified into two

categories.

A. Basic objectives .

1. Maintenance of adequate liquid assets in a firm:

The Objective of liquidity implies that financial management should ensure

that there are adequate cash funds in the hands of the firm at all times to its obligation and

avoid loss of reputation among the public. And the liquid asset maintained in the firm,

should just adequate, that is neither too low nor too excessive.

2. Maximization of profit or profit maximization:

This objective implies that financial management should ensure that the

profits of the firm are maximized, and financial decisions would be evaluated on the basis

of its overall contribution to the profits of the enterprise. And should ensures maximum

return to the shareholder, prompt payment to creditors, better payment and working

conditions for labour and reasonable price to consumers.

3. Maximization of wealth or wealth maximization.

Maximization of wealth means maximization of wealth of the company

that is net present worth of the company over the long run. The wealth maximized or

created is reflected in the market value of the equity shares of the company.



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The net present value or the worth of a company is the difference between the gross

present value or worth of the benefits of the action and the amount of capital investment.

B. Other Objectives

1. Ensuring maximum operational efficiency through planning, directing and controlling

of the utilization of the funds that is through the effective employment of funds.

2. Enforcing financial discipline in the organization in the use of financial resources

through the co-ordination of the operations of the various divisions in the organization.

3. Building up of adequate reserves for financing growth and expansion.

4. Ensuring fair returns to shareholders on their fair investment.

Functions of financial manager

A financial manager is a person who is responsible for, in a significant way, to carry out

the finance functions. The main functions are

Estimation of the financial management.

Selection of right source of funds.

Allocation of funds.

Analysis and interpretation of financial performance.

Capital budgeting.



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Profit planning and control.

Marinating liquidity and wealth maximization

Financial is that managerial activity which is concerned with the planning and controlling

of the firms financial resources. The subject of financial management is of immense

interest to both academicians and practicing managers. It is of great interest to

academicians because the subject is still developing and there are still certain areas where

controversies exist for which no unanimous solutions have been reached as yet.

Practicing managers are interested in this subject because among the most crucial

decisions of the firm are those which relate to finance, and an understanding of the theory

of financial management provides them with conceptual and analytical insights to make

those decisions skillfully.

Tools and Techniques of Financial management

Financial statements by themselves do not give the required information both for internal

management and for outsiders. They are passive statements showing the results of the

business i.e. profit or loss and the financial position of the business. They will not

disclose any reasons for dismal performance of the business if it is so. What is wrong

with the business, where it went wrong, why it went wrong, etc. are some of the questions

which no answers will be available in the financial statements.

Similarly no information will be available in the financial statements about the financial

strengths and weaknesses of the concern. Hence to get meaningful information from the



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financial statements which would facilitate vital decisions to be taken, financial

statements must be analyzed and interpreted.

Through the analysis and interpretation of financial statements full diagnosis of the

profitability and financial soundness of the business is made possible. The term analysis

of financial statements means methodical classification of the data given in the financial

statements. A number of tools are available for the purpose of analyzing and interpreting

the financial statements.

Financial analysis:

It refers to an assessment of the viability, stability and profitability of a business , sub-

business or project .

It is performed by professionals who prepare reports using ratios that make use of

information taken from financial statements and other reports. These reports are usually

presented to top management as one of their bases in making business decisions. Based

on these reports, management may:

Continue or discontinue its main operation or part of its business;

Make or purchase certain materials in the manufacture of its product;

Acquire or rent/lease certain machineries and equipments in the production of its

goods; Issue stocks or negotiate for a bank loan to increase its working capital .

Other decisions that allow management to make an informed selection on various

alternatives in the conduct of its business.

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Financial analysts often assess the firm's:

1. Profitability- its ability to earn income and sustain growth in both short-term 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 long-

term

3. Liquidity- its ability to maintain positive cash flow , while satisfying immediate

obligations;

Both 2 and 3 are based on the company's balance sheet, which indicates the financial

condition of a business as of a given point in time.

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 both the income statement and the balance sheet, as well as other

financial and non-financial indicators.

Financial analysts often compare financial ratios :

Past Performance: Across historical time periods for the same firm (the last 5

years for example),

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Future Performance: Using historical figures and certain mathematical and

statistical techniques, including present and future values, This extrapolation

method is the main source of errors in financial analysis as past statistics can be

poor predictors of future prospects.

Comparative Performance: Comparison between similar firms.

These ratios are calculated by dividing a (group of) account balance(s), taken from the

balance sheet and / or the income statement , by another, for example:

Net profit / equity = return on equity

Gross profit / balance sheet total = return on assets

Stock price / earnings per share = P/E-ratio

Comparing financial ratios are merely one way of conducting financial analysis.

Financial ratios face several theoretical challenges:

They say little about the firm's prospects in an absolute sense. Their insights about

relative performance require a reference point from other time periods or similar firms.

One ratio holds little meaning. As indicators, ratios can be logically interpreted in at least

two ways. One can partially overcome this problem by combining several related ratios to

paint a more comprehensive picture of the firm's performance.

Seasonal factors may prevent year-end values from being representative. A ratio's values

may be distorted as account balances change from the beginning to the end of an

accounting period. Use average values for such accounts whenever possible.

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Financial ratios are no more objective than the accounting methods employed. Changes

in accounting policies or choices can yield drastically different ratio values.

They fail to account for exogenous factors like investor behavior that are not based upon

economic fundamentals of the firm or the general economy.

Financial Statement

The income (or profit and loss) statement is simply a report card of how much activity

(revenue) was performed in the period, how profitable that activity was (gross

profit/loss), and what it cost the contractor to run the business (overhead). The

underwriter examines these carefully against industry and geographical norms.

Importantly, the underwriter will focus on the trend of these measures over several years.

For example, if the trend reveals 30% revenue growth every year, the immediate

concern is too fast growth. While revenue growth in a technology company may

make its stock price surge, in construction it creates questions about whether

pricing was sacrificed to create revenue growth, whether the contractor has the

people or systems resources to manage the growth without things falling through

the cracks, and whether the contractor has the cash to finance larger receivables

than he or she is accustomed to.

If overhead seems higher than a contractors peers, the underwriter will question

whether the business is being run to maximize profitability and financial strength,

or to finance expensive personal lifestyles. Clearly, some companies are mature

and have built superior financial strength over time, and therefore minimize the



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need to retain significant profits going forward. But in general, overhead analysis

can be the underwriters window on what the contractors true priorities are.

Balance Sheet

The balance sheet simply demonstrates what the contractor has (assets) and what he or

she owes against those assets (liabilities). The difference is the net worth of the business.

Net worth is significant to the surety because it is a measurement of the long-term staying

power of the business. But short-term staying power is very important too. Payroll,

accounts payable, debt payments, etc. all need to be paid regularlyin cash.

Underwriters analyze working capital to assess the contractors ability to finance these

requirements. Any interruption of cash coming in: a disputed receivable or change order,

unprofitable projects, etc. can place unbearable pressure on the contractors ability to

meet obligations. The underwriter analyzes the balance sheet in the context of what

ifcould they survive, and for how long if adversity struck. Contractors who maintain

their balance sheet to support only normal circumstances may not be enthusiastically

supported by their surety. Rainy-day capitalization (or risk capital) can be critical to

obtaining the desired level of surety support.

Leverage is an important area of focus as well. As mentioned earlier, the solution is not

necessarily to avoid taking on debt. Taking on debt may be the best thing for the

contractors business. But contractors should carefully question whether buying a pieceof equipment, or a building, etc. (and taking on debt to pay for it) is the best move at the

time. Especially if the contractors overall financial strength is modest, renting equipment

or putting off other asset purchases until financial strength is better may be the best



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course of action. Also, overdependence on an operating line of credit to finance cash flow

may be an indicator of undercapitalization. These are areas where a contractor should

solicit the counsel of trusted advisers.

