Financial Statement Analysis at Kirloskar Group

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ANALYSIS OF FINANCIAL STATEMENT

EXECUTIVE SUMMARY

INDUSTRY PROFILEThe healthy growth in the industrial sector achieved during 2003-04 has continued during

the current year as well with overall industrial growth (measured in terms of the index of

Industrial Production) growing at a rate of 7.9 percent during the April- September 2008-

09 compared with 6.2 percent achieved during the same last year.

The existing installed capacity in the industry is of the order of 4500 MW

thermal, 1345 MW of Hydro and about 25 MW of gas based power generation equipment

per annum and manufacturing units depending upon the needs and their capacity are

augmenting the capacity.

COMPANY PROFILE

THE KIRLOSKAR GROUP

A significant event in history of Indian industry was the rise of the Kirloskar

Group of companies to a multibillion conglomerate. The founder Mr. Laxmanrao

Kirloskar strongly believed that a companys progress was determined by the integration

of man and his intellect with technological growth and environment.

The first kirloskar product, iron plough, was an innovation far ahead of

its time a product designed wholly with the customer in mind. it ultimately became an

instrument of wealth for an entire society.

His words breathe the spirit with the Kirloskar industrial journey began. And this

spirit has continued through the passage of time. K.E.C Ltd. An ISO 9001 certified

Company was established in 1946 with its registered office at Rajajinagar in Bangalore.

As a part of diversification activity, K.E.C Ltd. started another unit at Hubli in 1969, to

manufacture Electric motors ranging from fractional horsepower to motor up 20HP.

Under the leadership of Shri Laxmanrao Kirloskar and Shri N.W.GUJAR, K.E.C unit-1

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Was started in Bangalore, Kirloskar Electric Company is the pioneer in India in the

manufacture of quality equipments like AC and DC electric motors, generators, welding

equipments, controls equipments transformers etc.

OBJECTIVES OF THE STUDY

To study on the financial performance of the company for the past 4 years.

To bring out the results of financial statements through ratio analysis.

To study about the Kirloskar electric company limited. Hubli in general.

To study the financial position of the company.

SCOPE OF THE STUDYThe scope of the study is the covered area for the purpose of study. The study is

limited to KAYTEE SWITCHERGEAR LIMITED (subsidiary of kirloskar electric co.

ltd) Unit II.

METHODOLOGY

Methodology is the systematic method or an activity, which is used to collect

the information required to complete this project work.

The data is collected by 2 methods:

1. Primary data

2. Secondary data.

Primary data is collected through collecting information from company officers, from

external guide.

Secondary data, which is secondary in nature i.e. already, collected information this

secondary data is collected through Companys Annual Report and discussion with them.

Interpretation of:

Balance sheet

Profit and loss account

Annual reports

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INTRODUCTION OF THE STUDY

The accounting process begins with the recording of transactions in the books of

primary entry. The accounting information resulting from the transactions so recorded

gets posted in to various accounting heads in the ledger. In the ledger each account is

balanced at the end of an accounting period and a summary of all balances in the various

accounting heads from the ledger is prepared which is known as trial balance from such

trial balances and after effecting certain adjustments considered necessary (which is

dependent on the particular accounting system followed by the organizations) the

financial statements relating to the accounting period are prepared.

NEED FOR THE STUDY

There are some questions, which arise from the study of financial statements.

These could be Is Companys profitability adequate? Why is a profit low in spite of

increased sales? Why is there liquidity problem though profitability is good? Why no

reasons for changes in assets, liabilities and equity between two dates? Why no dividends

are paid though there are good profits? From where have come cash flows and how they

are applied? These and many other questions need answers, which can be possible when

the financial statements are suitably analyzed

Thus financial statement analysis deals with meaningful interpretation of financial

data available in financial statements to serve specific purpose of organizations of such

data for their decision making .this involves identifying the purpose and selecting suitable

means of analysis. Financial statement analysis is essentially purposive.

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ABOUT THE ORGANIZATION

Kirloskar group of companies are a century old company which comprises of over

20 companies with a total turnover of over Rs.1200crores and personnel strength of over

25000 workers, engineers and managers.

In the history of India industry, a significant event was the rise of kirloskar group of

company.

The kirloskar stands for excellence in engineering, quality and reliability. The business

areas of the group companies reflects its diversity, process control equipment and

machine tools, rotating electrical machines, internal combustion, engines, computers etc.

The company started with manufacture of AC Motors 1984. Today KEC manufactures

diversified product range consisting of AC Motors, AC Generators, Transformers, DC

Motors and Electric equipments. The Unit-II in Hubli, Kirloskar Electric Company

limited is a subsidiary of Kirloskar electric company limited. It manufactures AC Motors

and AC Generators.

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INDUSTRY PROFILE

The healthy growth in the industrial sector achieved during 2003-04 has continued during

the current year as well with overall industrial growth (measured in terms of the index of

Industrial Production ) growing at a rate of 7.9 percent during the April- September 2008-

09 compared with 6.2 percent achieved during the same last year.

The worldwide electric power industry provides vital services essential to modern life. It

provides the nation with the most prevalent energy form known in history electricity. It

advances the nations economic growth and productivity; promotes business development

and expansion; and provide solid employment opportunities to workers globally in

general and India in particular. It is a robust industry that contributes to the progress and

prosperity of our nation. Today the electric power industry operates in a hybrid model of

competition and regulation. The worldwide electrical and electronics industry is growing

at a fast pace which consist of manufacturers, suppliers, dealers, electricians, electronic

equipment manufacturers.

Power industry restructuring, around the world, has a strong impact on Asian power

industry as well. Indian power industry restructuring with a limited level of competition,

since 1991, has already been introduced at generation level by allowing participation of

independent power producers (IPPs). The new Electricity Act 2003 provides the

provision of competition in several sectors. It is felt that the prevailing condition in the

country is good only for wholesale competition and not for the retail competition at this

moment.

As per the recent survey, the global electric & electronic market is worth $1, 03.8 billion,

which is forecasted to grow to $ 1,216.8 billion at the end of the year 2008. If we talk of

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electric & electronic production statistics, the industry accounted for $ 1,025.8 billion in

2006, which is forecasted to reach $1,051.5 billion in future.

Size of the Electric/ Electronic Industry

Top three electric and electronic goods manufacturing countries in the world are;

United States of America, Japan and Korea respectively, The United States of America

being the largest producer of electronic products worldwide contributes the total share of

around 21% furthermore; USA is at the forefront to have the largest market share with

around 29% in the global market.

The worlds electrical market size was $ 1038.8 billion in 2006, since last year an

increase of 10.6% is forecasted to grow even more. The industrial electrical goods

industry size was $ 651.3 billion, contributing around 62.7% of the total. With regard to

electronics parts and components sector, the total market share was around $ 282.7

billion i.e.; 27.2% while home electronics was 104.7 billion. This figure is supposed to

increase in this decade.

Major Production and Export CentersAs electronic manufacturing industry is growing with a fast pace, Western Europe is

developing gradually to contribute this industry. Western Europe comprising of 16

countries is contributing around 22% of the global market. Simultaneously, Eastern

Europe is forecasted to grow about $ 24 billion in 2013 from $ 9 billion in 2006.

If we talk of Asia Pacific region, China, Japan, North & South Korea, Singapore and

India are the top manufacturer of electrical and electronic products. Among these Asian

countries, China is becoming the manufacturing region of electronic products on the

globe.

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In United States of America, cities like New York, Atlanta, Colorado, Detroit, Florida,

and New England, San Diego, San Francisco, and Texas can be named as industrial hubs

of electronics industry.

At present, Asia is growing with more speed in comparison to America and Europe. In

2002, Asia occupied 41% of total electronics market share, which grew up to 56% in

2007. Those days are not far away when Asia will become the market leader globally.

Future Outlook of Electric & Electronic Industry

Totally, the electrical and electronic industry is experiencing phenomenon and

remarkable changes worldwide. The worldwide electronics industry is distinguished by

fast technological advances and has grown rapidly than most other industries over the

past 30 years.

