g Sravs Project

Financial Statement Analysis

MBA PROGRAMME

MADDI LKSHMAIAH & CO. LTD

INTRODUCTIONEvery organization irrespective of nature and mission may be viewed as financial entity. Management of the organization is confronted with issue and decisions about sources of finance, its capital structure and credit policy. In order to take strategic decisions the management needs to assess the progress and the performance of the organization.

Financial statements provides summery of the accounts of a business enterprises. But the accounts stated in the balance sheet and income statements are not self-explanatory, those statements required treatment in order as certain the financial health of the organization. There are many tools used to know about financial position and result operation. The main tools analysis of common size statements and ratio analysis. All the tools help to know the operations of the organizational particular position and also over period of time.

The focus of financial analysis is on key figures in the financial statements and the significant relationship that exists between them. The analysis of financial statements is a process of evaluating the relationship between the component parts of financial statements to obtain a better understanding of the firms position and performance. Financial analysis is the process of selection relation and evaluation. A financial statement is a compilation of data which is logically and consistently organized according to the accounting principles.

An understanding of some financial aspects of a business firm. It may show a position at a moment in time as in the case of a balance sheet or may reveal a series of activities over a given period of time, as in the case of an income statement. Financial statements are the major financial situations to stock holders, credited and the general public. The majority of firms include extensive financial statements in their annual reports of them.

Financial statements are prepared primarily for decision making. They play a dominant role in setting the frame weak of managerial decision. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of use in making decisions through analysis and interpretation of financial statements.

Financial analysis is the process of identifying the financial strengths and weakness of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss amount. There are various methods or techniques used in analyzing financial statements such as comparative statements, schedule of changes in working capital; funds flow and analysis ration analysis.

Management creditors, investors and others to from judgment and about the operating performance and financial position of the users of financial statements can get further insight about financial strengths and weaknesses of the firm. Management should be particularly interested in financial statements of the firm to make their best use and to be able to spot out financial weaknesses of the firm to take suitable corrective actions. The future plans of the firm should be laid down in view of the financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. Financial analysis can be undertaken by management of the firm, by parties outside the firm owners, creditors investors and others.

Meaning of Financial Statements:

A financial statement is a collection of data organized according logical and consistent accounting procedures. Its purposes are to convey an understanding of some financial aspects of a business firm. It may shows a position at a moment intimae as in the case of an Income statement thus the term financial statements generally refers to the statements. The position statement or the balance sheet and the Income statement or the profit and loss account. These statements are used to convey to management and other interested out standers the profit ability and financial position to a firm.

Financial statements are the outcome of summarizing process of accounting. In the words of John N. Her, the financial statements provide a summary of the accounts of business enterprise, the balance sheet reflecting the asset, liabilities and capital as on a certain date and the income statement showing the results of operations during a certain periods. Financial statements are prepared as an end result of financial accounting and are the major sources of financial information of an enterprise smith and Asborne define financial statements as the product of financial accounting in asset of financial statements prepared by the accountant of a business enterprise that purpose to reveal the financial position of the enterprise. The results of list recent activities and an analysis of what has been done with earning.

Financial statements are also called financial reports. In the words of Anthony, financial statements essentially are interring reports. Presented annually and reflect a division of the life of an enterprise on to more or less arbitrary accounting period more frequently a year.

FINANCIAL STATEMENT ANALYSIS:

A financial statement is an organized collection of data according to logical and consistent procedures. Its purpose is to convey an understanding of some financial aspects of a business firm. It may, show a position of a moment is time as in the case of a balance sheet, or many reveal a series of activities of over a given period of time, as in the case of an income statement.

Types of Financial Statements:Financial statements primarily comprise two basic statements.1) The position statement or the balance sheet and 2) The income statement or the profit and loss account. However, specified that a complete set of financial statements must include.

1) A balance sheet

2) An income statement

3) A statement of changes in financial position

Techniques of Financial Analysis:The analysis and interpretation of financial statement is used to determine the financial position and result of operations as well. A number of methods or devices are used to study the relationship between different statements. An effort is made to use those devices, which clearly analyze the position of the enterprise. The following methods of analysis are generally used.

1. Comparative statement

2. Common size statement

3. Trend analysis

2. Funds flow statement

3. Cash flow statement

4. Ratio analysis

1. Comparative Statement:

Comparative statements are those statements which are designed to provide time perspective to the consideration of various elements of financial position embodied in such statements. Both the income statement and balance sheets be prepared in the form of comparative financial statements.

Comparative Income Statements:

The income statement describes net profit or net loss account of operations. A comparative income statement will show the absolute figures for two or more periods. The absolute change from one period to another and if change in terms percentages. Since the two or more period can quickly ascertain whether sales have increased or decreased whether cost of sales has increased or decreased etc.

Comparative Balance Sheet:

The comparative balance sheet analysis is the study of the extend of the same items groups of items and computed items in two or more balance sheet of the same business enterprise on different dates. The changes in periodic balance sheet the conduct of a business.

The changes can be observed by comparison of the balance sheet at the beginning and at the end of a period and these changes can help in forming an opinion about the progress of an enterprise. The comparative balance sheet has two columns for the data of original balance sheet. A third column is used to show in increasing figures. The fourth column may be added for giving percentages of increases or decreases.

2. Common Size Statement:

Common size statements financial tool of studying key changes and trends in financial position of a company. In common size statement, each item is stated as a percentage of the total of which that item is a part each percentage exhibits the relation of the individual item to its respective tool. The common size percentage method represents a type of ratio analysis. This statement component percentage or100 percent statement.

1. State the total of the statement as 100.

2. Compute the ratio of each item to the total in the statement. Common size statement can be used both for vertical and horizontal analysis.

Common Size Balance Sheet:

Common size balance sheet is prepared by stating the total assets as 100 and reducing individual assets into percentages of the total. The common size balance sheet percentage shows the relation of each asset item to total assets and of each liability and owners equity item to total liabilities and owners equity. Comparison of common size statement of a single enterprise over the years is valuable in that it reveals the changing proportions of components within groups of assets and liabilities.

3. Trend Analysis:

The financial statements may be analyzed by computing trends of series of information. This method determines the direction upwards or downward and involves. The computation of the percentage relationships that each statement item bears to the same item in base year. The information for a number of years is taken one year. The figures of the base year are taken as 100 and trend ratios for other years are calculated on the base of the year. The analyst is able to see the trend of figures whether upward or downward.4. Funds Flow Statement:

The statement of changes in financial position a business enterprise. The sources and uses of working capital between dates of two balance sheets are known as the funds flow statement. A projected statement of changes in working capital is immensely useful in the firms long range planning. The flows of in order to plan the repayment schedules of its long-term debt. The major sources of working capital are the firms net profit from operations. The ultimate success of a company depends upon its ability to earn profit. The expense items that do not involve working capital should be added to not profit.

5. Cash Flow Statement:

The statement of cash flows is useful for short run planning. A firm needs sufficient cash to pay debts nature in the near future to pay interest and other expenses and to pay dividend to share holders. A statement of changes in financial position on cash basis, commonly known as the cash flow statement. Summarizes the causes of changes in cash position between dates of the two balance sheets. It indicates the sources and user of cash. The cash flow statement is similar to the funds flow statements expect that it focuses attention on cash instead of working capital or funds. This statement analyses changes in non-current accounts as well as current accounts to determine the flow of cash.

6. Ratio Analysis:

Financial ratios are useful measure to provide a snapshot of a companys financial position. A tool used by individuals to conduct a quantitative analysis of information in a companys financial statement.

Ratios are calculated from current year numbers and are then compared to previous year, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis.

Financial ratios give out a detail report about with reference to firms performance and financial situation.

Financial ratios are exercised to examine the trend and for comparing the firms financial status with the other firms. Thus, by such means, it will not be difficult to come across the potential problems.