1.7 IMPORTANCE OF FINANCIAL ANALYSIS

Nature of Financial Analysis:

The focus of financial analysis is on the key figures contained in the financial statements

and the significant relationship that exists between them. Analyzing financial statements

is a process of evaluating the relationship between the component parts of the financial

statements to obtain a better understanding of a firms position and performance.

The type of relationship to be investigated depends upon the objective and purpose of

evaluation. The purpose of evaluation of financial statements differs among various

groups: creditors, shareholders, potential investors, management and so on. For example,

short term creditors are primarily interested in judging the firms ability to pay its

currently-maturing obligations. The relevant information for them is the composition of

the short-term (current) liabilities. The debenture-holders or financial institutions granting

long term loans would be concerned with examining the capital structures, past and

projected earnings and changes in the financial position.

The shareholders as well as potential investors would naturally be interested in the

earnings per share and dividends per share as these factors are likely to have a significant

bearing on the market price of shares. The management of the firms, in contrast, analyses

the financial statements for self-evaluation and decision making.



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1.8 TYPES OF FINANCIAL ANALYSIS:

Financial analysis may be classified on the basis of parties who are undertaking the

analysis and on the basis of the parties who are doing the analysis, financial analysis is

classified into external analysis and internal analysis.

External Analysis: When the parties external to the business like creditors, investors,

etc. do analysis, the analysis is known as external analysis. This analysis is done by them

to know the credit-worthiness of the concern, its financial viability, its profitability, etc.

Internal analysis: This analysis is done by persons who have control over the books of

accounts and other information of the concern. Normally this analysis is done by

management people to enable them to get relevant information to take vital business

decision.

On the basis of methodology adopted for analysis, financial analysis may be either

horizontal analysis or vertical analysis.

Horizontal Analysis: When financial statements of a number of years are analyzed, thenthe analysis is known as horizontal analysis. In this type of analysis figures of the current

year are compared with the standard or base year. This type of analysis is otherwise

called as dynamic analysis as it extends over a number of years.



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Vertical Analysis: This type of analysis establishes a quantitative relationship of the

various items in the financial statements on a particular date. For e.g. the ratio of various

expenditure items in terms of sales for a particular year can be calculated. The other name

for this analysis is static analysis as it relies upon one year figures only.

TECHNIQUES OF FINANCIAL ANALYSIS:

The following are the important techniques of financial analysis which can be

appropriately used by the financial analysts:

1. Common-size financial statements

2. Comparative financial statements

3. Trend percentages

4. Ratio analysis

5. Fund flow analysis

6. Cash flow analysis

7. Break even Analysis

8. Du Pont Analysis

Common-size Financial Statements: In this type of statements figures in the

original financial statements are converted into percentages in relation to a common base.

The common base may be sales in the case of income statement, sales of the traditional



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financial statement are taken as 100 and every other item in the income statement is

converted into percentages with reference to sales. Similarly in the case of common-size

balance sheet, the total of asset/liability side will be taken as 100 and each individual

asset/liability is converted into relevant percentages.

Comparative Financial Statements: This type of financial statements is ideal for

carrying out horizontal analysis. Comparative financial statements are so designed to give

them perspective to the review and analysis of the various elements of profitability and

financial position displayed in such statements. In these statements figures for two or

more periods are compared to find out the changes both in absolute figures and in

percentages that have taken place in the latest year as compared to the previous year or

years. Comparative financial statements can be prepared both for income statement and

balance sheet.

Trend Percentages: Analysis of one year figures or analysis of even two years figureswill not reveal the real trend of profitability or financial stability or otherwise of any

concern. To get an idea about how consistent is the performance of a concern; figures of

a number of years must be analyzed and compared.

Ratio analysis : It is the most commonly used analysis to judge the financial strength of

a company. A lot of entities like research houses, investment bankers, financial

institutions and investors make use of this analysis to judge the financial strength of any

company.

A Ratio is an expression of the quantitative relationship between two numbers.



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A ratio is a simple arithmetical expression of the relationship of one number to

another.

Classification of accounting ratios:

On the basis of origin or source of figure placed in relation with each other:

Balance sheet ratios or financial ratios

Profit and loss account ratios or operating ratios.

Mixed, Combined, or Inter-statement ratios.

On the basis of nature and functions of the accounting ratios:

Liquidity Ratios

Leverage Ratios

Turnover Ratios

Profitability Ratios

Liquidity ratios or short term solvency ratios:

It measures the short-term solvency or short-term financial position of a firm.

These ratios are calculated to comment upon the short-term paying capacity of a concern

or the firm ability to meet its current obligations.

CURRENT RATIO:

It is the ratio, which expresses the relationship between current assets and current

liabilities.



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Current Assets

Current Ratio =

Current Liabilities

Current Assets : Includes cash and other assets which can be converted into cash

with in an year such as marketable securities, debtors, inventories, Bills receivables, cash

balance, Bank balance, prepaid expenses, outstanding or accrued incomes, advances to

staff and others, provisions for bad and doubtful debts.

Current Liabilities : All obligations maturing within a year are included in

current liabilities. They include bills payable, creditors, bank overdraft accrued expenses,

short-term bank loans, provision for income tax, dividend payable, incomes received in

advance, outstanding expenses.

Interpretation : As conventional rules, current ratio of 2:1 or more considered

satisfactory. If the actual current ratio is less than 2:1, then the logical conclusion is that

the concern does not enjoy sufficient liquidity and there is shortage of working capital.

QUICK / LIQUIDITY / ACID TEST RATIO

Quick ratio is the ratio, which expresses the relationship between quick or liquid

assets and quick or liquid liabilities.

Quick Assets

Quick Ratio =



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Quick Liabilities

Quick Assets : Includes all current assets excluding inventory and prepaid expenses.

Quick Liabilities : Includes all current liabilities excluding bank overdraft and cash

credit.

Interpretation : The ideal quick ratio is 1:1, if the quick ratio is equal or more than the

standard ratio, it is satisfactory and concern is liquid and it can pay off its short term

liabilities out of its quickly realizable assets.

INVENTORY TO WORKING CAPITAL RATIO:

Inventory to working capital ratio is the ratio of Inventory to working.

This expresses the relationship between Inventories to working capital.

Inventory or stock: It refers to closing stock of raw materials, work in progress and

finished goods.

Working capital: it is excess of current assets over current liabilities.

Inventory

Inventory to working capital ratio =

Working capital

Interpretation: As per the standard or ideal inventory to working capital ratio, the

inventories should not absorb more than 75% of working capital. As such, a low

inventory to working capital ratio indicates understanding, and so a high liquid position,



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while a high inventory to working capital ratio indicates overstocking and so a low

liquid position.

DEBT EQUITY RATIO / EXTERNAL INTERNAL RATIO

This is the ratio of total outsiders liabilities to total owners funds. The ratio

reflects on the relative claims of creditors & shareholders against the assets of the firm.

Total long term Debt

Debt Equity Ratios =Shareholders Equity

Total Long Term Debt : Includes long-term loan raised.

Share Holders Equity : Includes capital, all accumulated reserves, and profits.

Interpretation : The ideal debt equity ratio is 2:1 as such, if the debt is less than two

times of equity, the logical conclusion is that the financial structure of the firm is sound

and the stake of long-term creditors is relatively less.

PROPRIETARY RATIO

This ratio expresses the relationship between the net worth and equity and total

assets. Net worth / Shareholders fund

Proprietary Ratio =

Total assets

Net worth : Means owners funds or proprietors funds



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Total assets: Sum total of all realizable assets.

Interpretation : Ideal ratio is 0.50:1 higher the proprietary ratio, the stronger is the

financial position of the concern and Vice Versa.

SOLVENCY RATIO:

This ratio expresses the relationship between the total assets and total liabilities.