Products are heading towards new destinations where cost is less than other place with

higher costs involved. These places offer the most long term potential for market growth.

Companies indulged in manufacturing electrical products are investing a lot on research

and development for the best products to meet the demand of the market. They are

manufacturing the products with the best quality at reduced cost due to many

competitors.

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COMPANY PROFILE

THE KIRLOSKAR GROUP

A significant event in history of Indian industry was the rise of the Kirloskar

Group of companies to a multibillion conglomerate. The founder Mr. Laxmanrao

Kirloskar strongly believed that a companys progress was determined by the integration

of man and his intellect with technological growth and environment.

The first Kirloskar product the iron plough, was an innovation far ahead of its

time a product designed wholly with the customer in mind. It ultimately became an

instrument of wealth for an entire society. The group is committed to innovation, quality

and continuing technological advancement. This is evident in their and customs designed

products, which have already gained a worldwide reputation for meeting critical

industrial needs. The companys growth within the country and their entry into global

market is based on their highly skilled Human resource and their vast distribution

network. We have some of the best engineering and technical brains in the country, who

have made their mission immensely productive and successful.

.K.E.C at a glance

A countrys progress has been closely linked to effective harnessing and use of

electrical energy for the benefit of its people. Kirloskar Electric Companys endeavor has

been to contribute cost effective solutions in all application of electricity. They are

actively involved in supplying electrical industrial electronic equipment, systems to

industry, agriculture and utilities. In all these ventures, their focus has been to provide

state of the art technology that can living standards and thereby make the environment a

better place to live in.

In the words of Mr. Laxman Kirloskar:

My faith is in the human intellect. It gives us our means to create wealth by

directing our talents towards procedure work. And therefore, freedom for individual

ability is the only way a society can prosper. After all, you cannot distribute wealth

unless you first create it. And you cannot create it unless you know how

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His words breathe the spirit with the Kirloskar industrial journey began. And

this spirit has continued through the passage of time. K.E.C Ltd. An ISO 9001 certified

company was established in 1946 with its registered office at Rajajinagar in Bangalore.

As a part of diversification activity, K.E.C Ltd. started another unit at Hubli in 1969, to

manufacture Electric motors ranging from fractional horsepower to motor up 20HP.

Under the leadership of Shri Laxmanrao Kirloskar and Shri N.W.GUJAR, K.E.C unit-1

Was started in Bangalore, Kirloskar Electric Company is the pioneer in India in the

manufacture of quality equipments like AC and DC electric motors, generators, welding

equipments, controls equipments transformers etc.

The company started with manufacture of AC Motors in 1984. Today KEC

manufacturers diversified product range consisting of AC Motors, AC Generators,

Transformers, DC Motors and Electronic Equipments. The Unit II in Hubli, Kirloskar

Electric Company Limited is a subsidiary of Kirloskar Electric Company Limited. It

manufactures AC Motors and AC Generators.

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EMPLOYEES PROFILE

KEC Ltd. has a strong employee base. It has maintained fully trained and experienced

workers. It values its employees and the employees are considered the real Asset of the

company.

The employees are very hard working and dedicated towards the growth of the company.

The employee base can be depicted based on the number of employees in each section.

SECTION NO. OF EMPLOYEES

Canteen 9

Central Planning Dept. 5

Production Dept. 32

Engineering Dept. 13

Finance Dept. 14

Forwarding Dept. 3

General Stores 12

MED 3 Marketing Dept. 7

Packing Dept. 32

MMD and MSD 17

Personnel Dept. 4

Quality Assurance Dept. 73

Reception 1

----------

229

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MILESTONES IN THE HISTORY OF KEC

1946 ---- KEC established at Bangalore.

1948 -- A new era opens for Indian K.E.C produces the countrys very first AC

motors

1954 ---- Impatient for progress, the company gets into product diversification producing

its first transformers.

1956 ---- First transformer manufactured.

1958 --- A critical power situation inspires production of the countrys first

transformers.

1963 ---- The patient of breakdown continues. DC motors and DC generators roll off the

assembly line.

1965 ---- Market demand increases. Indias first motorized gear unit joins the K.E.C

product range.

1966 ---- Intensive research and development sets the pace for production of the first

induction heating equipment.

1973 ---- First oversees office at Malaysia.

1976 ---- Office at Nairobi established.

1982 ---- New collaborations. Better products. Thyristor, Converters, made in

collaboration with Thorn EMI, U.K.

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1987 ---- Introduction of CNC systems and factory automation.

1989 ---- More collaboration. More products. With Fuji of Japan for investors and with

Toshiba of Japan for UPS

1991 ----Toyo Denki collaboration for motors and generators up to 10MW/ MVA.

Production of technologically advanced large DC motors and large AC machines in

collaboration with AEG Daimler Benz of Germany up to 20MW

1992 ---- The company starts production of Hi- Tech CRT based CNC systems.

1993 ---- Kirloskar Electric becomes the first company in India to receive ISO 9001

certification for its entire product range and for all its manufacturing units.

1995 ---- Took over Voltas Transformer and started manufacturing plant at Tumkur for

Manufacturing units

1996 ---- Celebrated Golden jubilee and started manufacture of wind turbine.

2001 ---- Company restructure.

2002 ---- First test lab was started at Tumkur.

2003 ---- Received NVLAP certificate test lab.

2004 ---- Customer Excellence Certificate.

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COLLABORATION

KEC provides the latest technology products to customers. Towards this, it has entered

into collaboration with foreign companies apart from indigenous research and

development efforts. Some of the major collaboration is:

AC induction motors ---- AEG, Germany

AC generators ---- AEG, Germany

Cast resin transformer ----- OCREV, Italy

Inverters ----- Fuji Electric, Japan

Vector control inverters ---- University of Wuppertal, Germany

Uninterruptible power systems ---- Toshiba Corporation, Japan

CNC Controls ---- ADOLPH numerical controls.Ltd, UK

Transformers ---- Peebles Electric Ltd.

Wind turbine generators ---- Wind energy group, UK.

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K.E.C. UNITS

Units Place Products

Unit - 1 Bangalore AC motors, AC generators, motorized gear units.

Unit 2 Hubli AC motors, AC generators, motorized gear units.

Unit 3

Recently

Closed

Peenya DC motors, generators, traction.

Unit -4 My sore Industrial electronic group- thyristor

devices, static invertors, UPS systems.

Factory automation group- digital

readouts, CNC systems, Servo drives and

induction heaters.

Unit 5

Recently

Closed

Bangalore Transformers.

Unit 6 Pune Automation electric equipments, small range

induction motors and alternators up to 5 HP.

Unit 7 Tumkur Stampings, Die cast rotors/ bodies and coils.

Unit 8 Pune Cast resin, transformers, and oil filled

transformers.

ORGANISATION SET UP OF KEC

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Board of Directors manages KEC Unit II. Mr. Vijay Kirloskar is the Managing Directorand Chairman. Under the managing director, there is an Executive Vice- President. Achief executive manages each of this unit.

BOARD OF DIRECTORS

Vijay Kirloskar : Chairman and Managing Director

Agarwal. S.N : Director

Anil Kumar Bhandari : Director

Sarosh. J. Ghandy : Director

Mythili Bal Subramanian : IDBI Nominee

Ramesh. D. Damle : LIC Nominee

Malik. P.S : Dy. Managing Director

Venkatesh Murthy. D.R : Director Sales & Marketing

Company Secretary : P. Y. Mahajan

Auditors : B.K.Ramdhyani & co. Bangalore

BANKERS

1. Bank of Baroda

2. Bank of India

3. State bank of India

4. State bank of Mysore

5. State bank of Travancore

6. Standard Chartered Bank

7. The Hong Kong & Shanghai Banking Corp.

REGISTERED OFFICE

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Industrial Suburb, Rajajinagar

Bangalore 560010

FACTORIES

1. Belvadi Industrial Area, Mysore

2. Gokul Road, Hubli

3. Hirehalli, Tumkur.

K.E.C UNIT II

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The quality price of KEC shall be to design, manufacture and market at

competitive prices, products of such quality, which results in customer satisfaction,

quality reputation and market leadership.