Classifications of ratios:

Ratios are variously classified into different types based upon the endues as well as the nature of base adopted. Generally ratios are classified into four categories:

Liquidity Ratios

Leverage Ratios

Activity Ratios

Profitability RatiosA. Liquidity Ratios:

Liquidity Ratios measure the firms ability to meet its current obligations. We analyze the liquidity needs by the preparation of cash budgets, cash and funds flow statements, but we can calculate liquidity ratios, by establishing a relationship between cash and other current assets to current obligations, provide a quick measure of liquidity. A firm should ensure that it does not suffer from the lack of liquidity and that it does not have excess liquidity. There should be a proper balance between high liquidity and lack of liquidity to measure the liquidity of the firm. The following ratios are calculated the most common ratios which indicate the extent of liquidity or lack of it.

(i) Current Ratio:

It may be defined as the relationship between current assets and current liabilities. This ratio is known as working capital ratio. It is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position or liquidity of a firm. It is calculated by dividing the total of current assets by total of the current liabilities. Thus,

Current Ratio = Current Assets / Current Liabilities

A current ratio of 2:1 is considered as ideal. If current ratio is less than 2, it indicates that the business does not enjoy adequate liquidity. However, a high current ratio of more than 3 indicates that the firm is having funds and has not invested them properly.

(ii) Quick Ratio:

It is also known as acid test or liquid ratio is more rigorous test of liquidity than the current ratio. Quick ratio may be defined as the relationship between the quick/ liquid assets and current/ liquid liabilities. An asset is said to be liquid if it can be converted into cash within a short period without loss of value. Inventories cannot be termed to be liquid assets because they can not be converted into cash immediately.

Quick or Acid Test Ratio = Quick Assets / Current Liabilities

A quick ratio of 1 is considered as ideal. A quick ratio of less than 1 is indicative of inadequate liquidity of the business. A very high quick ratio is also not advisable.

B. Leverage Ratio:

The short term creditors like bankers and suppliers of raw material are more concerned with the firms current debt paying ability. On the other hand long-term creditors like debenture holders, financial institutions etc. are more concerned with the firms long- term financial strengths in fact a firm should have a strong short-term as well as long-term financial position of the firm like financial leverage or capital structure are also calculated their ratios indicated mix of fund provided by owners and lenders.

(i) Debt-Equity Ratio

(ii) Interest coverage ratio

(i) Debt-Equity Ratio:

It reflects the relative claims of creditors and share holders against the assets of the business. Debt, usually, refers to long term debt. Equity includes equity and preference share capital and reserves. Long term debtDebt- Equity Ratio = Share holders founds

Shareholders Found = Equity+ General Reserve+ Dividend Reserve+ Net Profit

A debt equity ratio of 2:1 is considered ideal. A firm with a debt equity ratio of 2 or less eposes its creditors to relatively lesser risk. A firm with a high debt equity ratio exposes its creditors to greater risk.

(ii) Interest Coverage Ratio:

It indicates the ability of a firm to meet its interest obligation. It used to test the firms debt servicing capacity. EBIT Interest Coverage Ratio = Interest Where,

EBIT=Earnings before interest and taxes

EBIT=net profit+ Interest+ taxes

C. Activity Ratios (or) Turnover Ratios:Turnover ratio is also referred to as activity ratios or asset management ratios, measure how efficiently the assets are employed by a firm. These ratios are based on the relationship between the level of activity, represented by sales or cost of goods sold, and levels of various assets. The following are the various types of turnover ratios.

(i) Inventory Turnover Ratio:

Stock turnover ratio indicates the number of times the stock has turned over into sales in a year.

Inventory Turnover Ratio = Cost of Goods Sold / Average Stock

Cost of Goods Sold = Sales-Gross Profit

Or

Cost of Goods Sold = Opening Stock + Purchases Closing Stock

Average Stock = Opening Stock + Closing Stock/2

In case, information regarding cost of goods sold is not known, sales may be taken in the numeration. Similarly, if average stock cant be calculated, closing stock conversion period. It is calculated as number of effective days in a year divided by number of days.

Need for the study

This study will help to find out the weak area of operation and also to find out the performance in a year. This study will help the organization to see where they are lacking and how is the performance. This study will help the organization in the future forecasting and also in implementing the strategies for the future action. This will help the organization to find out the competitors movement. This study will help the company to find out there position among the competitors, who are the major players and what is the future focus of the steel industry. Appropriate financial analysis is the key for the success of a business organization without which we cant anticipate a proper direction for the business. The present study financial statements analysis of Maddi Lakshmaiah & Co. helps me towards a real life scenario of financial management so that can have a practical knowledge of ratio analysis, comparative statements, common size statements and trend analysis. This certainly does through light on financial performance and its evaluation of the company. So that I can come out with my application of theoretical knowledge and thereby have practical insight into the financial management and there by I come out with meaningful findings and suggestionsObjectives of the study

The present study is intended to examine the overall financial performance of the Maddi Lakshmaiah & Co. Ltd. From the beginning of the study to till now. The following are the specific objectives of the study.

To present theoretical frame work relating to financial statements analysis.

The study and analysis the financial performance of the Maddi Lakshmaiah & Co. Ltd. in terms of liquidity, solvency, operating and profitability against the conventional financial norms and identity the short comings.

To comparative study in regard to one firm with another firm or one department with another department of the financial analysis.

To analyze the findings and suggestions of the firm.

To study financial statement analysis is needed to know the financial status of the company.

SCOPE of the study

The study of financial performance evaluation is confined to the financial position of Maddi Lakshmaiah & Co. Ltd. Performance Evaluation is confined only for the period 5 years i.e., from 2009 to 2013. The Financial Performance Evaluation is carried out on the basis of secondary data i.e., the annual reports of Maddi Lakshmaiah & Co. Ltd. To find out the financial stability of the organization using the different ratios. The study has been focused on ratio analysis, common size analysis, comparative analysis and trend analysis in Maddi Lakshmaiah & Co. Ltd.RESEARCH Methodology

Methodology is a systematic procedure of collecting information in order to analyze and verify phenomena. The study carried with the co-operation of the management who permitted to carry on the study and provided the requisite data. The data is collected from the following sources.

Sources of Data:

The financial statements are so many sources. The primary source is the data provided by the firm itself in its annual reports and required disclosures. The annual report comprises the income statements. The balance sheet and the statements of cash flows. There are three types of the data

1. Primary data

2. Secondary data

1. Primary Data:

It is the information collected directly without any references. In this study it is to gathered through interviews with concerned officers and staff. Either individually (or) collectively. Some of the information were verified and supplemented through personal observation. The Data Collection Includes: Interviewing of a few financial department heads officers and management bodies and staff members of the company from part of primary data.

2. Secondary Data:

1The secondary data collected from already published sources such as pamphlets of annual reports, returns and internal records.

The data collection includes:

1) Annual reports, published records and reference books.

2) Executive and staff of financial accounting department.

3) Executives of other departments.

Techniques used to analyze the data:

A number of methods or devices are used to study the relationship between different statements. An effort is made to use those devices, which clearly analyze the position of the enterprise. Those device (or) techniques.

1) Common size balance sheet

2) Comparative balance sheet

3) Comparative income and expenditure A/C

4) Ratio Analysis5) Trend analysisLimitations of the studySome of the important limitations of financial analysis are however summed up as below: It is only a study of internal reports.

Financial analysis is based upon only monetary information and non-monetary factors are ignored.

It does not consider changes in price level.

As the financial statements are prepared on the basis of a going concern, it does not give exact position. Thus accounting concept and conventions cause a serious limitation to financial analysis.

Changes in accounting procedures by a firm may often make financial analysis misleading.

Analysis is only a means and not an end itself. The analyst has to make interpretation and drawn his conclusions. Different people may interpret the same analysis in different ways. The project period is limited to 45 day which not sufficient to have completed analysis of financial position.