Total assets

Solvency Ratios =

Total liabilities

Total Assets: Fixed Assets + Current assets + Investment

Total liabilities: Long-term liabilities + Current Liabilities

Interpretation : Higher the solvency ratio of the concern the stronger is the financial

position.

FIXED ASSETS TO NET WORTH

This ratio expresses the relationship between fixed assets and net worth.

Net fixed assets

Fixed assets to Net worth ratios =

Net worth

Net Fixed Assets : Fixed assets Depreciation

Net worth : Owners funds



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Interpretation: Ideal ratio is 2/3 or 67% that the fixed assets should not constitute more

than 2/3 or 67% of the proprietors funds, it indicates that the proprietors funds are mostly

sunk in the fixed assets and the current assets are mostly financial out of loaned funds.

This indicates financial weakness of the concern and greater risks for the creditors.

CURRENT ASSETS TO NET WORTH

A current asset to net worth ratio is the ratio between current assets and net worth.

Current assets

Current assets to net worth ratio =

Net worth

This ratio indicates the proportion of current assets financed by the owners.

Interpretation: there is no standard or ideal current asset to net worth ratio.

If this ratio is high the financial strength of the concern is good, and if this ratio is low,

the financial position of the concern is weak.

CURRENT LIABILITIES TO NET WORTH:

A current liability to net worth ratio is the ratio between current liabilities and net worth.

Current liabilities

Current liabilities to net worth ratio =

Net worth



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Interpretation : the desirable level set for this ratio is 1/3 or 33.333 so, if the actual ratio

is very high it would mean that the liability base of the concern will not provide an

adequate cover for long term creditors. That means it would be difficult for the concern to

obtain long-term funds.

FIXED ASSETS RATIOS:

Fixed assets ratio is the ratio between fixed assets and capital employed

Fixed assets

Fixed assets ratio =Capital Employed

Capital Employed: Sum of owners fund, long-term loan, and debentures

Or

Sum of fixed assets, trade investment, And Net Working Capital

Interpretation: This ratio should not be more than one. The ideal ratio is 0.67; this

would mean that not only all the fixed assets but also a part of working capital is financial

by long-term funds. This is desirable because a part of the working capital, popularly

known as core working capital, should be met out of long-term funds.

INVENTORY TURNOVER RATIOS:

This is the ratio, which indicates the number of time stock is turned into sales and

then to cash during the year. This ratio indicates the efficiency of the firm in selling its

products. It is the ratio between stock and cost of goods sold.



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Cost of goods sold

Inventory Turnover ratio =

Average inventory

Cost of goods sold: Opening stock of goods + manufacturing expenses closing stock.

Average Inventory:

Opening stock of finished goods + Closing stock of finished goods.

2

Interpretation: A stock turnover ratio of 8 times a year considered ideal. The ratio

higher than the ideal ratio indicates the efficient sales of the concern i.e., the business is

expanding. Lower the ratio indicates the inefficient in sales of the products i.e., business

is not prosperous.

DEBTORS TURNOVER RATIO:

It is the ratio, which indicates the relationship between debtors and sales. It is the

ratio, which indicates the number of times debt collected in the year.

Net credit sales

Debtors Turnover ratio =

Average debtors

Opening debtors + Bills payable + Closing Debtors

Average Debtors =

2

Debt collection period



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This indicates the average time taken by the firm to collect debt.

Month / days in a year Debt Collection period =

Debtors Turn over Ratio

Interpretation: If the actual period of credit or ideal period of credit (30 days) the

indication is that credit collection is not efficient. In the adverse case, it is the indication

of efficient credit collection.

CREDITORS TURNOVER RATIO:

This is the ratio, which indicates the relationship between creditors and purchases.

It is the ratio, which indicates the number of times the creditors are paid in a year.

Net Credit purchaseCreditors Turnover Ratio =

Average creditors

Opening creditors + Bills payable + closing creditors

Average Creditors =

2

FIXED ASSETS TURNOVER RATIO:

Fixed assets turnover ratio is the ratio between fixed assets and turnover or sales.



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Net sales

Fixed assets turnover ratio =

Fixed assets

Fixed assets mean Net fixed assets i.e., fixed assets less depreciation.

Interpretation: The standard or ideal fixed assets turnover ratio is 5 times. Therefore, a

fixed assets turnover ratio of 5 times or more indicate better utilization of fixed assets. On

the other hand, fixed assets turnover ratio of less than 5 times is an indication of under

utilization of fixed assets.

In this context, it may be noted that a very high fixed assets turnover ratio means over

trading, which is not good for the business.

WORKING CAPITAL TURNOVER RATIO:

This is the ratio between sales and working capital

Net sales

Working capital turnover ratio =

Working capital

Working capital = current assets current liabilities

Interpretation: Higher the working capital turns over indicates the efficiency and low

ratio indicates the inefficiency of the management in the utilization of working capital.



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PROFITABLITY RATIOS:

Profitability ratios reveal the total effect of the business transaction on the profit

position of the enterprise and indicate how far the enterprise has been successful in its

aim.

GROSS PROFIT RATIO:

Gross profit ratio is the ratio, which expresses the relationship between gross

profit and sales.

Gross profit

Gross profit Ratio = X 100

Sales

Gross profit = Sales - cost of goods sold

Interpretation: The rate of the gross profit must be sufficient to cover all operating

expenses and non operating expenses and also leave sufficient amount of profit for the

owners.

NET PROFIT RATIO:

Net profit ratio is the ratio, which expresses the relationship between net profit

and sales.

Net profit



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Net profit Ratio = X 100

Sales

Net profit : means profit left after meeting all expenses. In other words, it is the excess of

total revenue over total expenses. In short it means the final profit available for the

owners.

Interpretation: A high net profit ratio indicates that the profitability of the concern is

good.

Fund Flow Analysis: The purpose of this analysis is to go beyond and behind the

information contained in the financial statements. Income statement tells the quantum of

profit earned or loss suffered for a particular accounting year. Balance sheet gives the

assets and liabilities position as on a particular date. But in an accounting year a number

of financial transactions take place which have a bearing on the performance of the

concern but which are not revealed by the financial statements.

Cash Flow Analysis: While funds flow analysis studies the reasons for the changes in

working capital by analyzing the sources and application of funds cash flow analysis pays

attention to the changes in cash position that has taken place between two accounting

periods. These reasons are not available in the traditional financial statements. Changes in

the cash position can be analyzed with the help of a statement known as cash flow

statement. A cash flow statement summarizes the change in cash position of the concern.

Transactions which increase the cash position of the concern are labeled as inflows of

cash and those which decrease the cash position as outflows of cash.



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Break Even Analysis : Break-even analysis is a technique widely used by production

management and management accountants. It is based on categorizing production costs

between those which are "variable" (costs that change when the production outputchanges) and those that are "fixed" (costs not directly related to the volume of

production). Total variable and fixed costs are compared with sales revenue in order to

determine the level of sales volume, sales value or production at which the business

makes neither a profit nor a loss (the "break-even point").

Du-Point Analysis:

The earning power of the firm may be defined as the overall profitability of an

enterprise. This ratio has two elements

1. profitability on sales reflected in the net profit margin

2. profitability of assets which is revealed by assets / investments turnover



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CHAPTER: 2

INDUSTRIAL AND COMPANY PROFILE

2.1. INDUSTRIAL PROFILE

History of tiles can be traced right down to Egypt where glazed decorative

tiles were first know to have been produced and from there the tile marketing art

spread its wings to Persia and across north Africa.

Today glazed tiles commonly called ceramic tiles are infinitely used in

numerous ways through out. The world and one doesnt have to be amongst the

wealthy to own them.

The history recites that the first decorative files to appear in colonial North

America were imported from northern, Europe, mainly England but the cost

restricted. The uses to utilization purposes on the colonies and were found almost

exclusively in the homes of the wealthy.