MISSION

To remain a leading produce of electrical technology products in India.

To continuously grow in our business and become a significant player in the

world market.

To maximize return on investment.

To achieve international levels of excellence in technology and quality.

VALUES

Products of highest technology and quality.

Customer orientation

Teamwork among our people.

Profits for growth

GUIDING PRINCIPLES

Innovate continuously to excel in design and manufacturing.

Development products required by market.

Manufacture products of highest quality

Focus on customer in all actions.

Respond promptly to customer needs.

Deliver supplies on time every time.

Treat each other with trust and respect to build a team.

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Develop people by training and delegation.

Adopt process-oriented thinking, continuous improvement, and management by

facts priority.

Reduce costs constantly to remain competitive.

Earn enough profits to fund growth and diversification.

Offer goods and services at competitive prices.

Look upon dealers, suppliers and business associates as partners.

Maintain safe, clean and healthy environment.

Conduct business in a socially responsible manner.

HODS OF KIRLOSKAR ELECTRIC CO.LIMITED,

UNIT-II

CEO - K.S.S.PANIKAR

PERSONNEL - U.PARAMESHWARA

PRODUCTION - A.B.JOSHI (SHOP III),

- D.S.WODEYAR (SHOP III),

FINANCE - K.SHRIDHAR

MARKETING - V.RAMPRASAD

ENGINEERING - D.A.DESAI

MMD - ASHOK KADAKOLI

MED & MSD - S.V.PUROHIT

CEN.PLANNING - A.B.JOSHI

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HUBLI

MANPOWER IN KEC UNIT-II

Chief Executive

Deputy General Manager

ProductionDepartment(SeniorManager)

FinanceDepartment(SeniorManager)

CentralPlanning(AssistantManager)

Stores(juniorManager)

EngineeringDepartment(SeniorManager)

QualityAssuranceDepartment(SeniorManager)

Marketing(DeputyManager)

M.M.D(AssistantManager)

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AS on 01-05-2007

Table: 1

Besides these permanent employees, around 81 trainees are recruited and contract Labour

are hired only for some specific purposes and in never employed in production or feeder

shops.

Officers cadre is divided into 2 categories.

1. Junior officers from the grade from 5 to 7

Junior officer 1: Grade 5



2. Senior officers from the grade from 8 to 9

Officer: Grade 8

Senior Officer: Grade 9

The manager cadre is classified as follows from grade 10 to 16

Assistant Manager - Grade 10

Deputy Manager - Grade 11

Manager - Grade 12

Deputy Senior Manager - Grade 13

Senior manager - Grade 14

Deputy General Manager - Grade 15

General Manager - Grade 16

Human Resource Total Members

Daily rated employees (DREs) From grade1 to 8

432

Monthly rated employees (MREs) Fromgrade 1 to 7

45

Officers, Engineers and above From grade8 to 16

85

Total 562

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PRODUCT PROFILE

AC Generator AC motor

`

DC Motor Traction Equipment

We design and manufacture our products according to the standards of :

ISO (International Organization for Standardization)

IEC (International Electro technical Commission)

BIS (Bureau of Indian Standards)

BSI (British Standards Institution)

JEM(Japan Electrical Manufactures Association)

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PERSONNEL DEPARTMENT

K.E.C, company recognizes its employees as its most important asset for its continued

growth. Human resources management in Kirloskar Electric Company shall striver to

ensure continuous organizational growth by nurturing the strengths of its employees and

providing the environment and opportunity for every individual to rise to his/her highest

potential, identity and achieve his/her personal goal within the framework of

organizational, social and natural objectives. To achieve this following sections are

formed to perform the various functions including, Positive Motivation, Preparation and

maintenance of quality plans with aid of systems, procedures and work instructions

published collectively in quality manuals.

Scope: Personnel Department is applicable to personal welfare safety and security.

Responsibility of Personnel Department:

Implementation and maintenance of various functions is the responsibilities of the Head

of Department (HOD) with appropriate duties assigned to section in charges (SIC) and

staff.

Functions:

The Main functions of Personnel Department are:

HOD-PERSONAL AND INDUSTRIAL RELATIONS:

To ensure that harmonious relations exists between workers and management

To ensure safe working conditions and to provide safety equipments.

To Co-ordinate security and vigilance activities

Manpower planning accountability.

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ORGANISATION CHART OF PERSONNEL DEPARTMENT

HOD

SICTRAININGIN CHARGE

CANTEEN

DEPARTMENTASSISTANT

SECURITYOFFICER

WELFAREOFFICER

IND.RELOFFICER

AMBULANCE ROOM

TIMEOFFICE I.C

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MARKETING DEPARTMENT

Success of any product totally depends on HO it is marked and positioned din the

market. Marketing department is on of the important functional divisions of KEC UNIT-

II, which is basically, identifies and meets the needs of customers profitably. The people

in the marketing department are responsible for the growth of a business concern because

they come in direct contact with the customers who now are considered as King of the

market as it is a buyers market and no more a sellers market.

As marketing departments basic principle is to take care of the customers to

achieve way they have divided their department in to there sections such as :

Marketing

Customer Service

Communication

Marketing is further having its subgroups i.e. technical group, which does the job of

tendering or equally handling Execution, is planning group.

The network of marketing department has all over India at 28 branches known as sales

office/branches.

The function of this division in K.E.C UNIT-II starts to determine the needs of the

customers their documents concurrently then accurately to communicate then to various

departments.

Marketing:-

When a branch office in any part of its network receives an order in case of special

product (i.e. as per customer requirements) it sends an order acceptance copy i.e. dulyverified by the sales engineering of that branch to the tendering group where this OA

copy is examined and sent to planning department and further forwarded engineering

department for design and development of special product who prepares its engineering

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The order acceptance is then separated into the one for standard products and

other for special products. The special products requirements have to be discussed with

the engineering department and then accepted.

CREDIT POLICY:

Generally K.E.C-II does not follow the policy. But some times the credit is issued

to a particular customer depending on the volume of the purchase, the type of a customer

K.E.C UNIT-II has a credit policy extending to a maximum of 30 days.

Objectives:

The objectives of marketing department are to achieve customer satisfaction with

quality products, price, and delivery in time, and presale service after sale service,

maintain brand image and earn profit for further diversification.

COMPETITIORS

1. Organized sector

BHEL

ASEA

Crompton Graves Ltd.

Bharat Bijli ltd.

Asian Brawn Boweri Ltd (ABB Ltd.)

General Electrical Company Ltd.

Jyoti Ltd.

Unorganized Sector:

Mainly cottage industries.

Direct Customers.

OEMs (Original Equipment Manufacturers)

OEAs (Original Equipment Assemblers)

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MATERIAL MANAGEMENT DEPARTMENT

Objectives:

To provide components can service for manufacturing as required by others

functional divisions.

Scope:

To plan and procure materials confirming to specifications through adequate

selection of sub contractor.

To feed the materials to the production division at required schedules at an

economic cost.

Functions:-

Work out material requirement based on sales requisite plan (SRP), Sales

constancy plan (SCP) and Critical credit requirement (CCR)

To exercise purchase order as per procedure.

To plan for non-production item based on purchase requisitions to materials

management division.

To finalize terms of purchase.

Job Description and Responsibility

To maintain and direct the organization, which is adequate to perform material

management functions.

To define the duties and responsibilities of MMD and to ensure that they carried

out effectively.

To plan for realistic purchase budget.

To manage obsolete surplus and scrap material.

SICS:

To plan the material requirement

To order material and on approved suppliers and supply in the quantity necessary

to satisfy marketing requirement.

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To monitor the material recipient as per delivery schedule indicated in purchase

order and co-coordinating with supplier.

To monitor the material release for production in accordance with SRP/SCP/CCP.

FICS

To plan the materials requirement.

To order material and on approved supplied and supply in the quantity necessary

to satisfy marketing requirement.