INDUSTRY PROFILE

In The Beginning:

Tobacco is a plant that grows natively in north and South America. It is in the same family as the potato, pepper and the poisonous nightshade, a very dead plant. The seed of a tobacco plant is very small. A 1 ounce sample contains about 300,000 seeds! It is believed that tobacco began growing in the America about 6,000 B.C. . As early as 1 B.C., American Indians began using tobacco in many different ways, such as in religious and medicinal practices. Tobacco was believed to be a cure-all, and was used to dress wounds, as well as a pain killer. Chewing tobacco was believed to relieve the pain of a toothache.

Soon after, sailors brought tobacco back to Europe, and the plant was being grown all over Europe. The major reason for tobaccos growing popularity in Europe was its supposed healing properties. Europeans believed that tobacco could cure almost anything, from bad breath to cancer. In 1571, a Spanish doctor named Nicolas Monads wrote a book about the history of medicinal plants of the new world. In this he claimed that tobacco could cure 36 health problems.

In 1588, a Virginian named Thomas Harriet promoted smoking tobacco as a viable way to get ones daily dose of tobacco. Unfortunately, he died of nose cancer (because it was popular then to breathe the smoke out through the nose).

During the 1600s, tobacco was so popular that it was frequently used as money! Tobacco was literally as good as gold!. This was also a time when some of the dangerous effects of smoking tobacco were being realized by some individuals. In 1610 sir Francis Bacon noted that trying to quit the bad habit was really hard!

In 1632, 12 years after the mayflower arrived on Plymouth Rock, it was illegal to smoke publicly in Massachusetts! This had more to do with moral beliefs of the day, than health concerns about smoking tobacco.

In 1760, Pierre Lorillard establishes a company in New York City to process tobacco, cigar, and snuff. Today, P.Lorillard is the oldest tobacco company in the U.S.TOBACCO: A GROWTH INDUSTRY:In 1776, during the American revolutionary war, tobacco helped finance the revolution by serving as collateral for loans the Americans borrowed from France! Over the years, more and more scientists begin to understand the chemical in tobacco, as well as the dangerous health effects smoking produces. In 1826, the pure form of nicotine is finally discovered. Soon after, scientists conclude that nicotine is dangerous poison.

In 1836, New Englander Samuel Green stated that tobacco is an insecticide, a poison, and can kill a man. In 1847, the famous Phillip Morris is established, selling hand rolled Turkish cigarettes. Soon after in 1849, J. E. Liggett and Brother are established in St. Louis, Mo. (the company that has settled out of the big lawsuits recently). Cigarettes became popular around this time when soldiers brought it back to England from the Russian and Turkish soldiers. Cigarettes in the U.S. were mainly made from scraps left over after the production of other tobacco products, especially chewing tobacco.

Chewing tobacco became quite popular at this time with the cowboys of the American West. In 1875, R. J. Reynolds Tobacco Company (better known for its Reynolds wrap aluminum foil) was established to produce chewing tobacco. It wasnt until the 1900s that the cigarette became the major tobacco product made and sold. Still, in 1901 3.5 billion cigarettes were sold, while 6 billion cigars were sold.

Along with the popularity of cigarettes however, was a small but growing anti-tobacco campaign, with some states proposing a total ban on tobacco. In 1902, the British Phillip Morris sets up a New York headquarters to market its cigarettes, including a now famous Marlboro brand. The demand for cigarettes grew however, and in 1913 R.J. Reynolds began to market a cigarette brand called Camel.

WAR & CIGARETTES: A DEADLY COMBO:

The cigarette exploded during world war (1914-1918), where cigarettes were called the soldiers smoke. By 1923, Camel controls 45% of the U.S. market! In 1924, Phillip Morris begins to market Marlboro as a womans cigarette that is a Mild as May.

To battle this, American Tobacco Company, maker of the lucky strike brand, begins to market its cigarette to women and gains 38% of the market. Smoking rates among female teenagers soon triple during the years between 1925-1935. In 1939, American Tobacco Company introduces a new brand, Pall Mall, which allows American to become the largest tobacco company in the U.S.

During World War II (1939-1945), cigarette rates are at an all time high. Cigarettes were included in a soldiers C-Rations (like food). Tobacco companies sent millions of cigarettes to the soldiers for free, and when these soldiers came home, the companies had a steady stream of loyal customers. During the 1950s, more and more evidence was surfacing that smoking was linked to lung cancer.

In 1952 P. Lorillard markets its Kent brand with the Micronized filter, which contained asbestos! This was fortuneless discontinued in 1956. In 1953, Dr. Ernst L. Winders find that putting cigarette tar on the backs of mice causes tumors! In 1954, RJ Reynolds introduces the Salem brand, which is the first filter-tipped menthol cigarette.HEALTH HAZARDS REVEALED:In 1964, the surgeon generals report on Smoking and Health came out. This report assisted in allowing the government to regulate the advertisement and sales of cigarettes. The 1960s in general was a time when much of health hazards of smoking were reported. In 1965, television cigarette ads are taken off the air in Great Britain. In 1966, those health warnings on cigarette packs begin propping up. In 1968, Bravo, a non-tobacco cigarette brand was marketed. Made primarily of Lettuce, it failed miserably.

Because of the negative press about tobacco, the major tobacco companies begin to diversify their products. Phillip Morris begins to buy into the Miller Brewing company, makers of Miller Beer, Miller Late, and Red Dog Beer. RJ Reynolds Tobacco Company drops the Tobacco Company in its name, and becomes RJ Reynolds industries. It also begins to buy into other products, such as aluminum. American Tobacco Company also drops Tobacco from its name, becoming American Brands, Inc. In 1971, television ads for cigarettes are finally taken off the air in the U.S. cigarettes, however, are still the most heavily advertised product second to automobiles. In 1977, the first national great American Smoke out takes place.

VFCTobaccoTraditional/Nls/Mysore20 millions

VALTobaccoHDBRG12 millions

LSBTobaccoLSB10 millions

ALTobacco-25 millions

The tobacco purchased from the tobacco board auction platforms will be graded further wherever required grading is a process of a manual separation of one variety of leaf from the other .in tobacco is done mainly on the basis if color. Each grade will generally have unique quality parameters.

The graded tobacco is further processed either manually or on machines, this processing is called DEBUTTING and STRIPPING workers separate the butt of the tobacco leaf from the leaf. This process can also on machines .The machines processing ism called THRESHING.

After stripping/threshing, the tobacco will be further processed for stabilization of moisture in it this process is called REDRYING. In this process the tobacco first of all will be dried completely a then will be given steam at the required temperature. After refrying process the tobacco will be packed in the required packing say bale packing /case packing etc. The packed tobacco is ready for exports. In India, the first threshing plant which is working uninterruptedly for the last 25/30 years an imported one by Maddi Lakshmaiah &co ltd.

This is created at Ganapavaram tie plant is still running at high efficiency levels in the country with 98% average efficiency level for the last 3 years. There are 2 plants owned by ITC which can be compared with this plant in the country. ITC uses their threshing plants for their own consumption. Average efficiency level for the last 3 years, there are 3 plants owned by ITC which can be compared with this plant in the country. ITC uses their threshing plants for their own consumption.