The over all improvement in the construction industry has to some extent

helped to over come the problem of excess production capacity in ceramic tile

industry. Competition between the organized v/s unorganized sectors is no more a

major issue in the Indian ceramic tile market. However the major threat is the

competition in the global market has adversely affected export of ceramic tile

from India. This has created a high pressure on selling price of the product

Ceramic tile industry being fuel intensive product Ceramic tile industry being fuel

intensive industry. The steep increase in the international price of crude has

adversely affected the earning of ceramic tile manufacturing Almost 30% like in



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the diesel price. Price over a period of last one year has increased the cost of

manufacturing and selling expenses due to increase in fright charges for the

incoming and outgoing materials.

The long awaited introduction of VAT has materialized in most part of the

country and efforts are on for the left out states to implement the same. This will

help the process of rationalization of the tax structure.

SIZE OF INDUSTRY

At present there are 14 units in the organized sector with an installed

capacity of 12 lacks MT, it accounts for about 2.5% of world ceramic tile

production. The ceramic tile industry has grown by about 11% per annum during

the last 3 years. In India the per capita consumption is 0.09sq.m Per annum as

compared to 1.2sq.m Per annum in china and 5 to 6sq.m Per annum in European

countries. Its demand is expected to increase with the growth in the housing

sector. Indian tiles are competitive in the international market.

These are being exported to east and west Asian countries. The export was

about 143 Crores during 2001-02 ever since liberalization process was initiated in

1991, the excise duty for the industry has been on the slide down, for as high in

the industry has been on slide down forms high in 55% 1993-94 it was reduced to

40% in 1994 to 30% in 1995-96 and 25% in the budget of 1997-98. The cuts

reduced the price differential between ceramic and mosaic tiles. This resulted in

short of boom in the industry. The companies expanded their capacity and a few



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new players entered in this field. In 1994-95, the industry capacity has continued

to expand by a similar jump in 1997-98.

2.2. COMPANY PROFILE

History of the Company

Bell ceramic limited promoted by JBS investment private limited

Singapore, on overseas body was in corporate on 18 th OCT 1985. The main

objective of the company is to manufacture and market ceramic glazed floor and

wall tiles in domestic and international markets. Today Bell ISO-9001 and 14001

companies with a turn over of 1350 million, employing more than 1000 people.

The plant located at Dora near Baroda in Gujarat western India has been

installed production capacity of 1000sq.mtrs per day of monodrama wall tiles and

floor tiles.

The second plant located at Hosakote Bangalore has been installed

capacity of 1000sq.mtrs of floor tiles per day.

The plant makes use of the world renewed multilane dry process

technology. This is an environment friendly and quality product through team

efforts. Form an installed manufacturing capacity of 20000 TPA. It has grown to

117000 TPA (62000 TPA wall tiles and 55000 TPA floor tiles). Today the

company manufactures ceramic tiles according to the guideline laid down by

CMITE EUROPEA DE NORMACISATION (CEN).



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Bell ceramics ltd has done good name and fame in the market for its quality and

standard product-gaining top 4 th place in the ceramic tile manufacturing

companies in India in zoom.

2.3 PRODUCT PROFILE

The products are available in spectacular range of 100 different shades,

design and different size for floor. Wall tiles are available in 250 different shades

and patterns. Bell tiles are manufactured to the strict comity European

normalization (CEN) standards.

The tiles are tested for size tolerance, water absorption, bending strength,

war page, and acid, alkali resistance, crazing resistance and thermal shock

resistance. The wall tiles are with high glass and exotic. Bell floor tiles are

manufactured using multilane dry process technology resulting in highly

affordable high quality tiles to the end user.



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CHAPTER 3

RESEARCH DESIGN

3.1. STATEMENT OF THE PROBLEM

This study has been concentrated on the Financial performance analysis at Bell

ceramics ltd This study made in the light of one of the tool of financial management.

The study broadly attempts to determine the over all financial performance of a company

for the last few years. Since finance is an important parameter of every business concern

to determine the growth and profitability, the study of the topic sounds momentous.

Therefore, an attempt has been made to analyze the trend in which the company is

moving and to identify the areas where lapses have occurred and also to suggest

necessary remedial measure to overcome the lapses.

3.2. OBJECTIVES OF THE STUDY

1. To study the soundness of financial position of the company.

2. To study the capital structure of the company3. To analyze the organizational performance of BELL CERAMICS LIMITED.

4. To give suggestions to the company for attaining favorable financial position.

3.3. SCOPE OF THE STUDY

The study is exclusively conducted at BELL CERAMICS LIMITED. The study is

confined to finance department. The study is limited only to the analysis of financial

statements of past years; even through a brief insight was given to other aspects.The

study includes the trends of BELL CERAMICS LIMITED Performance only for the

last 5 years.



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3.4 Data collection Methods

The data sources can be classified in tow categories:

Primary Data

Secondary Data

Primary Data:

Having discussions with different department managers and officers of the

company to get general information about the company and its activities.

Secondary Data:

1 .Annual reports

2. Company manuals.

3. Text books

4. News papers.

5. Internet sources.

3.5 KEY CONCEPTS

Financial Statement Analysis

Financial statement analysis is an analysis which highlights important relationship in the

financial statements. It focuses on evaluation of past operations as revealed by the

analysis of basic statements

It is an important means of assessing past performance and in forecasting and

planning the future performance. According Lev



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Financial statement analysis is an information processing system designed to

provide data for decision making models such as the portfolio selection model, bank

lending decision model, and corporate financial management model.

Technique or Basics Of Financial Statement Analysis

A study of financial performance comprises of analyzing the companys

financial position by using 7 different tools of financial management. They are as under

1. Comparative balance sheet technique

2. Common size balance sheet technique

3. Trend analysis

4. Ratio analysis

5. Cash flow Analysis

6. Fund flow Analysis

7. Break even Analysis

8. Du Pont Analysis

3.6 LIMITATIONS OF THE STUDY

Time duration for the study was restricted to 6 Weeks.

The company does not reveal some information related to the financial aspects

and it is kept confidential.



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CHAPTER-4

ANALYSIS AND INTERPRETATIONS

COMPARITIVE BALANCE SHEET FOR THE YEAR 2003 AND 2004

TABLE NO 4. 1Particulars

Amount

2003 2004 Difference %

SOURCE OF FUNDSShare Capital 3652.14 3652.14 0 0Reserves & Surplus 2707.67 2850.57 142.9 5.278

Secured Loans 8601.4 8091.32 -510.08 -5.930Unsecured loans 164.72 534.68 369.96 224.599

APPLICATION OF FUNDSFIXED ASSETS (net block) 10537.91 12502.98 1965.07 18.648Capital Work in Progress 83.81 56.12 -27.69 -33.039net INVESTMENTS 416.56 415.31 -1.25 -0.300

CURRENT ASSETS, LOANS &ADVANCES

Inventories 2604.85 2501.91 -102.94 -3.952Sundry Debtors 1120.09 629.63 -490.46 -43.788Cash and Bank Balances 58.13 50.24 -7.89 -13.573Loans and Advances 599.69 720.92 121.23 20.215

LESS: CURRENT LIABILITIES &PROVISIONS

Current Liabilities 2791.36 2858.79 67.43 2.416Provisions 58.74 110.74 52 88.526

NET CURRENT ASSETS

MISCELLANEOUS EXPENDITURE(TO THEEXTENT NOT WRITTEN OFF OR ADJUSTED)

1532.66 933.17 -599.49 -39.114

723.71 14.22 -709.49 -98.035



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TABLE NO 4.2

Particulars Amount


SOURCE OF FUNDS

Share Capital 3652.14 3652.14 0 0Reserves & Surplus 2850.57 2341.22 -509.35 -17.87Secured Loans 8091.32 8477.73 386.41 4.78Unsecured loans 534.68 558.89 24.21 4.53