To monitor the material release for production in accordance with SRP/SCP/CCP

To follow with supplier for supplier for supplying, required material at required

time of manufacturing.

To keep the manufacturing division and other functional divisions other than the

manufacturing informed of related activities to facilitate overall coordination

related activities include information regarding material availability supplier

training programs reasoning for user training for supplier products etc.

To determine the need of stock replacement through use of daily material receipt

perpetual inventory.

To monitor and reconcile materials issued to suppliers.

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ORGANIZATION CHART OF MMD

CEO HODMMD

ACMS3

SICSHOP3

OFFICE

ASSISTANT

SIC SHOP VACG

FICEXECUTIVESHOPS

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FINANCE DEPARTMENT

Finance department is the blood of any business organization to survive. Any

organization handicapped by finance will never complete an ultimately results in failure

and a burden to economy. Finance department is concerned with planning and controlling

of company financial resources.

The company policy is formulated and credit worthiness of the customer is evaluated

audits such as cash audit, internal audit, cost audit is done per month. In the finance

department of KEC UNIT-II, there are 26 staff members contributing towards the

effective functioning of the department.

ORGANISATIONAL HIERARCHY OF FINANCE DEPARTMENT

CORPORATE FINANCE

CHIEF EXECUTIVE

GRADE 8 AND ABOVE

M.R.Es up to GRADE 7

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KEC UNIT-II, is characterized by the fact that all the collaboration are sent to corporate

office at Bangalore and the expenditure of the particular day are sent to the unit as per the

requirement of the units.

FUNCTIONS:-

FINANCING FUNCTIONS

It includes cash payments, receipts, bank receipts and payments.

CREDIT MANAGEMENT:

Due to the competition, now a days credit is a means to achieve the target without credit

sale any organizational can fulfill their targets.

COSTING

Costing relates to calculation of production cost per unit and it tries to minimize the cost

of production and helps in the function of pricing with marketing department.

AUDITS:-

Audit is a way to confirm about the accountancy of the functions and records of all over

activities. It has employed cost Audit and Internal Audit etc.

RECORDING AND MAINTAINING OF ACCOUNTS:-

These are the present and future reference of the companys financial position. These are

useful for Shareholders, Creditors, Suppliers, and Bankers etc.

BANKERS OF K.E.C UNIT-II

K.E.C UNIT-II has the following Bankers:

1. Bank of Baroda

2. Bank of India

3. Canara Bank

4. Hong Kong Bank

5. State Bank of India

6. State Bank of Mysore.

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Financial Institutions:

Following are the financial Institutions of K.E.C UNIT-II:

1. Industrial Credit & Investment Corporation of India (ICICI)

2. Industrial Development Bank of India (IDBI)

3. Unit Trust of India (UTI)

K.E.C UNIT-II production per month is worth 10 crores. But now it attempting to

rise to Rs 11 to 11.5 crores, the raw materials is steel and copper. These are

procured from steel Authority of India Ltd., and Hindustan Copper Ltd. 1% of

the total turnover is used for welfare expenses and 6% of total turnover is

used for salary or expenditure.

On an average the KEC Unit-II is paying Rs.150 lakhs as excise duty/month, 6% of

total turnover is given as salary and 1% of the total turnover is spent on welfare activities.

The method of depreciation followed is straight-line method. The company has adopted

FIFO method for costing.

Listing on Stock exchanges:

Bangalore Stock Exchange Ltd., (KIRELECRRI)

Madras Stock Exchange Ltd.(KRL)

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ENGINEERING DEPARTMENT

Quality Policy of Engineering:

The quality policy of K.E.C UNIT-II shall be continuously improving the quality

management system in design, manufacture, market and service at competitive prices.

Product of such quality, resulting in customer satisfaction, quality, reputation and market

leadership, The role of engineering department is to design and develop products and

components taking into consideration the cost, product ability, usability, and maintenance

of the product.

Scope:

Applicable to quality objectives identified for improvement in design and

development of products manufactured in KEC UNIT-II.

Responsibility:

The head of the engineering department is responsible for receiving the objectives.

Procedure:

Objectives shall be derived from the organizational quality policy and need to

meet customer and product requirement.

Quality objectives by engineering department will lead to

Simplification in design Standardization of components

Reduction in reworking of design

Reduction cost of production.

For achieving or reworking quality objectives appropriate statistical quality

control technique shall be used.

Functions:

Preparation revision and release of engineering and electrical specifications.

Preparation, revision and control of drawings and release of material risk.

Validation of design of products.

Effective implementation of the design changes.

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PRODUCTION DEPARTMENT

In many manufacturing unit production department forms the most important

department of all the whole running of the unit depends upon this department the proper

and timely functioning of this department helps in products reaching the customers end at

right time. Slight difference in timing and quality upsets the cycle. Thus the production

department we can say is the heart of the firm.

K.E.C UNIT-II philosophy has always been to excel in what one knows best in

the process of development. KEC UNIT-II has laid great emphasis on adopting

technology to suit the environment in which it has to operate K.E.C UNIT-IIs production

process are continuously of upgraded from time to time by the latest technology.

Objectives:

To follow up the production schedule as per the plan.

To maintain the close and coordinated relationship with other department.

To upgrade technical efficiency of production.

K.E.C UNIT-II there is six shops in this department all of which have got

different functions to perform. The product moves from first to sixth shop and

then to the dispatch.

H.O.D Production heads the production department with a total shop of 600.

The whole shop is divided into among six shops.

The department is divided into 2 groups.

1. Feeder shop (Shop I and Shop II)2. Assembly Shop (Shop III and Shop V)

3. Shop IV is used as Research and Development Center is also called as

Invotech Center and Shop VI is painting section.

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Brief description of shops:

SHOP I:

The matching functions are carried out in this shop which has 5 lines engaged in

production namely welding section, sub assembly, labor section, tools and jigs crib and

tool room.

There are totally 80 machines and 100 workers in shop I. The raw materials

arrived in this shop where the metal drilling, milling and shaft fixing is done and sent to

the next process. The winding are also done in the shop I.

Here the process of Bodies KH 100 to LD 225 frames.

Covers KH 63 to LD 225 frame.

Shaft KH 63 to LD 180 frame.

Gear cases MGH 100 to MGH 225 frame.

Gears/pinions for Geared motors are done and also undertake manufacturing JIGS and

FIXTURES and DIE-CASTING dies.

ROTOR SUB ASSEMBLY:

Rotor is the static part in the ACMs and dynamic that is moving in the ACGs.

The rotor goes through the following process.

1) Sinking:

The roots are treated in the solution for convenience of inserting the shaft so that

they expand and make it easy for insertion of the shaft.

2) Turning:

The correct turning and made according to the specification.

3) Fan Shop Drilling:

This is the process where in the fan is to be fixed and for this purpose drilling is

done and then locks are fixed for safety.

4) Balancing:

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This step involves balancing the rotor properly.

WINDING:

Winding is the most important functional part of the machine. It has to be done

manually and precisely. This is the only process, which is totally manual. The motor is

wound with correct rating wires.

SHOP II

Shop II is die cast shop. Here in this shop only die-casting is done. That is the

shapes of body and nameplates final shape. The shop II has two machines, one for

nameplate pressing and another for body.

It houses the router section, here stampings are received and die casting of the

metal stamping is carried in a furnace heated at 675 degrees Celsius 755 degree Celsius

ROTOR SECTION:

Here processing of rotor sub assembling for KH 63 to 180 frames, SD 71 flange

machine is undertaken.

DIE-CASTING SECTION:

Here die-casting for motor for 63 to 225 frame motors and die-casting of bodies,

flanges, covers, and terminal boxes from KH 63 to 10 frames.

SHOP-III

This shop can be called as assembly shop because the products here will get upto

90% only, final finishing will be at this stage.

The assembling of motors of the frame size motors are assembled in this shop in

three different assembly lines namely:

The non-standard line for custom mode and is operated manually.

The standard line for this standard motor is also called verticals assembly line

where the motors are assembled mechanically by various stations in the machines

acquired for the specific purposes.