Tobacco industry is fetching more Rs 9000 cores of revenue to the central govt. it is providing employment to lakhs of people directly and millions of people indirectly and is also contributing RS 1000 cores of forex reserves to the country. Through the central govt. is announcing several restrictions on advertisement and consumption of cigarettes in the country. It is encouraging the farmers by providing subsidized, fertilizers and by supporting through tobacco board.The major players in tobacco industry in India are as under:Name of the companyOccupation% of business in India

ITC ltd.Cigarette manufacturing & un manufactured tobacco exports50%

VST industries ltd.Cigarette manufacturing & un manufactured tobacco exports12%

GTC industries ltd.Cigarette manufacturing & un manufactured tobacco exports6%

Godfrey Phillips India ltd.Cigarette manufacturing & un manufactured tobacco exports8%

COMPANY PROFILEML Company is a demand limited company (m/s Maddi Lakshmaiah and Company Limited). Which was originally incorporated on 8th day of October 1970 under the name, maddi lakshmaiah and company private limited having delay passed the necessary special resolution on the 23rd day of march 2002 , in terms of sec31(1)/44 of the companies act 1956 the name of the company changed to Maddi Lakshmaiah And Company Limited.The group is founded by Sri Maddi lakshmaiah, a mechanical engineer after 15 years of versatile experience in tobacco industry in 1970 at Chilakaluripet , Gnter dist, A.P .the group has 5 major concern namely;

1) Maddi Lakshmaiah & Co Ltd (MLCO)

2) ML Agro Products (MLAP)

3) K.S Subbaiah Pillai & Co Ltd (KSSP)

4) ML Exports (MLE)

5) Coromandal Agro Products & Oils Ltd (CAPOL)

Expecting capo which is engaged in edible oils all are engaged in tobacco industry. MLCO & MLAP have concentrated on processing activities where as KSSP & MLE are leading exporters and are recognized by govt. of India as export house.

SHARE HOLDING PATTERN& MANAGEMENT OF GROUP:The group has been successfully improving its business in all of its activities such as domestic sales, export sales, tobacco processing & other tobacco development activities, warehousing facilities etc. The group has 2 tobacco processing plants and one solvent extraction plant in south India. The group owns around 1, 00,000 sq. mats of warehousing complexes in south India.

HISTORY OF THE COMPANY:ML group of companies (ML group) was founded by Mr.Maddi lakshmaiah in 1970. He joined in his family business in 1952.after completing of his engineering degree. The joint family business started payback in 1943 dealing with tobacco exports, well before India.

ML group of companies (ML group) a pioneer in Indian unmanufactured tobacco industry has been exporting tobacco to all over the world for the past 3 decades it has solidified its relationship with overseas tobacco merchants& manufactures.

Maddi Lakshmaiah & co ltd, was set up at Chilakaluripet, a village in Andhra Pradesh that products some of the best tobacco in the country. Today it has evolved into a diversified, multi products conglomerate known as ML group that is recognized world over for its excellence. The company processes tobacco and another agro based products that are used both in the country and exported to the most quality conscious of world markets.

An emphasis on total quality and dedication to the interests of its clients world wide is a hallmark of ML group. The group is performing excellently well from the date of its incorporation and has been exporting large volume of tobacco to Russia.

CIS countries, U.K, Europe, African countries, china, Latin American countries, middle east countries, Bangladesh & Nepal etc. The group established its branches in Russia & European countries and has strong ties up with African and Latin American countries and especially with the neighbor giant china.

GROWTH OF THE COMPANY:Our ML company has developed strong relationship with overseas manufacturing in Europe, Russia and Middle East through there is very good demand from Russia market. Our company is not exporting much because of the poor economic conditions of the country. ML Company is now exporting cigarettes to Middle East and U.S.A by manufacturing the cigarettes on job work basis. The company foresees a very bright future for this company in tobacco in the coming years.ML group is the first tobacco company who exported tobacco to china and is the first company who imported tobacco also from china. These are no imported of tobacco in Indian tobacco history before this and after till now. The group maintains good relationship with the Chinese tobacco monopoly.

One of the trade delegates that accompanied our horrible prime minister to during his recent visit to china is from ML Company. There ambassadors of china have visited our company in the fast as our guests and expressed their satisfaction on our infrastructure facilities.

NATURE OF ACTIVITY: This factory products good quality tobacco. The production capacity per each day is 1 lakh 20 tones

The production current assets capacity per year is around1.5 million tones.

Achievements/Awards: Maddi Lakshmaiah Company has no particulars /peculiar/, achievements/ awards.

Other than that are of the concern of lakshmaiah Group Maddi i.e. (capol,Chirala , Prakasam Dist ) got several achievement awards.ML EXPORTS:(Exporting to the world):

ML exports is a totally export oriented unit, with clients in a variety of markets around the world. The company enjoys a reputation for excellent delivery schedules and transparent business practice in global markets.

Maddi Lakshmaiah & Co Ltd was set up at Chilakaluripet, a village in Andhra Pradesh that produces some of the best tobacco in the country. Today it has evolved into a diversified, multi products conglomerate known as ML Group that is recognized world over for its excellence. The company processes tobacco and another agro based products that are used both in the country and exported to the most quality conscious world markets.

An emphasis on total quality and dedication to the interests of its clients world wide is a hallmark of ML group. The group is performing excellently well from the date of its incorporation and has been exporting large volume of tobacco to Russia, CIS countries, U.K, Europe, African countries, China, Latin American countries, Middle East countries, Bangladesh & Nepal etc. The group established its branches in Russia & European countries and has strong tie up with African and Latin American countries and especially with the neighbor giant China. The group is founded by Sri Maddi Lakshmaiah, a mechanical engineer after 15 years of versatile experience in tobacco industry in 1970 at Chilakaluripet , Guntur dist, A.P .the group has 5 major concern namely;

Maddi Lakshmaiah & Co Ltd (MLCO). ML Agro Products (MLAP). K.S Subbaiah Pillai & Co Ltd (KSSP). ML Exports (MLE). Coramandal Agro Products & Oils Ltd (CAPOL)

Expecting CAPOL which is engaged in edible oils all are engaged in tobacco industry. MLCO & MLAP have concentrated on processing activities where as KSSP & MLE are leading exporters and are recognized by government of India as export house.

VISION:

Descriptions of some thing can organization corporate culture, business technology an activity in the future.

The company is trying to develop world class information technology building in Bangalore, china and Hyderabad in the coming 5 years time.

The company is going for sheet tobacco plant in joint venture with on of the Indian best tobacco cigarette manufacturer.

The company is also contemplating for 100% tobacco joint venture association with one of the best cigarette manufacturer.

The company exports with second strongest country china, Russia and Germany.

The ambassadors are coming to Maddi Lakshmaiah Company limited in August.

The ambassadors of South Africa are hold up and the company is having top joint venture with U.K.

MISSION:

A mission statement is an enduring statement of purpose that distinguishes one business from others similar firms. This statement identifies the scope of firms operations in product and market terms. M.L & company limited mission is to produce good quality of tobacco and get number one position in India in producing and exporting tobacco.

BOARD OF DIRECTORS: Managing Director:Sri Maddi Lakshmaiah

Director:Sri Maddi Seetha Devi

Director:Sri Maddi Venkateswara Rao (M.B.A in USA)

Director:Sri Maddi Ramesh

Executive Director: Sri Mallavarapu Rama Mohana Rao

Executive Director: Sri Meaden Sekhar

MANAGEMENT TEAM: Managing Director:M. Venkateswara Rao

Director:M. Lakshmaiah

General Director:M. Rama Mohana Rao

Personnel Manager:B. Babu Rao

Leaf Manager:M. Rama Mohana Rao

Finance Manager:M. Shekhar

Export Manager:M. Shekhar

Production Manager:K.S. Rami Reddy

Circle Manager:Anji Babu

Factory coordinator:P. Subba Rao

POLICIES:

Policies can be considered a guide to action it is desirable that persons responsible for implementation of policies use discretion and judgment in appraising and deciding among alternative courses of action.

The company has well defined policies for exports the quality tobacco.

To conduct its operation with honesty integrity and transparency.

Employment policy is formulation and adoption.

This company shall maintain quality leadership by providing products and services that completely and consistently meet the agreed.

Requirements of all customs and unsure fitness for use of all products there by ensuring total confidence to every customer.

Employment policy formulation and adoption.

Canteen, cleaning, security maintenance of good industrial relation.

Responsibilities:

The M.L Company managing director M.Venkateswara Rao is under the complete administrative control of the managing direction and he is reported by the director and he is reported by general manager.

The general manager of ML Company is M. Ram Mohan Rao assisted by fine general manager i.e., personal manager, leaf manager or department manager, finance manager, exports manager and production manager.