APPLICATION OF FUNDS

FIXED ASSETS (net block) 12502.98 13747.36 1244.38 9.95Capital Work in Progress 56.12 272.94 216.82 386.35net INVESTMENTS 415.31 415.31 0 0.00


Inventories 2501.91 3154.05 652.14 26.07Sundry Debtors 629.63 677.16 47.53 7.55Cash and Bank Balances 50.24 88.31 38.07 75.78Loans and Advances 720.92 1224.95 504.03 69.91


Current Liabilities 2858.79 4271.59 1412.8 49.42Provisions 110.74 317.51 206.77 186.72

NET CURRENT ASSETS

MISCELLANEOUS EXPENDITURE(TO THEEXTENT NOT WRITTEN OFF OR ADJUSTED)

933.17 555.37 -377.8 -40.49

14.22 5 -9.22 -64.84



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GRAPH SHOWING THE INCREASE IN THE SOURCES OF FUNDS

FOR THE YR 2004-2005

520

525

530

535

540

545

550

555

560

2006 2005

Sources of funds

Interpretation:

Comparative balance sheet for the year2003- 2004 and 2004-2005 revealed that

there is a drastic increase in the items of balance sheet like secured loans unsecured loan,

fixed assets, loans, capital work in progress, inventories, debtors and cash and bank

balances current liabilities and provisions. by 4.78%, 4.53%,9.95%, 69.91%, 386.35%,

26.07%, 7.55%, 75.78%, 49.42%, 186.78% respectively , At the same time there is a

decrease in reserves and surplus, , which has resulted in favorable growth.



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TABLE NO 4.3

Particulars Amount


SOURCE OF FUNDS

Share Capital 3652.14 3652.14 0 0Reserves & Surplus 2341.22 2452.66 111.44 4.76Secured Loans 8477.73 8632.49 154.76 1.83Unsecured loans 558.89 697.73 138.84 24.84

APPLICATION OF FUNDS

FIXED ASSETS (net block)13747.36 14312.28 564.92 4.11Capital Work in Progress 272.94 56.64 -216.3 -79.25

net INVESTMENTS 415.31 415.31 0 0.00


Inventories 3154.05 483.95 -2670.1 -84.66Sundry Debtors 677.16 910.57 233.41 34.47Cash and Bank Balances 88.31 38.02 -50.29 -56.95Loans and Advances 1224.95 731.71 -493.24 -40.27


Current Liabilities 4271.59 4795.08 523.49 12.26Provisions 317.51 242.25 -75.26 -23.70

NET CURRENT ASSETS 555.37 726.92 171.55 30.89MISCELLANEOUS EXPENDITURE(TO THEEXTENT NOT WRITTEN OFF OR ADJUSTED)

5 49.87 44.87 897.40




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0

100

200

300

400

500

600

700

2005 2006

Sources of

funds

Interpretation:

Comparative balance sheet for the year2004- 2005 and 2005-2006 revealed that

there is a drastic increase in the items of balance sheet like reserves and surplus, secured

loans, unsecured loan, fixed assets, debtors, current liabilities by 4.76%, 1.83%, 24.84%,

4.11%, 34.47%, 12.26% respectively. At the same time there is a decrease in capital work

in progress, inventories and cash and bank balances and advances, provisions by 79.25%,

84.66%, 56.95%, 40.27%, 23.70% respectively which has resulted in a un favorable

growth.




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TABLE NO 4.4

Particulars Amount


SOURCE OF FUNDSShare Capital 3652.14 3652.14 0 0Reserves & Surplus 2452.66 1785.01 -667.65 -27.22Secured Loans 8632.49 8519.29 -113.02 -1.31Unsecured loans 697.73 737.27 39.54 5.67

APPLICATION OF FUNDSFIXED ASSETS (net block) 14312.28 13744.46 -567.82 -3.97Capital Work in Progress 56.64 4.87 -51.77 -91.40net INVESTMENTS 415.31 411.71 -3.06 -0.87


Inventories 483.95 4304.93 3820.98 789.54Sundry Debtors 910.57 982.83 72.26 7.93Cash and Bank Balances 38.02 39.72 1.07 4.47Loans and Advances 731.71 572.58 -159.13 -21.74

LESS: CURRENT LIABILITIES &

PROVISIONS

Current Liabilities 4795.08 5169.30 374.22 7.80Provisions 242.25 146.05 -96.02 -39.71

NET CURRENT ASSETS 726.92 584.71 -142.21 -19.56MISCELLANEOUS EXPENDITURE(TO THEEXTENT NOT WRITTEN OFF OR ADJUSTED)

49.87 23.34 -26.53 -53.19





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670

680

690

700

710

720

730

740

2006 2007

Sources of funds

Interpretation:

Comparative balance sheet for the year 2003 and 2004 revealed that there is a

drastic increase in the items of balance sheet like unsecured loan, inventories, debtors and

cash and bank balances, current liabilities by 5.67%, 789.54%, 7.93%, 4.47%, 7.80%respectively. At the same time there is a decrease in reserves and surplus, secured loans

capital work in progress, net investments, and provisions, loans and advances,

miscellaneous exps by 27.22%, 1.31%, 3.97%, 91.40%, 0.87%, 21.74%, 53.19%

respectively Which has resulted in favorable growth.



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TABLE NO-4.5: COMMON SIZE STATEMENT

GRAPH SHOWING THE FLUCTUATIONS IN THE CURRENT ASSETS

Christ College Pondicherry University Twinning Program

Particulars 2003 2004 2005 2006 2007Amount % Amount % Amou

nt% Amount % Amount %

SOURCE OFFUNDSShare Capital 3652.14 24.14 3652.14 23.98 3652.14 24.29 3652.14 23.66 3652.14 24.85Reserves & Surplus 2707.67 17.90 2850.57 18.71 2341.22 15.57 2452.66 15.89 1785.01 12.14Secured Loans 8601.4 56.86 8091.32 53.13 8477.73 56.40 8632.49 55.92 8519.29 57.98Unsecured loans 164.72 1.08 534.68 3.51 558.89 3.71 697.73 4.52 737.27 5.0

APPLICATIONOF FUNDSFIXED ASSETS(net block) 10537.91 69.66 12502.98 82.10

13747.36 91.46 14312.28 92.72 13744.46 93

Capital Work inProgress 83.81 0.55 56.12 0.36 272.94 1.81 56.64 0.39 4.87 0.NetINVESTMENTS 416.56 2.75 415.31 2.72 415.31 2.76 415.31 2.69 411.71 2.8

CURRENTASSETS, LOANS& ADVANCESInventories 2604.85 50.81 2501.91 16.43 3154.05 20.98 4083.95 26.45 4304.93 29.30Sundry Debtors 1120.09 7.40 629.63 4.13 677.16 4.50 910.57 5.90 982.83 66.8Cash and Bank Balances 58.13 0.38 50.24 0.32 88.31 0.58 38.02 0.24 39.72Loans and Advances 599.69 3.96 720.92 4.73 1224.95 8.15 731.71 4.74 572.58 3.9

LESS: CURRENTLIABILITIES &PROVISIONSCurrent Liabilities

2791.36-

18.45 2858.79 -18.77 4271.59-

28.71 4795.08-

31.06 5169.30Provisions 58.74 0.39 110.74 -0.73 317.51 -2.11 242.25 -1.57 146.05 -0.9

NET CURRENTASSETS 1532.66 10.13 933.17 6.12 555.37 3.69 726.92 4.70 584.71 3.9

MISCELLANEOUSEXPENDITURE(TO THEEXTENT NOTWRITTEN OFF OR ADJUSTED)

723.71 4.78 14.22 0.093 5 0.03 49.87 0.32 23.34

43


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FROM THE YEAR 2003-2007

0

2

4

6

8

10

12

2003 2004 2005 2006 2007

Net currentassets

Interpretation:

Common size statement revealed that there is a greater fluctuation in the net

current assets position against the total of balance sheet by 10.13%, 6.12%, 3.69%,

4.70%, and 3.97% respectively in the year starting from 2003 to 2007 due to increase and

decrease of current liabilities position and provisions.