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The export line is where the motors have to be exported assembled with due care

and is done manually. After assembling the motors they are sent to the painting

section, which is housed in the same shop.

SHOP IV:

It works as research and development center for the company. It keeps its eye on

the changes that are taking place in the electrical world and tries to adopt those

changes in their manufacturing process. So it acts as research and development in the

company.

SHOP V:

Here assembling of medium and large motors generators and MGUs under

separate bays like ACM bay, ACG bay and MGUU bay.

Product Rating

A.C Motors Frame 200 to 225 15 KW to 75 K W

A.C Generator Frame and

180 & 250

DS-DL-CMA 2.5KVA to 90KVA

Motorized gear units 90 to 225 0.75 KW to 22 KW

Painting and testing is also done here.

SHOP VI :

In this section, components used in the motors are pre treated and painted.

K.E.C UNIT-II has to its credit the pioneering of the latest technology called

Unibake system. Earlier this system was applied to all the products but recently it has

been restricted only for export orders. The domestic products are painted in conventional

manner.

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ORGANISATION CHART OF FEEDER SHOPS

K.E.C has its corporate and marketing office at Bangalore. National Offices are divided

into 4 zones.

1. North Zone : Delhi, Ludhiana, and Jaipur

2. East Zone : Kolkatta, Jamshedpur, Guwahati, Bhubaneshwar and Ranchi.

3. West Zone : Mumbai, Nagpur, Pune, Ahmedabad, Surat and Indore.

4. South Zone : Chennai, Coimbatore, Cochin, Hyderabad, Bangalore, Belgaum,

Pondichery

CEO

HODProduction

SIC FEEDER SHOPS

FIC, TROOMAND TCRIB

FIC, ShaftBody

FIC DIECASTING

FICSHOP6

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QUALITY ASSURANCE

Quality is the fitness to end-use, it is all persuasive. In this modern and

competitive world each and every company is trying hard to introduce to quality and

every defect free product K.E.C has a full fledge quality assurance department headed by

highly qualified professionals committed to developing products that keep phase with the

changing desires and needs of the consumers. Quality plays important role in K.E.C

UNIT-II because its products are used for industrial customer applications. Hence it must

satisfy and come upto the customer expectations.

Objective:

The role of QA division is to assist all functional division in achieving and

maintaining level of specified quality requirement economically.

This unit being ISO-9001, certified unit, has to follow the stringent quality

specification. This department facilitates the total quality management (TQM) in all the

departments, by adopting process controls at all stages.

The quality assurance department follows a definite set of systems and

procedures, which are incorporated in the manuals. The manuals are drafted to the lines

of the standards as specified by the ISO-9000 series of clause for quality documentation.

Functions:The functional responsibilities of different sections of QA divisions are as follows:

Releasing of accepted products for further process.

Evaluating quality rating of suppliers.

Generation of NC reports for analysis/ review and initiating corrective action and

preventive action.

Quality information and reporting.

Maintaining documents and records as per procedures.

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FEEDER SHOPS QA:

Feeder shops QA is responsible for:

Inspection/ Testing of parts, sub assembly as per appropriate quality plan/

documents procedures/ inspection plans other documents.

Ensuring proper identification and inspection status.

Updating, revising inspection plans procedure as and when found necessary.

Generation of Non-conformance reports for analysis, revive and collective action,

preventive action.

Ensuring that calibrated instruments are used for measurements and coordinating

with calibration section for periodic calibration.

FINAL INSPECTION AND TESTING

Conduction routing/ type/ engineering tests on products to specified requirements as per

documented procedures:

Maintaining test records and providing test certificates.

Ensuring tested products and conforming to specified requirements and complete

in all respects.

Providing inspection/ tests stating for confirming products.

Providing engineering test results for design modification where necessary.

Assisting in customer inspection.

QUALITY LABORATORY:

Periodic calibration of instruments as per documented process.

Arranging for repair/ rectification/ disposal of measuring instruments.

Planning for new instruments/ organizing calibration function from external

agencies.

Maintaining documents/ records as per procedures.

QUALITY SYSTEMS:

Maintaining quality systems as per ISO 9001-2000

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Assisting HOD QA for conduction quality related training programs.

Analysis and reporting of customer complaints internal non-conformance

reports.

Conducting systems audits, monitoring corrective actions, preventive actions.

Implementing of corrective actions and preventive actions.

ORGANIZATION CHART OF QUALITY ASSURANCE

`

44

SIC-QA IMI 7Feeder Shop

QA (Shop 1&2)

SIC FinalInspection &

Testing Shop5 7QA Lab

SIC-FinalInspection Shop 3

FIC-QS

CEO

HOD Q.A


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PROCESS FLOW CHART

cuuu

FIC-FinalInspection

& TestingShop 3

FIC Finalinspection &

Testing &CustomerInspection Shop5

FICCustomer

Inspection

FICWindingInspection

FIC-QA Lab

FIC-WindingInspection

45

FIC-QA IMI FIC Shop 1& 2 QA

FIC-Shop 6QA

Customer-Requirements


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COMPUTER DIVISION

We are into technology revolution where process and manual jobs have been

atomized or computerized. So getting along with revolution K.E.C UNIT-II has also

MMDPlanning & Procurement of material

Engineering-Release of specification

Personnel &Computer- SupportingServices

Stores-Receipt & Issueof materials

Central Planning-Scheduling

QA-SupportingServices

MSD-SupportingServices

Production-Feeder Shop 1,2,&6-Product shop 3&5

MED-Supportingservices

Packing & Forwarding

After Sales & services

Marketing-EnquryHandling-Order execution

-Customer Feedback

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steeped into the field of computers and has computerized its various departments of the

unit.

Objective:

The computer division is responsible for software developments, maintenance of

computer hardware accessories, using appropriate methods.

Scope:

This is applicable to all the functions performed by the computer divisions of

K.E.C UNIT-II, Hubli.

The head of computer division has overall responsibility and delegate works to

other staff as appropriate.

FUNCTIONS:

Maintenance of computer hardware accessories:

User department raises requisition for hardware breakdown. The call is

attended enclosed after acknowledge for the user.

Preventive maintenance of computers and accessories:

Preventive maintenance is carried out for computer hardware every half

yearly and every quarterly and updated in the history card. This activity isacknowledged with the preventive maintenance sticker and stuck on the

computer accessories.

Software Revalidation:

Software revalidation is done annually as per the procedure defined in

software revalidation and records are maintained.

Back Ups:

Regular backup is ensured department wise as per the procedure defined. Document Control:

Records files are updated and maintained in the document control register.

GENERAL FUNCTIONS:

Computer department works as a supporting device for all department and all the

functional activities like payroll preparation and accounts receivables management is

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done with the help of computer department. In production field, it will help in planning,

investment management etc. The company also has CMAN and ERP procedure to

strengthen their production activities.

ORGANIZATION OF COMPUTER DEPARTMENT

CENTRAL PLANNING

Objective:

To describe the quality management system process & procedures followed in

production department.

Scope:

48

FIC-Hardware/ElectricalMaintenance

FIC-SoftwareDevelopment/Maintenance

SIC-SoftwareDevelopment/RevalidationMaintenance

SIC-SoftwareDevlopment/modification/Heardware/Backup

HOD CD

CEO


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Applicable to Central Planning Department.

To demonstrate product manufactured meets requirements by following

applicable process.

For effective application, implementation, continued improvement in the different

areas of work.

Approach:

Activities in the department are carried out with required resources. Resources

include Building, Personnel, Manufacturing equipments, Test equipment etc. the

available resources are managed to make quality products. The department, Organization,

Process & Other activities followed for QMS requirements is given.

Functions:

Release of material against SR/SCP to all departments.

Plan on basis of material availability.

Sub-contract is given.

Re-planning of material against the non-conformance.

Maintain of product identification and tractability.

Corrective action.

Maintain quality records.