The personal department manager B. Babu Rao is headed by who reports directly to G.M. he looks after the areas of personnel & administration under there may be a personal offices welfare officer and a safely officer.

The finance manager M.Shekhar is assisted by a team of experienced management and non management staff who tekes care of the finance is accounts activities of the organization. The export manager M.Shakhar deals all the matters regarding the export departments and directly reports to managing director.

The production manager K.S.Rami Reddy is headed by the G.M. is assisted by a plant engineer and staff of the production department.

OBJECTIEVES OF THE COMPANY: To serve the nations vital interest in the tobacco related sectors.

To maintain vicinity of supplies through M.L is tobacco& marketing network at optimum costs and provide up to date technical assistance to the consumer to conceive the valuable energy resources.

To earn a reasonable return on investment.

To work towards achievement of self reliance in the field of tobacco, threshing formulation& distribution system.

To create strong research& development in the field of tobacco and stimulate R&D of development of exports.

To maximize utilization of the existing facilities in order to improve efficient and increased productivity.

To import training, conduct seminary, workshop and educational courses on computers. Computer maintenance software development and software exports and to develop and design software in India.

Abroad and to start software technology part in India or abroad and to offer relationship management solutions for individuals and organizations both individually and through strategic alliances with others companies.

To employ experts to investigate and examine into the conditions, prospects, value character and circumstance of any business concern and under taking and generally of any assets property or right.

To carry on all kinds of agency business.

To carry on business as merchants in all kinds of goods.

To improve ,manage, work develop, lease mortgage abandon or otherwise deal with all or any part of the property, rights and concessions of the company.

ORGANISTION STRUCTURE:

The company (ML Company) is under the complete administrative control of the managing director and he is reported by the director and he is reported by general manager.

The general manager (ML Company) is assisted by 5 general managers.

Manager personnel.

Manager leaf department.

Manger finance.

Manager exports.

Manager production.

The personnel department is headed by personnel manager who reports directly to G.M. he looks after the areas of personnel& administration under may by a personnel officer, welfare officer and a safety officer. The leaf manager is headed by G.M and assisted by circle manager, a branch manager, buyers, factory co-ordinate and shift in charge.ML group was a multifaceted corporate leader of which the group consists of 5concern namely.

Maddi Lakshmaiah And Co Ltd: Tobacco threshers, packers & exporters real estate &leasing.

ML. Agro Products:

Tobacco threshers, packers &exporters.

K.S. Subbaiah Pillai & Co (India) Ltd:Tobacco export.

ML Exports:Exports house.

Coromandal Agro Products &Oils Ltd.:Bulk producers of oils

TURN OVER OF THE COMPANY:

The turnover of ML company for the following years of 2007-2013 are as follows:Table No:1:S. No.No. of YearsAmount In Rs In Lakhs

120072370

220081693

320092020

420102372

520113358

620123400

720133800

MARKETING POSITION OF THE COMPANY:In ML Company the methods of purchasing of tobacco is of various types i.e.

1. Which tenders rise in market document will be filled up by various companies or merchants can purchase them.

2. They have good contracts with various merchants (mediators between manufacture & exporters) in reputed companies Gnter.

3. Every year they were producing 1000 tones of various varieties /grades of tobacco.

4. They usually do their business with the international reputed companies like.

Universal

Demon

Standard commercial.

The company has some direct contracts with other countries and they directly ask them at the time of requirement.

Profit After Tax:Table No:2:SNONO OF YEARSAMOUNT IN Rs. IN LAKHS

12007270

22008203

32009312

42010262

52011134

62012103

72013123

The above table represents the profit for the following years after paying all the taxes.MARKETING CHANNELS:

Normally they send samples/verities.

At the time of requirement, they send samples through carriers.

Participating in exhibitions- every year ML company was taking participation in 5-6 exhibitions.

The people who have connection in tobacco may visit tobacco stalls usually, even from Europe, Russia & china.

People like manufactures, dealers, bankers, merchants of tobacco may visit the tobacco exhibitions.

ANOTHER MODE:

The other mode of marketing (channel) is through business delegations tobacco board of central govt., ministry of commerce govt. of India, Guntur. The tobacco board usually.

Regulation crop.

They register the foreigners.

They fix the crop size.

The board explores marketing possibilities with the help of exporters.

They get the business through reputation.

Customers usually approach them because of the good will of thecompany.

MODE OF PAYMENT:

Exporters normally receive payment from their buyers through L.CS (letters of credit).

Some time through advance payment ion terms of D.A & D.P.

Document against payment

Document against acceptance.

After customers checkers in the madras port it may send to abroad.

Shipment of tobacco is through Chennai port only.

CREDIT:1. Some parties asks/needs some time for payment with in certain period from the date of bill of payment (up to 180 days).

2. In India there is a rule that on credit basis, the payment must be done with in 180 days from the date.

MARKET RANGE:

ML Company was marketing 7-10 million kilos of tobacco every year. But the market range is not fixed. The market range depends on supply &demand forces.

1. When there is demand, the company produces more.

2. In the tobacco field, the marketing/market range may be flexible internationally supply demand.

MAJOR COPETETORS: M.L Group

Mittapalli Group

Bommidala Group

I.T.C and some other small companiesFINANCIAL INFORMATION: 1. Cash payments will be checked by cashiers.

2. Cash bills and credit bills may get from trashing factory and engineering department.

3. Concerned accounts may be generalized by the accountants and may be sent to concerned heads.

4. Credit bills payment will be given in the form of cheques or DDs

LAND MARKS: Maddi Lakshmaiah Company was the first India company entered with china to did business.

It was the first company to import tobacco and export tobacco.

Ambassadors have already come here and 4th one is coming in this august.

NEGOTIATIONS: The company is trying to develop world class information technology building in Bangalore, china and Hyderabad in the coming 5 years time and 100% tobacco joint venture association with one of the best cigarette manufacture.

The company exports with the second strongest country china, Russia and India.

The finance manager is assisted by a team of experienced management and non management staff who takes care of the finance & accounts activities of the organization.

The export manager (ML Company) deals all the matters regarding the exports department and directly reports to the managing director.

Future Plans:1. The company (Maddi lakshmaiah) for an ECB for 50 million dollars and development of regular trade and also infrastructure projects in India.

2. Maddi Lakshmaiah Company is also working on joint venture basis with UK based commodities Company for supply of agree products to South Asian countries.

3. The company already entered into joint venture with an US based company by name CARGIL for the south Indian need.

4. They have worked for joint venture arrangements with Yugoslavian Govt. for their requirement for India.

5. This for above 5 million dollars of investment in supply of 5000 tonnes every year.

ANALYSIS ON CAPITAL BUDGETING IN M.L. & CO LIMETED: IMPORTANCE OF INVESTMENT DECISION:Investment decisions require special attention because of the following reasons: They influence the firms growth in the long term.

They affect the risk of the firm.

They involve commitment of large amount of funds

They are irreversible or reversible at substantial loss and most difficult decisions to make.

INVESTMENT EVALUATION CRITERIA:Three steps are involved in the evaluation of investment:1. Estimation of cash flows.2. Estimation of the required rate of return (the opportunity cost of capital).3. Application of a decision rule for making the choice.ORGANIZATIONAL STRUCTURE

SWOT ANALYSISStrength:

Effective communication

Online growth

Loyal customers

Strong brand equity

Strong management team

Strong financial position

Pricing

Weakness:

Diseconomies to scale

Low R&D

No online presence

Not diversified

Opportunity:

Acquisition

Financial markets (raise money through debt, etc.)