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TABLE NO 4.6 TREND ANALYSIS

Christ College Pondicherry University Twinning Program

Particulars 2003 2004 2005 2006 2007Amount % Amount % Amount % Amount % Amount %

SOURCE OFFUNDSShare Capital

3652.1410

0 3652.14 100 3652.14 100 3652.14 100 3652.14 10Reserves & Surplus

2707.6710

0 2850.57105.2

8 2341.22 86.47 2452.66 90.59 1785.01Secured Loans

8601.410

0 8091.32 94.06 8477.73 98.56 8632.49100.3

6 8519.29Unsecured loans

164.7210

0 534.68324.5

9 558.89339.2

9 697.73423.5

8 737.2744

APPLICATIONOF FUNDS

FIXED ASSETS(net block) 10537.91

100 12502.98

118.64 13747.36

130.36 14312.28

135.82 13744.46 13

Capital Work inProgress 83.81

100 56.12 66.94 272.94

325.66 56.64 67.58 4.87

NetINVESTMENTS 416.56

100 415.31 99.69 415.31 99.69 415.31 99.69 411.71 98.8

CURRENTASSETS, LOANS& ADVANCES

Inventories2604.85 100 2501.91 96.04 3154.05 121.08 483.95 18.57 4304.93 16

Sundry Debtors1120.09

100 629.63 56.21 677.16 60.45 910.57 81.29 982.83

Cash and Bank Balances 58.13

100 50.24 86.42 88.31

151.91 38.02 65.40 39.72

Loans and Advances599.69

100 720.92

120.21 1224.95

204.14 731.71

122.01 572.58

LESS: CURRENTLIABILITIES &PROVISIONS

Current Liabilities2791.36

100 2858.79

102.41 4271.59

153.02 4795.08

171.78 5169.30

18

Provisions58.74

100 110.74

188.52 317.51

540.53 242.25

412.41 146.05

24

NET CURRENTASSETS

MISCELLANEOUSEXPENDITURE(TO THEEXTENT NOTWRITTEN OFF OR ADJUSTED)

1532.6610

0 933.17 60.88 555.37 36.23 726.92 47.42 584.71

723.7110

0 14.22 1.96 5 0.690 49.87 6.89

23.3445


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Interpretation:

The trend analysis of all the 5 years has been done by taking the year 2002-03 as

a base year. The study revealed that there are fluctuations in the form of decrease in

sources of funds and current assets position and increase in current liability position and

in provisions. There is an increase in the reserves and surplus in the year 2004 to

105.28% and decrease in the year 2005, 2006, 2007, to 86.47% , 90.59%, 65.93%

respectively secured loans have decreased drastically to 94.065, 98.56%, 99.04% in the

year from 2004,2005,2007 and in the year 2006 it has attained the positive position to

100.36%, unsecured loans have increased to unpredictable extent of 324.59%, 339.29%,

423.58% and 447.59% in the year from 2004 to 2007 respectively.

In the other hand fixed assets have increased to 118.64%, 130.36%, 135.82%, and

130.42% respectively from the year 2004 to 2007. Net investments have decreased to

99.69% from the year 2004 to 2006 and 98.83% in the year 2007. In the current assets

inventories have decreased in all the years except in the year 2005 to 95.23%, 91.47%,

17.69% and 29.30% respectively. Debtors have decreased to 57.30%, 32.21%, 34.64%,

46.58%, and 6.69% respectively in the years from 2003 to 2007.

Current liabilities have decreased in the years 2003, 2004,and in the year 2007 to

87.94%, 90.06% and to 35.185 respectively but it has increased to 134.57%, 151.06% in

the years 2005 and 2006. Provisions have increased to 110.74%, 54.53%, and 412.41%

and to 248.63% respectively.



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RATIO ANALYSIS

LIQUIDITY RATIOS

TABLE NO 4.7

TABLE SHOWING CURRENT RATIO OF THE COMPANY

(Rs. In Lakhs )

Particulars2006-07

2005-06 2004-05 2003-04 2002-03

Current

assets

5900.065764.25 5144.47 3902.270 4382.76

Current

liabilities

5315.355037.33 4589.10 2969.53 2850.10

Current

Ratio

1.1101.144 1.121 1.314 1.537

The current ratio of the company is fluctuating. In, 2002 2003 it was 1.537, in

the year 2003 2004 it was 1.314, In the year 2004 2005 it was 1.121 and in the year

2005 2006 it is 1.144. ,in the year 2006-07 it is 1.110

The current ratio is ascertained with the help of relevant financial figures. It has to

be compared with the standard ratio of 2:1. From 2002 2003 to 2006 2007 the current

ratio is less than the ideal ratio. This is not a good sign for the companys liquidity

solvency position.

CHART NO 1

GRAPH SHOWING CURRENT RATIO FROM 2002 2003 TO 2006 2007



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1.111.144 1.121

1.314

1.537

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

RATIO

2006-07 2005-06 2004-05 2003-04 2002-03

YEARS

Current Ratio

Current R

TABLE NO 4.8

TABLE SHOWING QUICK RATIO OF THE COMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Quick assets 1595.13 1680.30 1990.42 1391.70 1777.91

Quick

liabilities5315.35 5037.33 4589.10 2969.53 2850.10

Quick Ratio 0.300 0.333 0.434 0.468 0.623



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The Quick Ratio of the company is fluctuating. In 2002 2003 it was 0.623, in


2005 2006 it is 0.333. In the year 2006-07 it is 0.300

The actual quick ratio has to be compared with the ideal quick ratio is 1:1. The

quick ratio of the company is less than the ideal ratio of 1:1, so the companys liquidity

position is not satisfied.

CHART NO 2

GRAPH SHOWING QUICK RATIO FROM 2002 2003 TO 2006 2007

0.30.333

0.4340.468

0.623

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

RATIO

2006-07 2005-06 2004-05 2003-04 2002-03

YEARS

Quick Ratio

Quick R



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TABLE NO 4.9

TABLE SHOWING INVENTORY TO WORKING CAPITAL RATIO OF THECOMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Inventory2922.03 2784.42 1917.57 1479.41 1647.86

Working

capital584.71 726.92 555.37 933.17 1532.66

Inventory to

working

capital ratio

499.74% 383.04% 345.27% 158.53% 107.51%

The Inventory to working capital ratio of the company is increasing In 2002

2003 it was 107.51%, in the year 2003 2004 it was 158.53%, In the year 2004 2005 it

was 345.27% and in the year 2005 2006 it is 383.04%. . In the year 2006-07 it

is499.74%

The inventory to working capital ratio more than 75% of working capital it

indicates over stocking, and so a low liquid position of the company



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CHART NO .3

GRAPH SHOWING INVENTORY TO WORKING CAPITAL RATIO FROM

2002 2003 TO 2006 2007


4 9 9 . 7 4

3 8 3 . 0 43 4 5 . 2 7

1 5 8 . 5 31 0 7 . 5 1

0 . 0 0 %5 0 . 0 0 %

1 0 0 . 0 0 %1 5 0 . 0 0 %2 0 0 . 0 0 %2 5 0 . 0 0 %3 0 0 . 0 0 %3 5 0 . 0 0 %4 0 0 . 0 0 %4 5 0 . 0 0 %5 0 0 . 0 0 %

R AT I

2 0 0 6 - 0 72 0 0 5 - 0 62 0 0 4 - 0 52 0 0 3 - 0 42 0 0 2 - 0 3

Y E A R

In v e n to r y to w o r k in g c a

In ven to ry to w o rk


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TABLE NO 4.10

TABLE SHOWING DEBT EQUITY RATIO OF THE COMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Long-term Debt 9256.56 9330.22 9036.62 8626.00 8766.12

Equity 5437.15 6104.80 5993.36 6502.71 6359.81

Debt Equity

Ratio1.702 1.528 1.507 1.326 1.378

The Debt Equity Ratio of the company is fluctuating. in 2002 2003 it was 1.378,

in the year 2003 2004 it was 1.326, In the year 2004 2005 it was 1.507 and in the year

2005 2006 it is 1.528. . In the year 2006-07 it is1.702

.