ORGANISATION CHART OF CENTRAL PLANNING

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MANUFACTURING ENGINEERING DEPARTMENT

(MED)

Functions:

CEO

HOD CP

SIC-Planning SIC-componentmanufacturing/subcontract FIC

FIC-Assembly

planning

FIC-Die-casting& Rotor

sub- assembly

FUC-Subcontract

FIC-Records

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GENERAL STORES

To describe the process and procedure followed in stores department. A guide for

effective,

ORGANIZATION CHART OF STORES

Objective:The role of stores is to maintain accountability of the materials received, stored

and issued as per the specified requirements.

Scope: Applicable to stores activities.

Responsibility:

The head of stores division is responsible for overall function of the stores with

duties delegated to SIC/FIC as applicable.

CEO

HOD MED

SIC MED

FICJigs/Fixtures/Dies & Tooling &

Preparation & Release of Process Sheets

CEO HOD Stores SIC Stores

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Functions:

Receive material as per delivery Chilean/ Invoice/ Credit Reports.

Ensure identification, inspection status, and supplier identification on the

components vendor code/ material code in the delivery challan/ invoice.

DUTIES AND RESPONSIBILITIES OF HOD:

Overall administration of stores.

Establishment of inventory norms & controls.

Establishing & maintaining quality systems in stores division.

DUTIES & RESPONSIBILITIES OF SIC STORES:

Overall administration of stores.

Ensuring that all components / products received in stores are inspected and tested

as per the applicable specification/procedures.

Ensure receipt, storage & issue of materials.

DUTIES AND RESPONSIBILITIES OF FIC STORES

Receive and stores materials as per delivery Challan/ Invoice/ Audit

reports.

Ensure identification & inspection status for the components/ products.

Preparation of receipt memos.

Storing of outstanding in specified areas like mobile racks/ pallets etc.,

Issue of materials to shops/ suppliers as per indents.

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INTRODUCTION

Financial Ratios are used in the evaluation of the financial condition and profitability of a

company. The ratios are calculated from the financial information provided in the balance

sheet and income statements. While analyzing the financial statements you should keep

in mind the principles/practices that accountants use in preparing statements to examine

at the financial condition and preference of a company.

RATIO ANALYSIS

Ratio Analysis is one of the techniques of financial analysis where ratios

are used as a yardstick for evaluating the financial condition and performance of a firm.

Analysis and interpretation of various accounting ratios gives a skilled and experienced

analyst a better understanding of the financial condition and performance of the firm.

MEANING AND DEFINITION:-

A ratio is a simple arithmetic expression of the relationship of one number

to another. Ratio is relationships expressed in mathematical terms between figures which

are connected with each other in some manner.

DEFINITION:-

Ratio analysis is defined as, The systematic use of ratios to interpret the financial

statements so that the strengths and weaknesses of the firm as well as its historical

performance and current financial condition can be determined.

This relationship can be expressed as: 1) Percentages:- For example,

Assuming that net profits of Rs 25,000 and Sales of Rs 1,00,000. Then the net profits are

25% of sales. 2) Fraction:- net profit is of sales. 3) Proportion:- the relationship

between net profits and sales is 1:4.

To take managerial decision the ratio of such items reveals the soundness of

financial position. Such information will be useful for creditors, shareholders

management and all other people who deal with company.

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IMPORTANCE ORSIGNIFICANCE OF RATIO ANALYSIS:

The ratio analysis is one of the most powerful tools of financial analysis.

It is used as a device to analyze and interprets the financial health of enterprise. Just like a

doctor examines his patient by recording his body temperature, blood pressure etc. before

making his conclusion regarding the illness and before giving his treatment, a financial

analyst analyses the financial statements with various tools of analysis before

commenting upon the financial health or weaknesses of an enterprise. Following are the

uses of ratio analysis:

Liquidity position

Long term solvency

Operating efficiency

Overall profitability

Inter firm comparison

Trend analysis.

Liquidity Position

With the help of ratio analysis conclusions can be drawn regarding the

liquidity position of a firm. It would be satisfactory if it is able to meet its current

obligations when they become due. A firm can be said to have the ability to meet its short

term liabilities if it has sufficient liquid funds to pay the interest on its short maturing

debt usually within a year as well as to repay the principal. This ability is reflected in the

liquidity ratios of a firm. The liquidity ratios are particularly useful in credit analysis by

banks and other suppliers of short term loans.

Long term solvency:

Ratio analysis is equally useful for assessing the long term financial

viability of a firm. This aspect of the financial position of a borrower is of concern to the

long term creditors, security analysts and the present and potential owners of a business.

The long term solvency is measured by the leverage/capital structure and profitability

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deteriorating over the years. This is made possible by the use of trend analysis. The

significance of a trend analysis of ratios lies in the fact that the analysts can know the

direction of movement, that is, whether the movement is favorable or unfavorable. For

example, the ratio may be low as compared to the norm but the trend may be upward. On

the other hand, though the present level may be satisfactory but the trend may be a

declining one.

LIMITATION OF RATIO ANALYSIS:-

Ratio analysis is a widely used tool of financial analysis. Though ratios are simple to

calculate and easy to understand, they suffer from some serious limitations:

Limited use of Single Ratio:-

A single ratio usually does not convey much of a sense. To make a

better interpretation a number of ratios have to be calculated which is likely to confuse

the analyst than help him in making any meaningful conclusion.

Lack of Adequate Standards:-

There are no well accepted standards or rules of thumb for all ratios

which can be accepted as norms. It renders interpretation of the ratio difficult.

Change Of Accounting Procedure:-

Change in accounting procedure by a firm often makes ratio analysis

misleading e.g. a change in the valuation of methods of inventories, from FIFO to LIFO

increases the cost of sales and reduces considerably the value of closing stocks which

makes stock turnover ratio to be lucrative and an unfavorable gross profit ratio.

Window Dressing:-

Financial statements can easily can be window dressed to present a

better picture of its financial and profitability position to outsiders. Hence one has to be

very careful in making a decision from ratios calculated from such financial statements.

But it may be very difficult for an outsider to know about the window dressing made by

a firm.

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Personal Bias:-

Ratio is only means of financial analysis and not an end in itself. Ratios have

to be interpreted and different people may interpret the same ratio in different ways.

Incomparable:-

Not only industries differ in their nature but also the firms of the similar

business widely differ in their size and accounting procedure etc.. It makes comparison

of ratios difficult and misleading. Moreover, comparisons are made difficult due to

differences in definitions of various financial terms used in the ratio analysis.

Absolute Figures Distortive:-

Ratios devoid of absolute figures may prove distortive as ratio analysis is

primarily a quantitative analysis and not a qualitative analysis.

Price Level Changes:-

While making ratio analysis, no consideration is made to the changes in price

levels and this makes the interpretation of ratios invalid.

Ratios No Substitutes:-

Ratio analysis is merely a tool of financial statements. Hence, ratios become

useless if separated from the statements from which they are computed.

CLASSIFICATION OF RATIOS:

1) LIQUIDITY RATIO

Current Ratio

Quick Acid Ratio

2) CAPITAL STRUCTURE RATIO

Debt-equity Ratio

Proprietary Ratio.

Interest Coverage Ratio

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3) ACTIVITY RATIO:

Inventory Turnover Ratio

Debtors Turnover Ratio

Creditors Turnover Ratio

Capital Turnover Ratio

Working Capital Turnover Ratio

Fixed Assets Turnover

4) PROFITABILITY RATIO:

Gross Profit Ratio

Net Profit Ratio

Operating Profit Ratio

Operating Expenses Ratio Or Operating Ratio

Return on Investment Ratio

Liquidity Ratios:

These ratios are also termed as working capital or short term solvency ratio.

The importance of adequate liquidity in the sense of the ability of a firm to meet

current/short term obligations when they become due for payment can hardly be

overstressed. In fact, liquidity is a prerequisite for the very survival of a firm. The short

term creditors of the firm are interested in the short term solvency or liquidity of a firm.

But liquidity implies, from the viewpoint of utilization of the funds of the firm that funds

are idle or they earn very little

Leverage/capital structure ratios:

The second category of financial ratios is leverage or capital structure ratios.