Online

Product and services expansion

Take overs

Threats:

Competition

Cheaper technology

External changes(government ,politics, taxes, etc)

Maturing categories, products, or services

Exchange rate fluctuations

DATA ANALYSIS & INTERPRETATIONCOMMON SIZE BALANCE SEET OF M.L. COMPANY LTD., AS ON 31-3-2008:ParticularsAs on 31-3-2008Percentage in liabilities/assets

Sources of funds

Shareholders funds

Capital130000001.74

Reserves & surplus15113695720.34

Loan fund

Secured loan37947527051.08

Unsecured loan19304088025.98

Net deferred tax liability:62475310.84

TOTAL742900638100

Application of funds:

Fixed assets

Gross block726114635

Less-depreciation151280668

Net block57483396778.03

Capital work-in-progress51655500.70

Investments29831650.40

Current assets, loans & advances:

Inventories239880075

Sundry debtors35992686

Cash & bank balances7150276

Other current assets69640943

Loans & advances12529745

Less-current liabilities & provisions

Current liabilities202449314

Provisions9073986

Net current assets15367042520.68

TOTAL742900638100

COMMON SIZE BALANCE SEET OF M.L. COMPANY LTD., AS ON 31-3-2009:ParticularsAs on 31-3-2009Percentage in liabilities/assets

Sources of funds

Shareholders funds

Capital130000001.69


Loan fund




TOTAL773002348100


Fixed assets



Net block55088749671.77











Provisions21580520


TOTAL773002348100


Sources of funds

Shareholders funds

Capital130000001.49


Loan fund




TOTAL913565294100


Fixed assets

Gross block77255360


Net block51190008058.74











Provisions90860140

Net current assets354979800

TOTAL913565294100


Sources of funds

Shareholders funds

Capital130000001.19


Loan fund




TOTAL1137013461100


Fixed assets



Net block52391925750.2

Capital work-in-progress-










Provisions127893051


TOTAL1137013461100


Sources of funds

Shareholders funds

Capital130000001.29


Loan fund




TOTAL1000831727100


Fixed assets



Net block53890157253.84










Current liabilities13587382813.57

Provisions-


TOTAL1000831727100


Sources of funds

Shareholders funds

Capital130000001.14


Loan fund




TOTAL1138969025100


Fixed assets



Net block65523882957.52











Provisions-


TOTAL1138969025100

COMPARATIVE BALANCE SEET OF M.L. COMPANY LTD., AS ON 2006-07 to 2007-08:Particulars2006-072007-08Absolute increase/

(decrease)%

increase/

(decrease)

Sources of funds

Shareholders funds

Capital1300000013000000--


Loan fund

Secured loan390364244379475270(10888974)2.78

Unsecured loan199239493193040880(6198613)3.11


Total73866998774290063842306560.57


Fixed assets

Gross block711551528726114635145631072.04

Less-depreciation1054780211450331373955511637.5

Net block606073507581081498(24992009)4.12

Capital work-in-progress-51655505165550

Investments29831652983165--


Inventories1879341022398800755194606327.6

Sundry debtors2686054035992686913214633.9

Cash & bank balances60590377150276109123918.0


Loans & advances1172301912519745806726



12018960120189609073986(2944974)24.5


Total7386698274290063820644280227.9

COMPARATIVE BALANCE SEET OF M.L. COMPANY LTD., AS ON 2007-08 to 2008-09Particulars2007-082008-09Absolute increase/

(decrease)%

increase/

(decrease)

Sources of funds

Shareholders funds

Capital1300000013000000--


Loan fund

Secured loan3794752704786824759920720526.14

Unsecured loan19304088081595729(111445151)57.73

Net deferred tax liability:62475315523986(723545)11.58

Total742900638773002348301017104.05


Fixed assets

Gross block726114635738903208127885731.76


Net block581081498550887496(30194002)5.19


Investments29831652983165-


Inventories23988007523697576229043131.21

Sundry debtors35992686362585912659050.74


Other current assets69640943936871322404618934.53

Loans & advances1251974510864119(1665626)13.29


Current liabilities202449314158452146(43997168)21.73

Provisions90739862158052012506534137.83


Total742900638773002348301017104.05


(decrease)%

increase/

(decrease)

Sources of funds

Shareholders funds

Capital1300000013000000-


Loan fund

Secured loan478682475429126132(49556343)10.35

Unsecured loan815957298338620317904742.19


Total77300234891356529410760294613.92


Fixed assets

Gross block7389032087725536066164784889.54


Net block550887496511900080(38987416)7.08

Capital work-in-progress18558291550361(305468)16.46

Investments29831652983165-2986165


Inventories2369757623274125439043678138.16

Sundry debtors3625859122361498(13897093)38.33



Loans & advances1086411913966691310257228.56



Provisions215805209086014069279620321.03


Total77300234891356529410760294613.92

COMPARATIVE BALANCE SEET OF M.L COMPANY LTD, AS ON 2009-10 to 2010-11Particulars2009-102010-11Absolute increase/

(decrease)%

increase/

(decrease)

Sources of funds

Shareholders funds

Capital1300000013000000--


Loan fund

Secured loan42912613260069179517156566339.98

Unsecured loan8338620351737891(31648312)37.95


Total913565294113701346122354816724.47


Fixed assets

Gross block77255360827717465501638656.45


Net block511900080523919257168517613.04

Capital work-in-progress1550361--1550361



Inventories327412543341906868144943254.43

Sundry debtors223614988301315860651660271.23



Loans & advances1396669116218624225193316.12



Provisions908601401278930513703291140.76


Total913565294113701346122354816724.47


(decrease)%

increase/

(decrease)

Sources of funds

Shareholders funds

Capital1300000013000000--


Loan fund

Secured loan600691795398172603(202519192)33.71

Unsecured loan5173789128192253(23545638)45.51


Total11370134611000831727(136181734)11.977


Fixed assets

Gross block82771746583148248437650190.46

Less-depreciation303798208292580912(35767176)13.93

Net block523919257538901572320021575.60

Capital work-in-progress-3698112-3698112



Inventories341906868286746201(55160667)16.13

Sundry debtors83013158187578498106565340128.37

Cash & bank balances15600757227637213(128370359)82.28

Other current assets2198556018063870(56078269)25.51

Loans & advances162186249096384(7122240)43.94



Provisions127893051--1278930


Total1137013461100083172713618173411.97


(decrease)%

increase/

(decrease)

Sources of funds

Shareholders funds

Capital1300000013000000--


Loan fund

Secured loan3981726034382547544008215110.06

Unsecured loan2819225335892612770035927.31


Total1000831727113896902513813729813.80


Fixed assets

Gross block83148248498183065715034817318.08


Net block53890157265523882911633725721.58


Investments29831654423165144000048.27


Inventories2867462013576073177086111624.71

Sundry debtors18757849892904975(94673523)(50.47)



Loans & advances90963847838168(1258216)13.83



Provisions----


Total1000831727113896902513813729813.80

TREND ANALYSIS OF M.L. COMPANY.LTD. FROM 2006-07 TO 2007-08Particulars2006-2007%2007-08%

Share capital1300000010013000000100

Reserves& surplus130270036100151136957116.02

loan fund

Secured loans39036424410037947527097.2

Unsecured loans19923949310019304088096.88

Current liabilities & provisions


Provision12018960100907398675.49

Other liabilities

Deffered tax57962091006247531107.78

Total funds890313126100954423938107.21

Application of funds

Net fixed assets60607350910058108149895.87

Investments29831651002983165

Capital work in progress-5165550

Current assets & advances

Inventory187934012100239880075127.64

Sundry debtors26860540100359926861339.74

Cash & bank60590371007150276118.01


Loans & advances1172301910012529745106.88

Total890313126100954423938107.21

TREND ANALYSIS OF M.L. COMPANY.LTD. FROM 2006-07 TO 2008-09Particulars2006-07%2008-09%

Share capital1300000010013000000100

Reserves& surplus130270036100194200158149

loan fund

Secured loans390364244100478682475122.6

Unsecured loans1992394931008159572940.9



Provision1201896010021580520179.5

Other liabilities

Deffered tax5796209100552398695.3

Total funds890313126953035014107


Net fixed assets60607350910055641148291.8

Investments29831651002983165100



Inventory187934012100236975762126

Sundry debtors2686054010036258591134.9

Cash & bank605903710013998934231


Loans & advances117230191001086411992.6

Total890313126953035014107

TREND ANALYSIS OF M.L COMPANY.LTD FROM 2006-07 TO 2009-10Particulars2006-07%2009-10%