The ideal debt equity ratio is 2:1, as such if the debt is less than 2 times the equity,

the logical conclusion is that the financial structure of the concern is sound and so the risk

of long term creditors is relatively less. On the other hand, if the debt is more than 2 times

the equity, the conclusion is that the financial structure of the company is weak. So the

risk of long term creditors is relatively more.

On the whole the debt equity ratio is satisfactory.

CHART NO 4



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GRAPH SHOWING DEBT EQUITY RATIO

FROM 2002 2003 TO 2006 2007

1 . 7 01 . 5 2 1 . 5 0 1 . 3 2 1 . 3 7

00 .20 .40 .60 .8

11 .2

1 .41 .61 .8

R AT I

2 0 0 6 - 0 7 2 0 0 5 - 0 6 2 0 0 4 - 0 5 2 0 0 3 - 0 4 2 0 0 2 - 0 3

Y E A R

D e b t E q u i ty

D eb t E q ui



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TABLE NO 4.11

TABLE SHOWING SOLVENCY RATIO OF THE COMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Total Assets 19985.7 20422.48 19614.08 16877.11 15421.04

Total

Liabilities

14571.91 14367.55 13625.72 11595.53 11616.22

Solvency

Ratio1.371 1.421 1.349 1.455 1.327

There is a steady increase in the ratio from the year 2002 2003 to 2003-2004 the

ratio where 1.327, 1.445 respectively. Where as it is decreased in the year 2004 2005

the ratio where 1.349 and increase 2005-2006 the ratio where1.421. and decrease in the

year2006-07 the ratio is 1.371

Though there is no standard or ideal solvency ratio has established. One can say

that the higher the solvency ratio of the concern, the stronger is the financial position of

the concern and vise versa. There is a steady decreased in the ratio, which indicates low

efficiency of total assets to meet the total liabilities of the company.

CHART NO 5



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GRAPH SHOWING SOLVENCY RATIO

FROM 2002 2003 TO 2006 2007

1 . 3 7

1 . 4 2

1 . 3 4

1 . 4 5

1 . 3 2

1 . 2 61 . 2 81 .3

1 . 3 21 . 3 41 . 3 61 . 3 81 .4

1 . 4 21 . 4 41 . 4 6

R AT I

2 0 0 6 -0 7 2 0 0 5 - 0 6 2 0 0 4 -0 5 2 0 0 3 - 0 4 2 0 0 2 -0 3

YEAR

S o l ve n c y R

S olven c

TABLE NO 4.12



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TABLE SHOWING FIXED ASSET TO NETWORTH OF THE COMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Net Fixed

Assets13744.46 14312.28 13747.36 12502.98 10621.72

Net Worth 5437.15 6104.80 5993.36 6502.71 6359.81

FixedAssets Net

worth Ratio

2.527 2.344 2.293 1.922 1.670

There is a steady increase in the ratio. In the year 2002 2003 the ratio will

decrease it was 1.670 and in the year 2003 2004 to 2006-2007 it has increased 1.922 to

2.527.

The ideal ratio is 0.67 times, of the proprietors funds the indication is that the

proprietors funds are mostly sunk in the fixed assets and current asset are financed out of

loaned funds .

So such an indication means financial weakness of the concern and greater risks

for the creditor

CHART NO .6



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GRAPH SHOWING FIXED ASSET TO NETWORTH FROM 2002 2003 TO

2006 2007

2 . 5 2 2 . 3 4 2 . 2 9

1 . 9 2

1 .6

0

0 .5

1

1 .5

2

2 .5

3

R AT I

2 0 0 6-0 72 0 05 -0 620 0 4 -052 0 0 3-0 420 0 2-0 3

YEAR

F i x e d A sse ts N e t w o r

F ix e d A s s e t s N e t

TABLE NO 4.13



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TABLE SHOWING CURRENT ASSET TO NETWORTH RATIO OF THE

COMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Current

Assets5900.06 5764.25 5144.47 3902.270 4382.76

Net Worth 5437.15 6104.80 5993.36 6502.71 6359.81

Current

Assets Net

worth Ratio

1.085 0.944 0.858 0.600 0.689

The current asset to net worth Ratio of the company is fluctuating. In 2002 2003

it was 0.689, in the year 2003 2004 it was 0.600, In the year 2004 2005 it was 0.858

and in the year 2005 2006 it is 0.944. . In the year 2006-07 it is1.085

. Though there is no standard current asset to net worth. One can say that is this ratio is

high the financial strength of the concern is good and if this ratio is low the financial

position of the company is weak.

CHART NO 7

GRAPH SHOWING CURRENT ASSET TO NETWORTH FROM



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2002 2003 TO 2006 2007

1.0850.944

0.858

0.60.689

0

0. 2

0. 4

0. 6

0. 8

1

1. 2

RATIO

2006-07 2005-06 2004-05 2003-04 2002-03

YEARS

Curre nt Asse ts Ne t worth Ra

Current Assets Net wort

TABLE NO 4.14

TABLE SHOWING CURRENT LIABILITIES TO NETWORTH OF THE

COMPANY



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(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Current

liabilities5315.35 5037.33 4589.10 2969.53 2850.10

Net Worth 5437.15 6104.80 5993.36 6502.71 6359.81

Current

liabilities

Net worthRatio

0.977 0.825 0.765 0.456 0.448

The current liabilities to net worth Ratio of the company are fluctuating in 2002

2003 it was 0.448, in the year 2003 2004 it was 0.456, in the year 2004 2005 it was

0.765 and in the year 2005 2006 it is 0.825. . In the year 2006-07 it is 0.977

The desirable level set for this ratio is 0.33 or 33.1/3%. So if the actual ratio were

very high it would mean that the liability base of the concern would not provide an

adequate cover for long-term creditors. That means it would be difficult for the concern

to obtain long-term funds.

CHART NO 8

GRAPH SHOWING CURRENT LIABILITIES TO NETWORTH FROM 2002

2003 TO 2006 2007



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0.977

0.8250.765

0.456 0.448

0

0.10.2

0.30.4

0.50.6

0.70.8

0.91

RATIO

2006-07 2005-06 2004-05 2003-04 2002-03

YEARS

Current liabilities Net worth Rati

Current liabilities NetRatio

TABLE NO 4.15

TABLE SHOWING FIXED ASSET RATIO OF THE COMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Fixed Assets 13749.33 14368.92 14020.30 12559.10 10621.72

Capital

Employed14693.71 15385.15 15024.98 15214.48 14402.22

Fixed Assets

Ratio0.935 0.934 0.933 0.825 0.737

The fixed asset ratio of the company is increasing. In 2002 2003 it was 0.737, in


2005 2006 it is 0.934. . In the year 2006-07 it is 0.935



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The fixed asset ratio should not be more than 1. It should be less than1. The ideal

ratio is 0.67 times. This would mean that not only all the fixed assets but also a part of

working capital are financed by the long-term funds, which is not a good sign towards the

efficiency of the company.