These ratios explain how the capital structure of a firm is made up or the debt-equity mix

adopted by the firm. The long term solvency ratio of a firm can be examined by using

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leverage or capital structure ratios. The leverage or capital structure ratios may be defined

as financial ratios which throw light on the long term solvency of a firm as reflected in its

ability to assure the long term creditors with regard to: (1) Periodic payment of interest

during the period of the loan and (2) Repayment of principal on maturity or in pre

determined instalments at due dates.

Activity Ratios:

Activity ratios are concerned with measuring the efficiency in asset management.

These ratios are also called efficiency ratios or assets utilization ratios. The efficiency

with which the assets are used would be reflected in the speed and rapidity with which

assets are converted into sales. The greater is the rate of turnover or conversion, the more

efficient is the utilization/management, other things being equal. For this reason, such

ratios are also designated as turnover ratios.

Profitability Ratios:

Profitability is indication of the efficiency with which the operations of the

business are carried on. Poor operational performance may indicate poor sales and hence

poor profits. A lower profitability may arise due to the lack of control over the expenses.

Bankers, financial institutions and other creditors look at the profitability ratios as an

indicator whether or not the firm earns substantially more than it pays interest for the use

of borrowed funds and whether ultimate repayment of their debt appears reasonably

certain. The Management of the firm is naturally eager to measure its operating efficiency

of a firm and its ability to ensure adequate return to its shareholders depends ultimately

on the profits earned by it. The profitability of a firm can be measured by its profitability

ratios.

In other words, the profitability ratios are designed to provide answers to

questions such as: (1) Is the profit earned by the firm adequate? (2) What rate of return

does it represent? (3) What is the rate of profit for various divisions and segments of the

firm? (4) What is the rate of return to equity holder.

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1) CURRENT RATIO:

This ratio is an indicator of firms commitment to meet its short- term

liabilities. Higher ratio, better the coverage. 2:1 ratio is treated as standard ratio. This

ratio is also called as solvency / working capital ratio.

The current ratio is the ratio of the current assets and current liabilities. It is

calculated by dividing current assets by current liabilities.

Formula:Current Ratio= Current assets

Current liabilitiesTable-1

(Amount in Lakhs)

Year 2008-09 2009-10 2010-11 2011-12

Current Assets 14,11,798 17,37,753 24,09,647 31,59,775

Current

Liabilities

12,86,103 15,76,507 18,05,200 22,14,785

Current Ratio 1.09 1.10 1.33 1.43

SOURCE: ANNUAL REPORTS OF COMPANY

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Interpretation: - The current ratio of last four years is less than ideal ratio 2:1, i.e.

fluctuating. This indicates that firms commitment to meet its short liabilities was not so

good. In 2011-12 and 2010-11 the current ratios are good compare to 2008-09, 2009-10.

2) QUICK / ACID TEST / LIQUID RATIO:

Liquid ratio is indication of availability of quick assets to honor its

immediate claims. Higher the ratio betters the coverage. And the standard ratio is 1:1.An

asset is liquid if is can be converted into cash immediately without loss of value. Hence

cash is most liquid assets after assets which are considered to be relatively liquid are;

Debtors balance, marketable securities etc. inventories considered to be less liquid

therefore they require some time form relishing into cash and their value also has

tendency to fluctuate.

Formula:

Quick ratio = Current Assets- Inventories / Current LiabilitiesTable-2 (Amount in Lakhs)

Year 2008-09 2009-10 2010-11 2011-12

Quick Assets 12,84,269 15,19,792 21,79,920 27,03,911

Current

Liabilities

12,86,103 15,76,507 18,05,200 22,14,785

Quick Ratio .99 .96 1.20 1.22


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Table- 3: ( Amount in lakhs)

Year 2008-09 2009-10 2010-11 2011-12

Cash+

marketable

securities

2,17,773 1,39,434 4,13,668 5,24,749

Current

Liabilities

12,86,103 17,37,753 18,05,200 22,14,785

Cash Ratio .17 .08 .22 .23


Interpretation: In Cash ratio there is no standard ratios for maintained the cash balance

because now a days nothing to be worried about the lack of cash if the company has

reserve borrowing power for its day to days activities. Holding of Cash in the year 2011-

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Interpretation: Interval measure is said to be good if No of days are sufficient liquid

asset to finance its operations. This chart Indicates that KEC have sufficient Liquid assets

to finance its operations for 2942 days even though it does not receive any cash for 2942

days.

LEVERAGE RATIO

LEVERAGE RATIO is also called as capital structure ratio. It relates to the study

of various types of capital structure of firm. The long- term solvency of a company can

be examined by using leverages or capital structure ratios. These ratios are for long-term

creditors to judge the long-term financial strength of the company.

THE DIFFERENT LEVERAGE RATIOS ARE:

1. Debt Equity Ratio

2. Proprietary Ratio

3. Interest Coverage Ratio

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1) DEBT RATIO

Debt ratios are use to analyze the long term solvency of firm. It is the proportion of

the interest bearing debt in the capital structure. Debt ratio is Calculated by total debt by

total debt by capital employed or net asset of the firm.

Formula:

Total debt /Total debt +Net worth

Table-5 (Amount in lakhs)

Year 2008-09 2009-10 2010-11 2011-12

Long term debt 2,03,121 1,93,574 3,16,343 4,41,152

Shareholders

Funds

13,11,350 13,01,803 11,08,229 12,52,506

Debt-equityratio .15 .14 .28 .35


Interpretation: The debt ratio for the 2011-12 was .35 or 35% of the capital employed.

It indicates owners have provide the remaining finance that is 1-35=65% of capital

employed. From above analysis the firm has lower risk in the year 2008-09 & 2009-

10.But afterwards it has increased its risk in the year 2010-11 &2011-12.

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2) DEBT-EQUITY RATIO

It measures the relation between debt and equity in the capital structure of the firm.

In other words, this ratio shows the relationship between the borrowed capital and

owners capital.

Formula:

Debt equity ratio= Long term debt/Net worth


Year 2008-09 2009-10 2010-11 2011-12

Long term

debt

2,03,121 1,93,574 3,16,343 4,41,152

Net

worth

11,08,229 11,08,229 11,08,229 12,52,506

Debt-Equity

Ratio

.18 .17 .28 .35


Interpretation:- The ratio is high in 2011-12. It shows that a large share of financing by

the creditors of the firm and it is more risky to the creditors. In 2008-09 and 2009-10 it

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has declined to .18 and 0.17 respectively. In 2009-10 and 2010-11 the ratio is low i.e.,

0.18 and 0.17. It indicates that the firm finance point of view, the company has low risk.

It means that the company is in safer side of finance and a margin of safety to the

creditors.

3) PROPRIETORY RATIO: It establishes relationship between the propitiator or

shareholders funds & total tangible assets. The ratio indicates properties stake in total

assets. Higher the ratio lowers the risk and lower the ratio higher the risk. Debt equity

ratio & current ratio affects the proprietary ratio.

Formula:

Proprietary Ratio=Shareholders Funds

Total Assets


Year 2008-09 2009-10 2010-11 2011-12

Shareholders

Fund

4,32,688 4,32,688 4,32,688 4,52,688

Total Assets 15,39,264 18,56,702 25,25,498 32,92,946

Proprietary

Ratio(%)

.28 .23 .17 .13


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Interpretation: The equity ratio is high in 2008-09 i.e. 28%. It indicates that a high

proprietary ratio relatively little danger to the creditors and it is better for long-term

solvency position of the company. But it has been decreased to 13% and 17% in the year

2010-11 and 2011-12 respectively. A ratio below 50% is dangerous to the creditors at the

time of winding up of a company.