Share capital1300000010013000000100


Loan Fund

Secured loans390364244100429126132109.9

Unsecured loans1992394931008338620327.8



Provision1201896010090860140755.9

Other liabilities

Deffered tax579620910042151888727.2

Total funds8903131261147786394128.9


Net fixed assets60607350910055405196891.4

Investments29831651002983165100



Inventory187934012100327412543174.2

Sundry debtors268605401002236149883.3

Cash & bank6059037100738914611219.5


Loans & advances1172301910013966691119.1

Total8903131261147786394128.9


Share capital1300000010013000000100


loan fund

Secured loans390364244100600691795153.8

Unsecured loans19923949310051737891255.9



Provision120189601001278930511064.0

Other liabilities

Deffered tax579620910046984472810.6

Total funds8903131261390888717156.2


Net fixed assets60607350910057090372994.1

Investments29831651002983165100

Capital work in progress--


Inventory187934012100341906868181.9

Sundry debtors2686054010083013158309

Cash & bank60590371001560075722574.7


Loans & advances1172301910016218624138.3

Total8903131261390888717156.2


Share capital1300000010013000000100


loan fund

Secured loans390364244100398172603102

Unsecured loans1992394931002819225314.4



Provision12018960100--

Other liabilities

Deffered tax579620910049104631847.1

Total funds8903131261136705555127.6


Net fixed assets60607350910053890157288.9

Investments298316510029830165100

Capital work in progress-3698652-


Inventory187934012100286745201152.5

Sundry debtors26860540100187578498698.3

Cash & bank605903710027637213456.3


Loans & advances11723019100806387068.78

Total8903131261136705555127.6


Share capital1300000010013000000100


loan fund

Secured loans390364244100438254754112.26

Unsecured loans1992394931003589261218.01



Provision12018960100--

Other liabilities

Deffered tax5796209100611174741054.43

Total funds8903131261247015015140.06


Net fixed assets606073509100655238829108.11

Investments29831651004423165148.27

Capital work in progress-3718810-


Inventory187934012100357607317190.28

Sundry debtors2686054010092904975345.88

Cash & bank605903710054394425897.74


Loans & advances11723019100783816866.86

Total8903131261247015015140.06

LIQUIDITY RATIOS:

It is extremely essential for a firm to be able to meet its obligation as they become due. Liquidity ratios measure the ability of the firm to meet its current obligations (liabilities). In fact, analysis of the liquidity needs the preparation of cash budgets and cash and funds flow statements. The most common ratios which indicate the extend of liquidity or lack of it, are: (i) current ratio and (ii) quick ratio. Other ratio includes cash ratio, interval measure and net working capital ratios.CURRENT RATIO:

The current ratio is a measure of the firms short-term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. Current ratio is calculated by dividing current assets by the current liabilities.

Current Ratio = Current Assets/Current LiabilitiesCurrent assets include cash and those assets that can be converted into cash with in one year, such as marketable securities, debtors, inventories and prepaid expenses are also included in current assets.Current liabilities include creditors bills payable, accrued expenses, short- term loans, income tax , liability and long term debt maturing in the current year.

YEARSCurrent assets

(A)Current liabilities (B)Ratio

C=A/B

20093917845381800326662.17

20105892009002342211002.51

20118170018232438752563.21

20125191221661358738283.82

20135836342111080459905.40

Graphical Representation:

INTERPRETATION:

The above table and chart shows the current ratio.

It is maximum (5.40) in the year 2013 and minimum(1.72) in the year 2009.

But the liquidity position of the company is satisfactory. It is more than standard ratio i.e. 2:1 during the period of study.QUICK RATIO:

It is also known as acid test or liquid ratio is more rigorous test of liquidity than the current ratio. Quick ratio may be defined as the relationship between the quick/ liquid assets and current/ liquid liabilities. An asset is said to be liquid if it can be converted into cash within a short period without loss of value. Inventories cannot be termed to be liquid assets because they can not be converted into cash immediately.

Quick or Acid Test Ratio = Quick Assets / Current Liabilities

A quick ratio of 1 is considered as ideal. A quick ratio is less than 1 is indicative of inadequate liquidity of the business. A very high quick ratio is also not advisable

YEARSQuick assets

(A)Current liabilities (B)Ratio

A/B

20092617883571800326661.45

20104750949552342211002.03

20113043759652438752561.25

20122867462011358738282.11

20132260268941080459902.09


INTERPRETATION:

The above table shows the quick ratio of the company.

It is maximum (2.11) in the year 2012 and minimum (1.25) in the year 2011.

The convention rule for quick ratio is 1:1.

LEVERAGE RATIOS:

The short term creditors like bankers and suppliers of raw material are more concerned with the firms current debt paying ability. On the other hand long-term creditors like debenture holders, financial institutions etc. are more concerned with the firms long- term financial strengths in fact a firm should have a strong short-term as well as long-term financial position of the firm like financial leverage or capital structure are also calculated their ratios indicated mix of fund provided by owners and lenders.

(i) Debt-Equity Ratio

(ii) Interest coverage ratio

(i) Debt-Equity Ratio:

It reflects the relative claims of creditors and share holders against the assets of the business. Debt, usually, refers to long term debt. Equity includes equity and preference share capital and reserves.

Debt- Equity Ratio=

Shareholders Found = Equity+ General Reserve+ Dividend Reserve+ Net ProfitA debt equity ratio of 2:1 is considered ideal. A firm with a debt equity ratio of 2 or less eposes its creditors to relatively lesser risk. A firm with a high debt equity ratio exposes its creditors to greater risk.DEBT-EQUITY RATIO:

YEARSDebt

(A)Equity

(B)Ratio(A/B)

20095602782042072001582.70

20105125123353589010711.43

20116524296864375003031.49

20124263642565253622400.81

20134741473666037041850.79


INTERPRETATION:

The above table shows the debt equity ratio.

In the fallowing years the ratio is fluctuating. It is highest (2.70)in the year 2009 and lowest (0.79)in the year 2013.

The overall debt equity ratio of the company is satisfactory.INTEREST COVERAGE RATIO:

It indicates the ability of a firm to meet its interest obligation. It used to test the firms debt servicing capacity. EBIT

Interest Coverage Ratio= Interest EBIT = Earnings before interest and taxes

EBIT = Net Profit+ Interest+ Taxes YEARSEBIT (A)Interest (B)Ratio

(A/B)

200960103469491327431.22

201025141569403572910.62

2011120583786465438582.59

2012260447088366900547.09

20131277566484342447780.29


INTERPRETATION:

The above table shows the interest coverage ratio of the company.

In the fallowing years the ratio is fluctuating. It is maximum (7.09) in the year 2012 and minimum (0.29) in the year 2013.

The overall interest coverage ratio of the company is satisfactory.

ACTIVITY RATIOS:

Turnover ratio is also referred to as activity ratios or asset management ratios, measure how efficiently the assets are employed by a firm. These ratios are based on the relationship between the level of activity, represented by sales or cost of goods sold, and levels of various assets. The following are the various types of turnover ratios.

(i) Inventory Turnover Ratio:

Stock turnover ratio indicates the number of times the stock has turned over into sales in a year.Inventory Turnover Ratio = Cost of Goods Sold / Average Stock

Cost of Goods Sold = Sales-Gross Profit

Or

Cost of Goods Sold = Opening Stock + Purchases Closing StockAverage Stock = Opening Stock + Closing Stock/2

YEARSCost of goods sold (A)Average stock(B)Ratio

A/B

20093229926892028725061.59

20103184164492247888201.42

20111289727372685620160.48

20125273627183212695301.64

20137123713422999841062.37


INTERPRETATION:

The above table represents the inventory turnover ratio of the company

In the present year i.e. 2013 the ratio is very high (2.37) when compare to previous years.