CHART NO 9

GRAPH SHOWING FIXED ASSET RATIO FROM 2002 2003 TO 2006 2007

0.935 0.934 0.9330.825 0.737

0

0.2

0.4

0.6

0.8

1

RATIO

2006-07 2005-06 2004-05 2003-04 2002-03

YEARS

Fixed Assets Ratio

Fixed Assets R



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ACTIVITY RATIOS

TABLE NO 4.16

TABLE SHOWING INVENTORY TURNOVER RATIO OF THE COMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Cost of Goods

Sold

15362.53 13535.94 11983.59 9445.15 7904.94

Average Stock 2853.22 2350.99 1698.49 1563.63 1776.06

Stock Turnover

Ratio5.38 5.75 7.05 6.04 4.45

The Inventory turnover ratio of the company is fluctuating. in 2002 2003 it was

4.45, in the year 2003 2004 it was 6.04, in the year 2004 2005 it was 7.05 and in the

year 2005 2006 it is 5.75. . In the year 2006-07 it is 5.38

A stock turnover of 8 times a year is considered ideal, as such a stock turnover of less

than 8 times it means that the concern has accumulated on saleable goods.

There is inefficient and so it is not able to sell away its goods quickly.



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CHART NO 10

GRAPH SHOWING STOCK TURNOVER RATIO FROM

2002 2003 TO 2006 2007

5.385.75

7.05

6.04

4.45

0

1

2

3

4

5

6

7

8

RATIO

2006-07 2005-06 2004-05 2003-04 2002-03

YEARS

Stock Turnover Ratio

Stock Turnover R

TABLE NO 4.17

TABLE SHOWING DEBTORS TURNOVER RATIO OF THE COMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Net sales 16923.35 15885.62 14812.23 12679.09 10026.52

Average Debtors Credit 982.83 910.57 677.16 629.63 1120.09

Debtor Turnover Ratio 17.21 17.44 21.87 20.13 8.95

Days 21.20 20.6 16.45 17.87 40.21



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17.21 17.44

21.87 20.13

8.95

0

5

10

15

20

25

RATIO

2006-07 2005-06 2004-05 2003-04 2002-03

YEARS

Debtor Turnover Ratio

Debtor Turnover


There is an increasing trend in the debtors turn over ratio from 2002-2003 to

2004-2005. It has decreased in the year 2005 2006. and increased in the year 2006-07

The actual period of credit allowed is less than the normal period of credit or the ideal

period of credit i.e., 30 days; the indication is that credit collection is efficient.

In case of BELL CERAMICS LTD, the collection period less than the standard

(i.e. 30 days) so the companys performance is good.

CHART NO 11

GRAPH SHOWING DEBTORS TURNOVER RATIO FROM

2002 2003 TO 2006 2007



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TABLE NO 4.18

TABLE SHOWING CREDITORS TURNOVER RATIO OF THE COMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Net Credit Purchase15500.1

414402.79 12421.75 9276.70 7648.53

Average Creditors 3251.21 2792.75 2711.64 1421.25 1243.08

Creditors Turnover

Ratio4.76 5.15 4.58 6.52 6.15

Days 76.68 69.80 78.58 55.15 58.50

The creditors turnover ratio of the company is fluctuating. In 2002 2003 it was

58.50, in the year 2003 2004 it was 55.15, In the year 2004 2005 it was 78.58 and in

the year 2005 2006 it is 69.80. . In the year 2006-07 it is 76.68

The standard or ideal debt payment period is 30 days. If the actual period of credit

received from creditors is less than 30 days. Then it indicates that average period from

the creditor is not sufficient, other wise (i.e. more than 30 days) is sufficient.

In case of BELL CERAMICS LTD, we can see that the average period of credit

received is more than the ideal so concern has sufficient time period of credit.



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CHART NO 12

GRAPH SHOWING CREDITORS TURNOVER RATIO FROM 2002- 2003 TO

2006 2007

4 . 75 . 1

4 . 5

6 . 5 6 . 1

0

1

2

3

45

6

7

R A T I

2 0 0 6 -0 72 0 0 5 -0 62 0 0 4 -0 52 0 0 3 -0 42 0 0 2 -0 3

Y E A R

C r e d i to r s T u r n o v

C re d it o rs T u rn



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TABLE NO 4.19

TABLE SHOWING THE FIXED ASSET TURNOVER RATIO OF THE

COMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Net Sales 16923.35 15885.62 14812.23 12679.09 10026.52

Net Fixed Assets 13744.46 14312.28 13747.36 12502.98 10621.72

Fixed Asset Turnover

Ratio1.231 1.10 1.077 1.01 0.94

The fixed assets turnover ratio of the company is increasing. In in 2002

2003 it was 0.94, in the year 2003 2004 it was 1.010, in the year 2004 2005 it was

1.09 and in the year 2005 2006 it is 1.10. . In the year 2006-07 it is 1.231



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The standard or ideal fixed assets turnover ratio is 5 times. So, fixed assets turnover ratio

of 5 times or more indicates better utilization of fixed assets. On the other hand a fixed

assets turnover ratio of less than 5 times is an indication of under utilization of fixed

assets.

The fixed assets turnover ratio is showing an increasing trend which indicates the

efficient utilization of fixed assets of the company.

CHART NO 13

GRAPH SHOWING FIXED ASSET TURNOVER RATIOFROM 2002 2003 TO 2006 2007


1.231 .1 1 .07

1.01 0.9

0

0.2

0 .4

0 .6

0 .8

1

1.2

1 .4

R AT I

2006-072005-062004-052003-042002-03

YEAR

F i x e d A s se t Tu r n o v e r

Fixed Asse t Tu rno


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TABLE NO 4.20

TABLE SHOWING WORKING CAPITAL TURNOVER RATIO OF THE

COMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Sales 16923.35 15885.62 14812.23 12679.09 10026.52

Working capital 584.71 726.92 555.37 933.17 1532.66

Working capital

Turnover Ratio28.94 21.85 26.67 13.58 6.54

The working capital turnover ratio of the company is showing increasing trend

from 6.54 in the year 2002 2003 to 27.21 in the year 2004 2005. Where decrease in

the year 2005 2006 it is 21.85.

Though there is no ideal working capital turnover ratio one can say that a high

working capital turn over ratio indicates the efficiency and a lower working capital



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turnover ratio indicates the inefficient of the management in utilization of working

capital.

In the case of BELL CERAMICS LTD, is ratio is not very high or not too low, but it is

satisfactorily indicates the efficiency of the organization.

CHART NO 14

GRAPH SHOWING WORKING CAPITAL TURNOVER RATIO FROM 2002

2003 TO 2006 2007



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2 8 . 9

2 1 . 8

2 6 . 6

1 3 . 5

6 .5

0

5

1 0

1 5

2 0

2 5

3 0

R AT I

2 0 0 6 - 0 72 0 0 5 - 0 62 0 0 4 - 0 52 0 0 3 - 0 42 0 0 2 - 0 3

Y E A R

W o r ki n g c a p i ta l T u rn o

W ork ing c ap i ta l Tu



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PROFITABILITY RATIOS

TABLE NO 4.21

TABLE SHOWING GROSS PROFIT RATIO OF THE COMPANY

(Rs. In Lakhs)

Particulars 2006-07 2005-06 2004-05 2003-04 2002-03

Gross Profit 1560.82 2349.68 2828.64 3233.94 2121.58

Sales 16923.35 15885.62 14812.23 12679.09 10026.52

Gross Profit Ratio 9.22% 14.79% 19.09% 25.50% 21.15%

The gross profit of the company fluctuating in the year 2002 2003 it was

21.15%, in the year 2003 2004 it was 25.50%, in the year 2004 2005 it was 20.70%

and in the year 2005 2006 it is 14.79%. . In the year 2006-07 it is 9.22%

The actual gross profit ratio is compared with the gross profit ratio of the previous years

and those of other concerns carrying on similar business. If the actual grass profit ratio is

high, it is an indication of good result

Documents

FINANCIAL ANALYSIS AND INTERPRETATION OF BELL CERAMICS