4) EQUITY RATIO:

Equity Ratio is calculated by dividing capital employed (CE) by Net worth

(NW)

Formula:

Equity Ratio= Capital employed (CE)/Net worth


Year 2008-09 2009-10 2010-11 2011-12

Capitalemployed

4,32,688 4,32,688 4,32,688 4,52,688

Net worth 11,08,229 11,08,299 11,68,229 12,52,506

Equity Ratio .39 .39 .37 .36


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Interpretation: There are no standard rules for maintaining equity ratio. It differs

according to the nature of the business. The lower performance in maintain Net worth in

2008-09 & 2009-10 but in 2010-11 &2011-12 good performance maintaining of capital

employed to net worth.

TURNOVER / ACTIVITY RATIOSOFTHE COMPANY

Introduction:

Activity ratios are employed to evaluate the efficiently with which the

firm manages and utilizes its assets. These ratios are also called as turnover ratio.

Therefore they indicate the speed with which assets are being converted / turned over in

to sales.

Thus an activity ratio involves relationship between sales and assets. A proper balance

between sales and assets generally reflects that assets are managed well.

In other words, turnover ratio indicates the efficiency with which the capital employed is

rotated in the business.

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Higher the ratio of rotation, the greater will be the profitability

DIFFERENT TURNOVER RATIOS:

1) Inventory stock turnover Ratio

2) Debtors (Accounts Receivable) Turnover Ratios.

3) Creditors (Account Payable) Turnover Ratios

4) Fixed Assets turnover Ratio

5) Current Assets turnover Ratio

6) Working capital turnover Ratio

7) Total Assets turnover Ratio

8) Net Assets turnover Ratio

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1) INVENTORY / STOCK TURNOVER RATIO (ITR/STR).

It indicates the efficiency of firm in producing and selling its products. High Ratio is

good from the view point of liquidity and vice versa. A low ratio would signify that

inventory does not sell fast and stably in the warehouse for a longtime.

Formula:

Cost of Goods Sold OR Sales________________ __________Avg. Inventory Inventory


Year 2008-09 2009-10 2010-11 2011-12

Sales 31,20,434 41,40,246 59,13,957 72,77,768

Inventory 1,27,529 2,17,961 2,29,727 4,55,864

Inventory

turnover ratio

24.4 18.9 25.74 15.96


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Interpretation:- In the above chart, the inventory turnover ratio is high in 2010-11,

2008-09, i.e. 25.7, 24.4 respectively. But it is low in 2011-12 and 2009-10 i.e. 15.9 and

18.9 respectively. Usually, a high inventory turnover indicates efficient management of

inventory because more frequently the stocks are sold.

DAYS OF INVENTORY HOLDING:

Formula: Inventory*360/Sales

Table -10 (Amount in lakhs)

Year 2008-09 2009-10 2010-11 2011-12

Inventory 1,27,529 2,17,961 2,29,727 4,55,864

Sales 31,20,434 41,40,246 59,13,957 72,77,768

Days of

inventoryholding

14.7 18.95 13.98 22.5


Interpretation:- In the year 2008-09, 2006-067 due to increase in sale of inventory, the

inventory holding period is less i.e. the inventory has been disposed off or sold on an

average in 14.7, 13.9 and in 2011-12 the days have increased .

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2) DEBTORS TURNOVER RATIO:

Debtors constitute an important constituent of current assets and therefore

the quality of debtors to great extent determines that firms liquidity. There are two ratios.

They are:

1) Debtors turnover Ratio2) Debtors collection period RatioDebtors turnover ratio:Formula:

Debtors turnover ratio = Creditor Sales

DebtorsHigher the ratio is better, since it indicate that debts are being collected more promptly.


Year 2008-09 2009-10 2010-11 2011-12

Sales 31,20,434 41,40,246 59,13,957 72,77,768

Debtors 8,25,008 11,26,390 13,78,923 15,98,625

Debtors

turnover

3.78 3.67 4.2 4.5


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Interpretation: - The ratios are increasing year by year. In 2010-11, it is 4.25and it has

been increased to 4.5 in 2011-12. The ratio is not so high. It shows that the payments of

debtors are not so prompt. It is less standard ratio i.e. 8 times.

Debtors Collection Period:

Formula:

Debtors collection period ratio= Debtor*360/sales


Year 2008-09 2009-10 2010-11 2011-12

Debtor 8,25,008 11,26,390 13,78,923 15,98,625

Sales 31,20,434 41,40,246 59,13,957 72,77,768

Debtors

Collection

Period

95 98 84 79


Interpretation: - The collection period of KEC is not good

ASSETS TURN OVER RATIO:

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The important findings of the study are as follows.

1) Cash ratio of the company is poor hence they will find problem of liquidity

position.

2) The debtors collection period of kec is not good.

3) The quick ratio of kirloskar electric limited is showing a increasing trend & it is

also below the standard ratio 1:1.

4) The current ratio of kirloskar electric limited is not satisfactory but it is below the

standard ratio i.e. 2:1.

5) Debt equity ratio of the company is far below the standard. They have not utilized

the potential of borrowing for the debts.

6) In the kirloskar electric limited the creditors are paid promptly.

7) The company maintains a co-operation among the staff member & management.

8) On an average all together other ratios are normal.

9) As per order given by the customer supply manufacture products to them at right

time & at right places.

SUGGESTIONS:

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1) Company should try to maintain its current ratio at the standard 2:1.

2) The company should reduce its cost of production through adopting new

technology. It will help to increase the sales.

3) The kecs average collection period is very high. For avoiding the company

should take major techniques to collect the money from debtors.

4) Company should try to reduce its credit sales through cash discount at the time of

sales. It will helps to meet the current obligation.

5) Company is suggested to maintain sufficient amount of cash & bank balance to

pay its quick liabilities, which will increase its credit worthiness & goodwill.

6) The company is in loss due to heavy interest burden to avoid this the company

should plan to adoption of share capital in the business.

7) The company should conduct weekly meetings for central planning, material

management department, and production department towards operations of the

company.

8) The company should conduct monthly meetings to knowing its performance. If

the performance is not reached then it will helps to take necessary decisions.

CONCLUSION:

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Financial statements plays very important role in providing facts and figures for

the decision makers. In the same way ratios will act as analysis kit in the hands of

financial analyst. These ratio will help us and in answering the basic question like why,

how, what of these statements.

Now a days financial statement are very much in consideration for decision

making. In deciding what to do and what not to do they are required to analyze the data

as per their requirement. Thus in our project we try to give brief outline of ratio analysis

(i.e., how to analyze the facts and figures given in the financial statements) form the

angle of all stake holders.

Throughout my project I have analyzed companys financial position and pros and

cons of the situation and we have also interpreted the data. In spite of some limitation we

try to analyze and interpreted the facts and figures with accuracy.

Based on the analysis and interpretation I tried to give my findings and suggestions

for the company as per my best knowledge.

Finally project really helps us in knowing the practical things of the corporate world.

Really I enjoyed this project work in its real spirit.

ANNUAL REPORT 2008-09

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BALANCE SHEET AS AT 31ST MARCH 2009(Rs. in lakhs)

Schedule As At 31st March 2009 As At 31st March 2008SOURCES OF FUNDS

SHARE HOLDERS FUNDS

a) Capitalb) Reserves & Surplus

AB

432,688675,541

432,688787,205

1,108,229 1,219,893LOAN FUNDS a) Secured Loansb) Unsecured Loans

CD

201,0012,129

303,5252,895

203,121 3,06,420TOTAL 1,311,350 1,526,313

======= ========APPLICATION OF FUNDS

FIXED ASSETS

a) Gross Blockb) Less : Depreciation

c) Net Blockd) Capital work in progress (at Cost)

E 389,739262,273

127,46658,666

612,328301,444

302,88459,511

186,122 362,395

INVESTMENTS F 655,951 583,531

CURRENT ASSETS, LOANS &

ADVANCES

a) Inventoriesb) Sundry Debtorsc) Cash & Bank Balanced) Loans & Advances

G 127,529825,008217,773241,488

126,729637,630348,375179,554

1,411,798 1,292,288

LESS : CURRENT LIABILITIES &

PROVISIONS

a) Current Liabilityb) Provisions

Documents

Financial Statement Analysis at Kirloskar Group