The overall inventory turnover ratio of the company is satisfactory.

DEBTORS TURNOVER RATIO:

Debtors turnover indicates the number of times debtors turnover ratio expresses the relationship between debtors and sales. It is calculated as: Credit sales

Debtors Turnover Ratio =

Average debtors Net credit sales imply credit sales after adjusting for sales returns. In case information on credit sales is not available, sales can be taken in the numeration. YEARSSales(A)Debtors(B)Ratio

A/B

2009255762587359926867.11

2010257993866362585917.12

20112806785642236149812.55

2012588655944830131587.09

20136781755541895784983.58


INTERPRETATION:

The above table represents the debtors turnover ratio of the company

The highest ratio is 12.55 in the year 2011, and the lowest ratio is 3.58 in 2013. The overall debtors turnover ratio of the company is Satisfactory.

FIXED ASSETS TURNOVER RATIO:

By this ratio we can identified the efficiency of utilizing the fixed assets in the firm separately to generate the sales. The ratio is defined as: Fixed Assets Turnover Ratio = Net Sales / Net Fixed AssetsYEARSNet sales (A)Net fixed assets (B)Ratio

(A/B)

20092557625875810814980.44

20102579938665564114820.46

20112806785645540519680.51

20125886559445709037291.03

20136781755545389015721.26


INTERPRETATION:

The above table represents the fixed assets turnover ratio of the company.

The highest ratio is 1.26 in the year 2013, and the lowest ratio is 0.44 in 2009.

The fixed assets turnover ratio of the company is not satisfactory.

TOTAL ASSETS TURNOVER RATIO:(iv) Total Assets Turnover Ratio:

This ratio shows the firms ability in generating sales from all financial resources committed to total assets. Total Assets Turnover Ratio = Net Sales / Total AssetsYearsNet Sales (A)Total Assets (B)Ratio(A/B)

20092557625879544239380.27

20102579938669530350140.27

201128067856411477863940.24

201258865594413908887170.42

201367817555411367055550.60


INTERPRETATION:

The above table represents the Total Assets turnover ratio of the company.

The highest ratio is 0.60 in the year 2013, and lowest ratio is 0.24 in the years 2011.

In the present year i.e. 2011 the ratio is very high when compare to previous years.

The overall Total assets turnover ratio of the company is satisfactory.

PROFITABILITY RATIOS:

Profitability reflects the final result of business operations. There are two types of profitability ratios: profit margins ratios and rate of return ratios. Profit margins ratios show the relationship between profit and sales. The two popular profit margin ratios are: gross profit margin ratio and net profit margin ratio. Rate of return ratios select the relationship between profit and investment the important rate of return measures are: return on total assets, earning power, and return on equity. Generally, there are two types of profitability ratios.

Profitability in relation to sales

Profitability in relation to investment(i) Gross Profit Ratio:

It is calculated by dividing the gross profit by sales. Gross Profit Gross Profit Ratio = x 100

Net Sales YEARSGross Profit (A)Net Sales (B)Ratio (A/B)

2009672301022557625870.26

201060422532579938660.02

20111517058272806785640.54

2012612932265886559440.10

2013341957886781755540.05


INTERPRETATION:

The above table represents the gross profit ratio of the company.

The highest ratio is 0.54 in the year 2011, when compare to previous years.

The lowest gross profit ratio is 0.02 in the year 2010

The overall gross profit ratio of the company is satisfactory.

PROFIT RATIO: Net profit is obtained when operating expenses, interest and taxes are subtracted from the gross profit. This ratio indicates the managements efficiency in manufacturing, administering and selling the products. This ratio is the overall measure of the firms ability to turn each rupee into net profit. Net profit Net Profit Ratio = x 100

Sales YEARSNet Profit (A)Sales (B)Ratio (A/B)

2009243428752557625879.52

20105861882625799386622.72

201126044708828067856492.79

201212058378658865594420.48

201312775664867817555418.84


INTERPRETATION:

The above table represents the net profit ratio of the company. The highest ratio is 92.79 in the year 201,

The lowest net profit ratio in the year 2009 i.e., 9.52.

The overall net profit ratio of the company is satisfactory.

Return On Net Worth:This ratio indicates how well the firm has used the resources of owners. And also gives the shareholders and idea if the return of founds .as well as useful for inter-firm and inters industry comparisons. Profit after tax ROE = x 100

Net worth YEARSPAT (A)Equity (B)Ratio (A/B)

20092104457716413695712.82

20104209649420720015820.32

201115166792635890107142.26

20127869823243759930317.98

20138412398952536224016.01


INTERPRETATION:

The above table represents the return on net worth of the company.

The highest ratio is 42.26 in the year 2011,

The lowest return on net worth in the year 2009 i.e. 12.82.

The overall return on net worth of the company is satisfactory.

RETURN ON CAPITAL EMPLOYED:

The ratio is calculated by dividing the net profit with total capital employed in the firm. Net profit means profit means profit after tax but with interest. Capital employed is founded by subtracting intangible assets from investment.

Net profit + Interest Return on Capital Employed Ratio = x 100

Capital employed (or) Return on investment

YearsNet Profit (A)Capital Employed (B)Ratio (A/B)

200958618826130000004.51

201024342875130000001.87

2011120583786130000009.28

20122604470881300000020.03

2013127756648130000009.83


INTERPRETATION:

The above table represents the return on capital employed of the company.

The highest ratio is 20.03 in the year 2012,

The lowest return on capital employed in the year 2010 i.e. 1.87 The overall return on capital employed of the company is satisfactory.

Earnings Per Share:YearRatio

20093.23

20101.61

201111.67

20126.05

201314.66


Interpretation:

The above table represents the earning per share of the company.

The highest ratio is 14.66 in the year 2013. In the previous year 2013 the ratio is very high when compared with the previous years.

The lowest earnings per share in the year 2010 i.e. 1.61.

The overall earnings per share of the company is satisfactory.

FINDINGS

Based on the analysis of various ratios applied in analyzing. In financial data relating Maddi lakshmaiah & co ltd and conclusions arrived at the fallowing findings are as fallows: It was observed that the current ratio of Maddi lakshmaiah & co ltd. is fluctuating for the period of study the company.

In the year 2010, the quick ratio is very high, a high quick ratio is not advisable to the company.

The study reveals that the debt ratio of the company is high in the year 2010 through this we can say it is in a not satisfactory position.

The study reveals that the inventory turnover ratio of the company is very low in the year 2009. The reason for this low ratio is sales are not satisfactory in that year.

The debtor turnover ratio of the company is not effective in the period of study the company.

The fixed assets turnover ratio is very low in the year 2011 compared to the other succeeding years.

The gross profit ratio is good indicator of the company. But the gross profit ratio of the company is very low in the year 2010 compared to the other succeeding years.

The net profit ratio of the company is not satisfactory for the period of the study of the company.

From the profit after taxation, most of the amount transfers to the provision under different heads. So that it is good indicates for future expansion.

It was found that the standard debt equity ratio of the company.

SUGGESTIONS

Based on the analysis of various ratios applied in analyzing. In financial data relating Maddi lakshmaiah & co ltd. and conclusions arrived at the following suggestions are as fallows: The company has maintained a satisfactory current ratio due to increase in current assets more than current liabilities.

The quick ratio 1:1 is considered as ideal. So, I am suggested to company maintain the quick ratio is not below the one.

The company should maintain the same interest coverage ratio in future also.

The debtors turnover ratio of the company is not effective in the period of study. I suggest that maintain the debtors turnover ratio is 10-12 debt collection period is 30-60 days.

The Maddi lakshmaiah & co ltd. has maintained the same equity share capital from begin to till onwards. It is very good indicator to Maddi lakshmaiah & co ltd.

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